ATM LEASEBACK SCHEMES-- any insight?

[grimreaper]

State law claims to recover fraudulent transfers vary,
and can exceed the bankruptcy code’s two year reachback
period. California law, for example, provides a
seven-year statute of repose for actually fraudulent
transfer claims. See Cal. Civ. Code § 3439.09(c).
Certain claims for transfers beyond four years must be
brought under California law within one year after
the fraudulent transfers could reasonably have been
discovered by the claimant. See Cal. Civ. Code §
3439.09(a).

The *fly in the ointment* is this part>>
"must be
brought under California law within one year after
the fraudulent transfers could reasonably have been
discovered by the claimant"

Here's a case I found on the seven year limitations in Ca:

Read pages 7-8
http://www.google.com/url?sa=t&rct=j&q= ... Ww&cad=rja

Here, the Court finds that the Section 3439.09(c) seven-year bar does not apply to the
Receiver’s claims against Christopher because the transfers at issue occurred between 2004 and 2009
and this suit was filed in 2011.4 Pl.’s Mot. Summ. J. Br. 8, ECF No. 46. Under the constructive
fraudulent transfer theory, the Receiver would be unable to recover fraudulent transfers that occurred
before March 1, 2007, see Cal. Civ. Code § 3439.09(b); however, as discussed below, the Receiver
can recover the funds under the actual fraudulent transfer theory, rendering this limitation
immaterial. See Kowell, 533 F.3d at 773. Because it took several years for the fraud to be
discovered, the Receiver was not appointed until March 26, 2009. Pl.’s App. Mot. Summ. J. Ex.
7 (Decl. of Richard Roper), at App. 89–90, ECF No. 47. Moreover, forensic accountants were
unable to provide an initial Investor Analysis and Summary to the Receiver until May 11, 2010, and
were unable to provide information about the brokers until June 1, 2010. Id. Thus, these fraudulent
commission transfers were not reasonably discoverable until May or June of 2010. Id.; see Fox, 110
P.3d at 920. Because this suit against Christopher was filed on March 1, 2011, less than a year from the date the fraudulent transfers were reasonably discoverable, the cause of action has not been
extinguished. See generally Pl.’s Compl., ECF No. 1; see also Cal. Civ. Code § 3439.09(a)
(mandating that a suit be filed “within one year after the transfer or obligation was or could
the transfers were not reasonably discoverable prior to May or June of 2010, leaving no genuine
issue of material fact on this matter. See Fed. R. Civ. P. 56(c). Therefore, the Receiver’s claims
against Christopher are not barred by the statute of limitations except for any transfers that occurred
before March 1, 2004.

[JamesVincent]

Which is all fine and dandy if the receiver uses California law. Once again, we are back to speculation of the not useful sort. We have no clue what the receiver is going to do. The only given is that it's going to take a long time and it's doubtful that 100% will be recovered, based on past receiverships.

[Arthur Rubin]

Which is all fine and dandy if the receiver uses California law. Once again, we are back to speculation of the not useful sort. We have no clue what the receiver is going to do. The only given is that it's going to take a long time and it's doubtful that 100% will be recovered, based on past receiverships.

Why shouldn't the receiver use California law? The principals and business office were located in California. Or am I missing something?

On the other hand, the fact of fraud could reasonably have been discovered by reading this thread, which started in 2009. Only the amount of fraud remains to be discovered when the receiver completes his work in 2015-16.

[grimreaper]

Which is all fine and dandy if the receiver uses California law. Once again, we are back to speculation of the not useful sort. We have no clue what the receiver is going to do. The only given is that it's going to take a long time and it's doubtful that 100% will be recovered, based on past receiverships.

They are based in Calif..so Ca law *should* apply. Even if If the RESIDENCE of the investor is the determining factor (which I don't believe is the case), most investors are probably from Calif.

[Arthur Rubin]

Imagine: Quatloos being used by the ANSI principals as a defense.

It reminds me of the Financial News Network (and two other companies) bankruptcy case. They claimed a false loan request couldn't have been fraud, because no rational person would have believed the CFO's representations. (I was a small creditor ($1000) in class IV-A, and degraded my claim to class IV-B to settle for 100% of $400, when some of the remaining management claimed that the person who agreed to pay me the $1000 didn't have the authority to do so. I think I may have gotten a larger share, as additional class I and II claims were coming in, reducing the estimated percentage for IV-A from 63%., even if the bank's class III-B claim was denied.)

