Fraudulent Conveyance
Categories: Trading, Ethics/Morals, Regulations
Fraudulent conveyance...a.k.a. fraudulent transfer...is a type of fraud where property is transferred from one party to another through a bankruptcy trustee. Even though it’s fraud, it’s considered civil law rather than criminal.
There are two types of fraudulent conveyance: actual fraud and constructive fraud. Actual fraud is when someone in debt transfers property in an attempt to protect their own assets. For instance, maybe they set up a shell corporation or transferred the property to their spouse or other relative...trying to sneakily keep it without having to actually give it up.
The other type, constructive fraud, is when someone in debt gets screwed over in a property transfer and becomes insolvent. For instance, if they receive way less money than the property was actually worth, which means the creditor owes the debtor some money (who now can’t pay their debts). It’s important to distinguish between the two, since one looks into the debtor while the other looks into the creditor. It takes two to tango, and either of them could be doing sketchy things.
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