Isaiah v. JPMorgan Chase Bank, N.A., 060120 FED11, 17-15585

Docket Nº:17-15585
Party Name:AMIR ISAIAH, as court-appointed Receiver of Coravca Distributions, LLC; Timeline Trading Corp.; Edgewater Technologies, CA, Corp.; and Edgewater Technologies, S.A. Plaintiff - Appellant, v. JPMORGAN CHASE BANK, N.A., Defendant-Appellee.
Judge Panel:Before ROSENBAUM and TJOFLAT, Circuit Judges, and PAULEY, District Judge.
Case Date:June 01, 2020
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

AMIR ISAIAH, as court-appointed Receiver of Coravca Distributions, LLC; Timeline Trading Corp.; Edgewater Technologies, CA, Corp.; and Edgewater Technologies, S.A. Plaintiff - Appellant,


JPMORGAN CHASE BANK, N.A., Defendant-Appellee.

No. 17-15585

United States Court of Appeals, Eleventh Circuit

June 1, 2020

Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 1:16-cv-21771-JEM

Before ROSENBAUM and TJOFLAT, Circuit Judges, and PAULEY, [*] District Judge.


This appeal arises out of a Ponzi scheme executed by the principals of two entities, Coravca Distributions, LLC and Timeline Trading Corp. (the "Receivership Entities"). Amir Isaiah, the court-appointed receiver for the Receivership Entities, sued JPMorgan Chase Bank, N.A. ("JPMC"), seeking to recover funds that were fraudulently diverted from the Receivership Entities' bank accounts in connection with that Ponzi scheme. His complaint sought to avoid the fraudulent transfers and recover the diverted funds on behalf of the Receivership Entities under the Florida Uniform Fraudulent Transfer Act ("FUFTA"), and to collect damages from JPMC for JPMC's alleged aiding and abetting of three torts: breach of fiduciary duty, conversion, and fraud. Isaiah claimed that JPMC helped facilitate the Ponzi scheme by transferring funds into, out of, and among the Receivership Entities' bank accounts, despite its alleged awareness of suspicious banking activity on those accounts. The District Court dismissed the complaint under Federal Rule of Civil Procedure 12(b)(6), holding that Isaiah failed to allege an applicable conveyance or fraudulent transfer for purposes of his FUFTA claim, and failed to sufficiently allege that JPMC had actual knowledge of the underlying Ponzi scheme for purposes of his aiding and abetting claims. After careful review, and with the benefit of oral argument, we affirm.


Because this case was dismissed on a Rule 12(b)(6) motion to dismiss, we restate the following facts as alleged by Isaiah in his complaint. A Florida state court appointed Isaiah receiver of the Receivership Entities in September 2010, after finding that the principals of the Receivership Entities, Rosa Aguirre (a/k/a Rosa Villarroel) and Diego Corado (the "Ponzi schemers"), had been using the Entities to perpetrate a Ponzi scheme against investors. In this classic Ponzi scheme, the Ponzi schemers solicited investors by promising astronomical returns on investments supposedly involving the trade of Venezuelan and U.S. currency. As proof that the investments were generating returns, the Ponzi schemers would send "distributions" to the investors through the Receivership Entities. In reality, the "distributions" consisted merely of money invested by other duped investors instead of actual gains on legitimate investments. Through this charade, the Ponzi schemers ultimately defrauded more than 2, 000 investors and pilfered millions of dollars from the Receivership Entities.

The Ponzi schemers operated this fraudulent scheme, in part, by depositing investments into and making "distributions" from several JPMC bank accounts belonging to the Receivership Entities. Until early 2010, the Receivership Entities had only one corporate account at JPMC, and for the first twenty-eight months of their banking relationship with JPMC, the account activity was fairly normal. But in January 2010 the total amount of monthly deposits and withdrawals skyrocketed, and in February the Receivership Entities opened a second bank account at JPMC. The Receivership Entities continued to make substantial deposits into and withdrawals from these accounts in rapid succession and corresponding amounts until, in May 2010, JPMC's internal anti-money laundering section detected suspicious activity on the accounts and unilaterally closed both bank accounts. Almost immediately after JPMC detected fraud on the two accounts-indeed, less than a day after closing each account-JPMC allowed the Receivership Entities to open two new JPMC bank accounts. This, the complaint alleges, allowed the Ponzi schemers to "wind down their affairs" and transfer the funds from the Receivership Entities' JPMC accounts to new bank accounts at Bank of America and Wachovia Bank, where the Ponzi schemers continued their fraudulent scheme over the next several months.

