solace about twenty years ago so that the trustee could distribute these funds to the later investors usually hedge funds there are two fundamental errors mandating reversal here the st relates to enforceability on the jury instruction issue the reason the grip equipment value jury instruction issue the jury i would like you to clarify the jury you have an adverse jury verdict on both actual fraud and destructive from the correct so just prevailing on the good faith issue would not touch the actual fraud verdict correct it would not touch well because my bottom where i'm going at the bottom line if you don't win both as the verdict stand so if we win on only reasonably equivalent value that mandates reversal of the construct of fraud verdict but if that's the only big because that's an element of the case for constructive frock but if that is reversed and not good faith then the actual fraud verdict would still stand in the same amount so you would still have to address the issue of raising of the equivalent value even if that even if the numbers wouldn't change because there were two separate two separate verdicts two separate judgments so on date so that may be sure i understand the jury was asked specifically on the verdict form you're familiar with and they said no longer good faith can just one of them can be good right if the good faith instructions good you've lost right if we lose seventeen going if we if we lose on good faith we lose on on actual fraud we could still win on constructive fraud but it wouldn't make any difference in the dollar amount because the dollar amounts on the constructive fraud and the actual fraud are the same so it's something you would have to address but it wouldn't make any difference on the dollar amount now you could however importantly judge benson you could find that the destruction seventeen was proper but still find that there was good faith because the reasonably equivalent faith with the time he got the payments did he have reason to think that he was getting paid with swindled money from somebody else that's that actual knowledge standard some courts like texas refer to a willful ignorance which is kind of a did not receive those payments in good faith but the jury is instructed that that's a separate element that they that they have to consider and it seems to me you could argue and maybe you did that there's just no way maybe it was so well hidden it was so fraudulent that nobody could figure this out and so that the good faith does have some it does do work separate from what you've described in what you think is now an er equipment value instruction if there were particular if they were a proper instruction on good faith it was still a huge hurdle that we head once the jury was told  client was being paid on worthless notes that was going to be really really tough for him to convince the jury that he received those payments a good faith and we try to make those arguments but the instructions they were given talks about the types of things that could put somebody an inquiry notice in that case there was a quote looming bankruptcy in arc that our case made a bankruptcy eight years later and that sherman case  i understand your argument did you begin it by saying it was illegally improper instruction that's correct because as i understood your objection and the district court is that you didn't have a problem as a legal matter but you are saying either i  our example so we're not my understanding of your objection was so we're not highlighting very pieces of evidence that the court things are important or take them take them all out so i maybe i misunderstood the nature of your and your that that the payments he was getting was ill gotten gain or obtained by fraud or what it was and this could be debatable because there's no minnesota law on this or was it should he have particular case you could look at what might be actual red flags the red flags here actually were not red flags of what he should have known relatively high interest rates on loans at forty eight percent and when during the relevan period that's not anywhere near the interest rate in that red flag you know red flag means watch out yes rip red flag means means watch out but focus on the time that you're looking at the good that the jury needs a lot of a lot of help with that it just stopped with the st sentence so that would have been much improved and sort of this thing you know i'm michael my question was more specific was that  counsel see this as a proposed instruction i think i think it was the day before but i well i was not was there a proposal from the defense on this question the proposal was just to t ake out those examples judge and says no it was an either or action which would suggest that the or would suggest the need for a specific proposal and he said that he wasn't going to shouldn't defense counsel those at a proper alternative i think we supposed to make it up or it's a district court supposed to make it up you know i could have a flat objection this is not a term that the jury needs help on the state such things as possible alternative red flags stop there now i know what the defense has proposed what you're saying i don't know what they proposed what they proposed was take out that attacking these two jury instructions that your honors have already hit on and it is correct as you noted that to reverse the court must find prejudicial abuse of discretion or error in both of those instructions seventeen and eighteen of legally enforceable contract i'm certainly happy to talk about that your honor and if it seems that what that's what the basis of eighteen is that's correct and if then you know if the district court notion of legally the presumption expressly rejected by the supreme court i'm in a solo then would you agree can structured a team's gong is there and we can now we can just talk about good faith and we'll leave we'll leave that issue for the next argument i would agree that if you perceive legal