• Southern District of New York Deepens Internal Split Over Loophole in Bankruptcy Safe Harbor for Capital Markets Transactions
  • January 29, 2014 | Authors: Joaquin M. C De Baca; Joel Moss; Brian Trust
  • Law Firm: Mayer Brown LLP - New York Office
  • The Bankruptcy Court for the Southern District of New York recently held in Edward S. Weisfelner, as Litigation Trustee of the LB Creditor Trust v. Fund 1., et al. (In re Lyondell Chemical Company, et al.) (“Lyondell”), that section 546(e) of the Bankruptcy Code does not bar fraudulent transfer claims when such claims are brought by an entity other than the bankruptcy trustee (or its successors) under state fraudulent transfer laws rather than the Bankruptcy Code. Section 546(e) is the Bankruptcy Code’s safe harbor for certain prebankruptcy transfers made in connection with securities contracts by, to or for the benefit of financial institutions.