Lawsuits Filed in Reed Slatkin Bankruptcy:

The initial suits were for recovery under the fraudulent transfer provisions of the Federal Bankruptcy Code and have been filed against individuals listed at the link below. The underlying premise is that Slatkin investors that withdrew more money from their accounts than they deposited are required to return the excess. Under the Bankruptcy Code, those excess withdrawals are viewed as fraudulent transfers from Slatkin to the investor, even if the investor was unaware of Slatkin’s fraud. A trustee can "void" the transfers by suing the persons who got more money than they put in. The theory is to even the playing field between the winners and losers in a "Ponzi" scheme. The issues relate to what remedies can the Trustee apply to a Slatkin investor since it was not a pure Ponzi scheme (see link), what statute of limitations should apply (how far back can the Trustee reach to void transfers from Slatkin), and whether the investors had given value or were owed preexisting debt that were resolved by the transfers from Slatkin.

Attachments in the Reed Slatkin Bankruptcy:
The Trustee filed actions to freeze the assets of six investors that received more money than they deposited with Slatkin. The Trustee’s motions seek writs to attach-link unspecified assets of these six investors. The Trustee has used Slatkin's plea bargain -link
and a declaration against Tony Hitchman as support -link(see important last page) The Trustee was initially successful in getting an attachment Hitchman’s assets. Tony Hitchman now lives in South Africa. Mr. Hitchman is appealing his attachment and he along with the above defendants will appear in a legal sense on Dec 20th in Bankruptcy court in Santa Barbara. The judge must find that it is "more likely than not" that the Trustee will prevail in his case for the judge to rule in the Trustee's favor. Writs are almost never heard of in fraudulent transfer cases, but one was initially issued against Tony Hitchman already so they are in fact quite possible. The countervailing legal arguments revolve around the necessity that the Trustee identify and trace assets and that the Trustee is not likely to ultimately prevail in his fraudulent transfer claims against these investors. The Trustee argues there is no tracing requirement and that it is unnecessary to trace cash transfers. Defendants have responded that the likelihood of the Trustee’s prevailing is in question due to forensic evidence to showing Slatkin was not running a pure Ponzi because of significant business activity, multiple successful ventures and the possession of more co-mingled assets after 13 years than net monies entrusted to him.. Per the Trustee, a Ponzi scheme by definition is insolvent from day one. See "Ponzi Scheme?" Copy of Trustee's Motion for writ -link.

=> Fraudulent Transfer Complaint MAIN SUIT
=> Proceedings-Writ of Attachment-hearing Dec 20th
=> Proceedings-Partial Summary Judgment hearing Jan 17th 2003

Reed Slatkin Bankruptcy involves a potential 350 defendants and another 400 investors who are not being sued.