[grimreaper]

Any defense will be futile:
PONZI SCHEME PRESUMPTION>>>

http://theponzibook.blogspot.com/2012/0 ... nding.html

"Most courts endorse and affirm the use of the “Ponzi scheme presumption” against recipients of transfers from the Ponzi debtor. These courts hold that, in an actual fraudulent transfer case, the transferor’s fraudulent intent is presumed if the trustee establishes that the transferor was perpetrating a Ponzi scheme and that the transfer was made within the scope of the scheme The rationale for the broad brush application of a presumption of actual intent in a Ponzi scheme is that “transfers made in the course of a Ponzi scheme could have been made for no purpose other than to hinder, delay or defraud creditors.” Bear, Stearns Sec. Corp. v. Gredd (In re Manhattan Inv. Fund, Ltd.), 397 B.R. 1, 8 (S.D.N.Y. 2007). Such a presumption can be a powerful tool in a Ponzi scheme case, as it eliminates the need to prove actual intent to hinder, delay or defraud by the more customary “badges of fraud” analysis that uses circumstantial evidence."

[Tednewsom]

Ed is 67 years old and Joel is 64. I hope they never get out, if they get in.
https://www.youtube.com/watch?v=eHWlXDQDLXg

From way-way back in this thread-- gee, maybe a whole month. So it turns out I wasn't being polite, I was being accurate.

[snookered]

Ed is 67 years old and Joel is 64. I hope they never get out, if they get in.
https://www.youtube.com/watch?v=eHWlXDQDLXg

From way-way back in this thread-- gee, maybe a whole month. So it turns out I wasn't being polite, I was being accurate.

Oops! My Bad, and my apologies.

[grimreaper]

On the other hand, the fact of fraud could reasonably have been discovered by reading this thread, which started in 2009.

Yes..but this blog doesn't count....when was it REPORTED TO LAW ENFORCEMENT? When was a complaint first filed?

[JamesVincent]

Why in the world would a Federal receiver be limited to state law when the Federal government has all those laws just sitting there? A Federal receiver has the choice of pursuing action under Federal law or, if state law is more advantageous, under the applicable state law. Which is why, in cases like Madoff, New York law was used since it had a longer reach all around. UFTA has a general 2 year reach but has certain circumstances where it can reach 7 years or 10 years, though I don't think we have to worry about them giving the money to charity. The point is we don't even know which law they will use yet, any speculation that hinges on that law is just that, real speculation.

[Arthur Rubin]

On the other hand, the fact of fraud could reasonably have been discovered by reading this thread, which started in 2009.

Yes..but this blog doesn't count....when was it REPORTED TO LAW ENFORCEMENT? When was a complaint first filed?

Yes, this blog probably does count. The particular clause (in California law) reads:

Certain claims for transfers beyond four years must be brought under California law within one year after the fraudulent transfers could reasonably have been discovered by the claimant.

The questions of whether a "reasonable man" would have found Quatloos, and whether said "reasonable man" could have discovered the fraud by reading the start of this thread, are debatable. If "the claimant" translates to "the SEC" in this case, it's even more complicated.

[Tednewsom]

And truly, the first 15 pages of this thread-- before the collapse -- were a debate on whether or not it sounded like a Ponzi scheme. Though said debate may have been one-sided at times, there were a lot of people who defended it on both simple and intricate bases. It might have offered suspicion that NAS was crooked, but there was still room for doubt in some people's minds up to the very end.

[notorial dissent]

The only thing(s) that matters NOW, is what the court has said, IT IS A PONZI, and IT IS IN RECEIVERSHIP. What will matter is what the receiver eventually finds out and makes determination on, and what the court ultimtaley lets him do.

Until then, this is just pointless wheel spinning, and utterly pointless. You won't be able to do anything until the court makes a ruling in any case. So save it for something that does matter.

