Darr v. Plaintiffs' Interim Executive Committee, No. 18-2001 (1st Cir. 2019)
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The First Circuit affirmed the decision of the district court adopting bankruptcy court orders arising out of the bankruptcies of TelexFree, LLC, TelexFree, Inc., and Telexfree Financial, Inc. (collectively, TelexFree), one of the biggest Ponzi-pyramid schemes in United States history, holding that the bankruptcy court did not err in ruling that Appellant's unjust enrichment claims were stayed pursuant to 11 U.S.C. 362(a)(3).
At issue in this case was who would be allowed to seek to recover payments made by new participants in the scheme to the existing participants who recruited them (the contested funds). While Trustee Stephen Darr attempted to recoup the contested funds through avoidance actions, victims represented by the Plaintiffs' Interim Executive Committee (PIEC) asserted unjust enrichment claims to recover the same amounts. The district court stayed the unjust enrichment claims under section 362(a)(3), thus permitting the trustee to pursue the contested funds and to stop PIEC's efforts to pursue those funds. The First Circuit affirmed, holding that the arguments the PIEC raised on appeal were not persuasive.
The court issued a subsequent related opinion or order on November 12, 2019.
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