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Rasmussen v. Smith

United States District Court, N.D. Texas, Dallas Division

January 8, 2020

MARK W. RASMUSSEN, RECEIVER FOR ARISEBANK Plaintiff,
v.
RICHARD SMITH, JR., and KURT F. MATTHEW, JR., Defendants.

          MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

          BARBARA M. G. LYNN CHIEF JUDGE

         Before the Court is Plaintiff's Motion for Summary Judgment. (ECF No. 21). The Motion is GRANTED as to Defendant Kurt F. Matthew, Jr. and DENIED as moot as to Defendant Richard Smith, Jr.

         I. Background

         In this case, Plaintiff, the Court-appointed receiver, sued Defendants to recover funds for the Estate of AriseBank and its affiliates (the “Receivership Estate”) stemming from AriseBank's cryptocurrency payment toward the purchase of a nonexistent bank. (ECF No. 1 ¶¶ 1-3).

         AriseBank was a startup venture aiming to provide cryptocurrency and banking services. (ECF No. 23 at 28-30; see also ECF No. 22 at 3). AriseBank raised funds primarily by selling its own cryptocurrency, called “PIVX coins.” (ECF No. 23 at 28-30). In December 2017, AriseBank CEO Jared Rice and Defendant Smith began discussing AriseBank's potential purchase of a bank from Defendant Matthew, who allegedly told Smith he owned a bank. (Id. at 101, 105). Matthew now states he has never owned a bank. (Id.) On or about December 13, 2017, Rice and Smith signed a term sheet outlining the “preliminary terms and conditions” of the bank purchase (the “Term Sheet”) for a price of at least $12 million.[1] (Id. at 17-19). Matthew, the purported owner of the bank for sale, did not sign the Term Sheet. (Id. at 19). The Term Sheet did not obligate either Smith or Rice to do anything, and both have stated that they did not view it as binding. (Id. at 70-71, 92-93).

         On or about January 10, 2018, Rice, himself or through one of the entities in the Receivership Estate, transferred 95, 000 PIVX coins to Smith as a 10% “due diligence deposit” on the bank purchase (the “Coin Transfer”). (See Id. at 21, 72; see also ECF No. 22 at 6-7). AriseBank had an estimated $4.3 million in assets at the time of the Coin Transfer. (ECF No. 23 at 4-5).

         The 95, 000 PIVX coins were worth an estimated $1.3 million at the time of the Coin Transfer. (Id. at 4, 63-64, 72).[2] After converting some of the coins to cash, Smith transferred $123, 000 to Matthew as a 1% “good faith deposit” on the purchase. (Id. at 8, 26, 75-80). Defendants allege in their response to this Motion that this sum was also for Matthew's “consulting / investing advice, ” and reference the Term Sheet, but the Term Sheet provides no evidence of this. (See ECF No. 26 at 2; see also ECF No. 23 at 17-19). Defendants have stated that they intended the $123, 000 as a 1% deposit on the purchase price and calculated it as such. (See Id. at 61-62, 75-76). Matthew has stated he knew the $123, 000 came from AriseBank and Rice as partial payment for the purchase of a bank he did not own. (Id. at 107).

         Smith alleges that the Coin Transfer was also for the purchase of his “high frequency trading” software, as described in the Term Sheet, but Smith did not deliver software while AriseBank was operating or even before Plaintiff had informed Defendants of the receivership and requested the return of the funds from the Coin Transfer. (Id. at 7, 17, 36, 46-47, 66). Plaintiff states that he has been unable to locate any software in the Receivership Estate's assets. (Id. at 7). Rice agreed with the characterization of the software as “a side benefit” to “acquiring a bank, ” and when asked if he cared about the software, he said, “No.” (Id. at 90). Smith stated that he advertised a license to use the software for “$10 million a year, ” but that he has not had any paying customers. (Id. at 67).

         As receiver, Plaintiff seeks the return to the Receivership Estate of the Coin Transfer, and moves for summary judgment on all of his claims: unjust enrichment, conversion, and fraudulent transfer. (ECF No. 21). Plaintiff also seeks the award of prejudgment and postjudgment interest, costs and attorney's fees. (Id. at 2).

         II. Legal Standard

         Under Federal Rule of Civil Procedure 56, summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A factual issue is material “if its resolution could affect the outcome of the action.” Weeks Marine, Inc. v. Fireman's Fund Ins. Co., 340 F.3d 233, 235 (5th Cir. 2003). A factual dispute is “genuine if the evidence is such that a reasonable [trier of fact] could return a verdict for the non-moving party.” Crowe v. Henry, 115 F.3d 294, 296 (5th Cir. 1997). The Court must resolve all disputed factual controversies in favor of the non-moving party, “but only if both parties have introduced evidence showing that an actual controversy exists.” See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); see also Boudreaux v. Swift Transp. Co., Inc., 402 F.3d 536, 540 (5th Cir. 2005); Lynch Props., Inc. v. Potomac Ins. Co., 140 F.3d 622, 625 (5th Cir. 1998) (citation omitted).

         III. Analysis

         Plaintiff moves for summary judgment on his claim of constructive fraud under the Texas Uniform Fraudulent Transfer Act. As this Court has stated, constructive fraudulent transfer is a fraudulent transfer without there needing to be intent to defraud. E. Poultry Distribs., Inc. v. Yarto Puez, 2001 WL 34664163, at *2 (N.D. Tex. Dec. 3, 2001) (Lynn, J., presiding), aff'd, Matter of Life Partners Holdings, Inc., 926 F.3d 103, 120 (5th Cir. 2019). To establish constructive fraud, a plaintiff must plead facts demonstrating: “(1) a lack of reasonably equivalent value for the transfer; and (2) the transferor was financially vulnerable or insolvent at the time of the transaction.” Id. at 120; see also Tex. Bus. & Com. Code § 24.005(a)(2).

         A. AriseBank Did Not Receive Reasonably Equivalent Value ...


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