[JamesVincent]

And truly, the first 15 pages of this thread-- before the collapse -- were a debate on whether or not it sounded like a Ponzi scheme. Though said debate may have been one-sided at times, there were a lot of people who defended it on both simple and intricate bases. It might have offered suspicion that NAS was crooked, but there was still room for doubt in some people's minds up to the very end.

Would be interesting to hear about the people who left NAS after reading this forum and what they tell the receiver.

[wserra]

Cough cough.....Madoff

Ding ding ... Skilling.

Fee fee ... Whitney.

Gee gee ... Boesky.

Pen pen ... Milken.

Furs furs ... Ebbers.

[grimreaper]

The questions of whether a "reasonable man" would have found Quatloos, and whether said "reasonable man" could have discovered the fraud by reading the start of this thread, are debatable. If "the claimant" translates to "the SEC" in this case, it's even more complicated

Great point there. Out of 2400 investors there are are handful of people posting here and many aren't directly involved either. I think the reference for *discoverable* would be the initial bouncing of checks and subsequent filing forced bankruptcy by three investors. Up to that point they were under the radar. However, as I recall, the SEC was investigating before the checks bounced? If that's the case, what triggered the investigation? I take it someone tipped them off. The court might use THAT point in time as the *discovery* point. We'll just have to wait and see.

[Judge Roy Bean]

Cough cough.....Madoff

Ding ding ... Skilling. { Could be out in about three years }

Fee fee ... Whitney. { Served a little over 3 years }

Gee gee ... Boesky. { Served a little over 3 years }

Pen pen ... Milken. { Served two years }

Furs furs ... Ebbers. { He's about 10 years into a 25 year sentence }

Madoff will probably die in prison, but if they cooperate, these two yahoos probably won't spend the rest of their life behind bars.

[Tednewsom]

Playing with numbers. Yes, I know, this is sheer speculation, but I wanted to try to understand where the hell it all went. I think I finally have, and it was like building a condo on Krakatoa. Fine while it lasted, but when you're in trouble, ka-blooey.

I've used the $19,800 buy-in figure throughout because a) everyone I know paid that amount, b) because that's what it says in the contract printed here, and c) that's what Gillis said in his interview. That resulted in a $333/month payment per machine (the alleged “20% ROI”), which I've rounded to $300 -- thus a consistent $3600/year payout per contract. That's a constant whether or not the "contract" has matured.

The yearly nut is (roughly) calculable since the pay-outs do not grow exponentially. The pay-out drain on the company is straightforward and consistent: it's the total number of contracts from previous years, plus the number of new contracts sold in any given year. If there were a total of 5000 contracts in Year Ten and during Year 11 NAS sold 500, it would pay out on 5,500 contracts during Year 11. Plus, the pay-outs mostly remained constant through the years without alarming hiccups or missed checks.

In the interview from about 5 years ago, Gillis claimed NAS operated about 20,000 machines; the SEC complaint says it was 31,000 when they closed it down. They were operational from (at least) 1998 through 2014. Figuring they started with 0 contracts and ended up with a total of 30,000, with an average of 2000 additional "ATM contracts" per year, I've attempted to start them "small" and level off to a reasonable annual average of 2000 additional contract sales, based on the numbers of existing clients spreading the word, etc. I've arbitrarily assigned a couple of "good years" and a few "bad years" to have fluctuation fun.

What I have not done is speculate on how much Gillis or Wishner earned or swiped, or what their annual overhead was. I'm guessing the former was hefty, the latter minimal. I was just trying to figure an approximate cash flow. And for that purpose, I've kept a running total of "company assets" from Year One to get a general idea of the health of the scam. So for the purposes of totaling and approximation, they had Zero annual overhead (it was minimal anyway) and they didn't skim or pay themselves anything. I know, that's ridiculous, but bear with me.

Sure, your mileage may vary, contents are sold by weight not volume, do not operate heavy machinery-- but it boggles me how this thing ever lasted as long as it did, and why any sane person would have extended the game once the little ATM contracts grew up into "profit" and started being a drain on the company bank account.

