September 17, 2014 Articles

"Neo Badges": The Evolution of the Badges of Fraud

History shows that the badges evolve to keep up with the creative spirit of those who commit fraud.

By Ronald Peterson and Landon Raiford

The “badges of fraud” in a fraudulent transfer analysis are one of the most familiar concepts to bankruptcy practitioners. As the popular refrain goes, “[b]ecause proof of actual intent to hinder, delay or defraud creditors may rarely be established by direct evidence, courts infer fraudulent intent from the circumstances surrounding the transfer.” In re Sherman, 67 F.3d 1348, 1353 (8th Cir. 1995). Consequently, courts look for the presence of what colloquially are known as “‘badges of fraud’: proof by a creditor of certain objective facts . . . [that] raise a rebuttable presumption of actual fraudulent intent.” BFP v. Resolution Trust Corp., 511 U.S. 531, 541 (1994). This article addresses the evolution of the badges of fraud from the Statute of Elizabeth to what the authors refer to as the latest “neo badges of fraud.”

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