error instruction eighteen that instruction seventeen is my question if if the if the district court's interpretation of legally enforceable contract is looking after the fact as a matter of hindsight years later it's it's void because it was in furtherance of a ponzi scheme if that is the legally equivalent of restoring the ponzi scheme presumption that the finn case rejected as a matter of minnesota law then this this language instruction eighteen is shares that fatal  if instruction eighteen reinstated the ponzi scheme presumption it is an error of law but instruction eighteen did not do that you did not use a presumption it was entirely consistent with your honor and i'm happy to get and use the pres there was no presumption in this case your honor because there was transfer by transfer evidence with respect to every single one of these transactions it's not the point the point is that the jury was instructed i believe at least this is what the ponzi scheme but it's because in terms of notes being used to further fraud and so on but the keep distinction your honor is the district court did not presume those facts about the notes it was proved in my case to a jury but every single one of those notes was used to further the fraud and paid with money stolen from other investors there is no contrary evidence in this record in the jury's verdict absolutely shows that on a transfer by transfer basis exactly  the and the payments were made they were only it seems to me they were only legally unenforceable as a met when so when years later people uncovered the bond well you're out of that that takes us in a phantom i'm happy to tell that you're they're supposed to go transfer by transfer it doesn't have the language it sounds like fan so it has language it says if an interest payment is paid on really it says that wise if an interest payment is paid on they incur debt then there is no valid in a cd debt not for reasonable value it says that twice right so it's directly contrary to fan it speaks in terms of single transfers and on fraud does any thanks a transfer by transfer the phrase transfer by transfer is not you know that's pretty bad ride to comply with frank fan well your honor i think that the wave of the evidence was presented in the way that the instructions and the jury verdict form presented the issues as a whole left the jury basically i mean that the evidence was presented on a transfer by transfer basis and the jury was effectively told that  if if there were there were some transfer transactions by the patters p c i they were legitimate none of the ones in this case are and what until until until it dug out ten years later and the whole world has been fooled into fraud what is what is legally what is legally on enforceable about notes taken  based on a representation or promise of by the debtor that these the proceeds will be used to to finance legitimate transactions what is legally unenforceable your honor is that the law of this court and of minnesota and of every other particular on alcohol and horseracing and prostitution and that stuff it's hard to figure those cases out it did i've actually think that what those cases stand for that you're referring to the older minnesota cases that appellant sites around and those deal with  between the two parties to the contract and what they effectively say and for example the heart publication case says this that appellant cited says that the breaching party cannot use its own fraud really galli to avoid responsibility that makes actively deem a contract between the operator of the scheme and an investor to be unenforceable as a matter of public policy and that your on on the scheme presumption a lemonades the possibility that an investor has a legally enforceable claim against the debtor based on the investment contract and then it rejects that reasoning it rejects the presumption that every contract with a ponzi scheme is a fraudulent contract the contract that issu g fan were real loans based on a real business dealings were real loans they were the proceeds were just misused the proceeds will misuse the loans were never intended to be used as represented to the brutality by home preference law argument respectfully are i wouldn't agree with that we've established all of the elements of the project that transfer and preference arguments for over many many years and that's sure what it sounds like let me return if i can your hon to the key points in fin that i think support our position on this st of all is the question presented and that is whether the so called ponzi scheme presumption applies that's a page six hundred and forty two dollars so this is limited to the presumption which is a the contracts in front of it are enforceable it says that existence of reasonable equivalent value depends on the facts and circumstances of each case it says that a contractual promise to pay quote would fit comfortably within the realm of antecedent debt absent the existence of got money and money out and it got new it got new investors in new investments to investment dollars to use to promote its business supposedly what everybody would leave  eight if instruction eighteen it keyed the jury to that statement but your run of the evidence before the jury was that every single one of these deals was funded by fraudulent lee obtain money from the ponzi scheme only as only in your honor yes but on general principles parole evidence is always admissible to prove that a contract was part of an illegal deal and on that basis for example in or about the court ordered a new trial basically to allow evidence that a deal was tainted place is not anywhere found in any precedent on good faith cases that they are always consider the facts and get a chance to argue we have lost the chance to argue the on the issue of whether has certainly been thoroughly briefed and we've gotten into at least part of it an argument we'll take a break and let the counsel for the side what needs to be we need to hear further