NAS approximate progression

Year 1. 100 contracts total
Gross income: $1,980,000
Total debit ($3600/year each) -$360,000
Annual net $1,620,000
Total company balance to date $1,620,000

Year 2. 250 contracts total (150 new)
Gross income: $2,970,000
Total debit ($3600/year each) -$900,000
Annual net $2,070,000
Total company balance to date $3,690,000

Year 3. 500 contracts total (250 new)
Gross income: $4,950,000
Total debit ($3600/year each) -$1,800,000
Annual net $3,150,000
Total company balance to date $6,840,000

Year 4. 750 contracts total (250 new)
Gross income: $4,950,000
Total debit ($3600/year each) -$2,700,000
Annual net $2,250,000
Total company balance to date $9,090,000

Year 5. 1250 contracts total (500 new)
Gross income: $9,900,000
Total debit ($3600/year each) -$4,500,000
Annual net $5,400,000
Total company balance to date $14,490,000

Year 6. 2500 contracts total (1250 new)
Gross income: $24,750,000
Total debit ($3600/year each) -$9,000,000
Annual net $15,750,000
Total company profit to date $30,240,000

Year 7. 3500 contracts total (1000 new)
Gross income: $19,800,000
Total debit ($3600/year each) -$12,600,000
Annual net $7,200,000
Total company balance to date $37,440,000

Year 8. 7000 contracts total (3500 new)
Gross income: $69,300,000
Total debit ($3600/year each) -$25,200,000
Annual net $7,200,000
Total company balance to date $44,640,000

Year 9. 12,000 contracts total (5,000 new)
Gross income: $99,000,000
Total debit ($3600/year each) -$43,200,000
Annual net $55,800,000
Total company balance to date $100,440,000

Year 10. 15,000 contracts total (3,000 new)
Gross income: $59,400,000
Total debit ($3600/year each) -$54,000,000
Annual net $5,400,000
Total company balance to date $105,840,000

Year 11. 17,500 contracts total (2,500 new)
Gross income: $49,500,000
Total debit ($3600/year each) -$63,000,000
Annual net -$13,500,000
Total company balance to date $92,340,000

Year 12. 20,000 contracts total (2,500 new)
Gross income: $49,500,000
Total debit ($3600/yr each) -$72,000,000
Annual net -$13,500,000
Total company balance to date $78,840,000

Year 13. 23,000 contracts total (3,000 new)
Gross income: $59,400,000
Total debit ($3600/yr each) -$82,800,000
Annual net -$23,400,000
Total company balance to date $55,440,000

Year 14. 25,000 contracts total (2,000 new)
Gross income: $39,600,000
Total debit ($3600/yr each) -$90,000,000
Annual net -$50,300,000
Total company balance to date $5,140,000

Year 15. 28,000 contacts total (3,000 new)
Gross income: $59,400,000
Total debit ($3600/yr each) -$100,800,000
Annual net -$41,400,000
Total company balance to date -$36,260,000

Year 16. 31,000 contracts total (3,000 new)
Gross income: $59,400,000
Total debit ($3600/yr each) -$111,600,000
Annual net -$52,200,000
Total company balance to date -$88,460,000

----
Quite a roller coaster ride, but that last dip is a bitch and a half.

[Judge Roy Bean]

According to the Receiver, they have thus far identified 2,450 past and present "investors," and estimate the total received/invested to be approximately $123M.

Let's assume $19,800 per machine for a moment - that's only 6,212 "contracts." Let's assume for another moment that there were some number of contracts sold at $12,000 and come up with a nice round guesstimate total of 7,350 "contracts," which conveniently just happens to average out to 3 per investor.

[grimreaper]

According to the Receiver, they have thus far identified 2,450 past and present "investors," and estimate the total received/invested to be approximately $123M.

Let's assume $19,800 per machine for a moment - that's only 6,212 "contracts." Let's assume for another moment that there were some number of contracts sold at $12,000 and come up with a nice round guesstimate total of 7,350 "contracts," which conveniently just happens to average out to 3 per investor.

The $123M was for a 1 1/2YR period from Jan 2013 on. That was TOTAL funds including REAL ATM earnings (insignificant). I would estimate the *mean* # contracts per investor is 12. That's 30000 contracts divided by 2450 investors. If you take a look at the survey here http://nasivictims.wordpress.com/ you get an idea of investor profile ownership, albeit a very limited one. 43% of those reporting ownership had more than 10 contracts. Iknow this is a very small sample, but it gives you some indication.