Isaiah, now the court-appointed receiver of the Receivership Entities, filed this suit against JPMC in state court based on JPMC's handling of the Receivership Entities' accounts. He sought (1) avoidance and recovery of certain fraudulent transfers allegedly made to JPMC under the FUFTA, Fla Stat. § 726.105(1)(a), and (2) damages for JPMC's aiding and abetting the Ponzi schemers' breach of their fiduciary duties, conversion of the Receivership Entities' funds, and fraud. Specifically, the complaint seeks to recover from JPMC, on behalf of the Receivership Entities, funds that were fraudulently deposited into, withdrawn from, and transferred among the Receivership Entities' bank accounts because JPMC was an "actual recipient[] of the transfers and [a] bad faith commercial conduit[]" that "acted in bad faith in processing bank transactions for and/or on behalf of the Receivership Entities." Compl. ¶ 51. As to the aiding and abetting claims, the complaint alleges that JPMC failed to follow sound banking practices and willfully ignored suspicious banking activity, and thus knowingly encouraged the Ponzi schemers' tortious conduct by providing a platform for them to carry out their illicit scheme.

JPMC removed the state-court complaint to federal court pursuant to 28 U.S.C. § 1441, and the District Court properly exercised diversity jurisdiction under 28 U.S.C. § 1332. JPMC then filed a motion to dismiss the complaint in its entirety under Rule 12(b)(6) of the Federal Rules of Civil Procedure, which the District Court granted.[1] The District Court reasoned that Isaiah's complaint failed to allege an applicable conveyance or fraudulent transfer for purposes of FUFTA liability because it alleged nothing more than routine banking activity by JPMC; the Ponzi schemers never departed with the assets in the bank accounts, but merely transferred the funds between themselves. Isaiah v. JPMorgan Chase Bank, N.A., No. 16-CIV-21771-MARTINEZ, 2017 WL 5514370, at *2 (S.D. Fla. Nov. 15, 2017). The District Court also held that the complaint failed to adequately allege that JPMC had actual knowledge of the underlying tortious conduct-the Ponzi scheme-as required for aiding and abetting liability. Id. at *4. This appeal followed. We review the District Court's ruling on JPMC's motion to dismiss de novo, accepting the above allegations as true and construing them in the light most favorable to Isaiah. See Lamm v. State St. Bank & Tr., 749 F.3d 938, 942 (11th Cir. 2014).


The FUFTA provides generally that a creditor may avoid a debtor's fraudulent transfer to the extent necessary to satisfy the creditor's claim. Fla. Stat. § 726.108(1)(a). Under the FUFTA, "[a] transfer made . . . by a debtor is fraudulent as to a creditor . . . if the debtor made the transfer . . . [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor." Id. § 726.105(1)(a). To prevail on a fraudulent transfer claim, a creditor must demonstrate (1) there was a creditor to be defrauded, (2) a debtor intending fraud, and (3) a conveyance-i.e., a "transfer"-of property which could have been applicable to the payment of the debt due. Wiand v. Lee, 753 F.3d 1194, 1199-1200 (11th Cir. 2014).2

The FUFTA defines a "transfer" as "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset." Fla. Stat. § 726.102(14). While the definition of transfer is broad, the statute plainly requires a plaintiff to show that the debtor either disposed of his asset or relinquished some interest in that asset. Nationsbank, N.A. v. Coastal Utilities, Inc., 814 So.2d 1227, 1230 (Fla. Dist. Ct. App. 2002). As long as the debtor relinquishes some interest in or control over the asset a FUFTA transfer has occurred, even if he remains the technical owner of the asset. In re Levine, 134 F.3d 1046, 1050 (11th Cir. 1998). Accordingly, in Levine we held that the debtor's purchase of an annuity constituted a FUFTA transfer because, by purchasing an annuity, the debtor limited his ability to withdraw his money to the terms of the annuity contract, thereby relinquishing some interest in that money. Id. at 1049-50. The debtor no longer retained total control over or unfettered access to the full amount of his "property." Id. at 1050.

Isaiah's complaint identifies three types of banking transactions that he alleges constitute fraudulent transfers under the FUFTA: deposits into the Receivership Entities' JPMC bank accounts, withdrawals from the Receivership Entities' JPMC bank accounts, and so-called "Intercompany Transfers" among those JPMC bank accounts. Isaiah's primary argument on appeal is that when the Ponzi schemers deposited money into the Receivership Entities' bank accounts, they "transferred" that money to JPMC within the meaning of the FUFTA. He argues that when an accountholder deposits money into his bank account, the bank takes title to the money and then owes a debt to the accountholder, creating a debtor-creditor relationship between the accountholder and the bank. Thus, a deposit represents the accountholder's conditional parting with his property, subject to his right to later withdraw the deposited funds.

We disagree that a routine bank deposit constitutes a transfer to the bank within the meaning of the FUFTA. To be sure, when an accountholder deposits...

To continue reading