the issue before the court is an interesting one and it is one that is subject to a very clear circuit split amongst other courts that of decided it we have both parties of side of the cases clearly showing that different courts reached polar opposite conclusions when faced with the same basic fact pattern unfortunately the district court here adopted the rationale from the fist circuit in the warfield the byron case in doing so the district court impose ultimately determined to be without mr mark with his knowledge of ponzi scheme we're here to now ask the court to reverse a district court's decision granting summary judgment and in doing so adopt the competing rationale that is set forth by the federated were a little bit different because the defendant there a miss or like was an office manager she was providing then jury will day to day duties for the for the company were here the evidence is an undisputed mr markowitz provided solely referrals he was not employee of the company but i do think the financial federated case is instructive when looking at those facts the defendant there was a miss or like she was the daughter of the ponzi schemes operator the  made a note that she had a very limited educational professional background yet she received over one point one million dollars in quote unquote salary for office manager ariel duties the eleventh circuit seemed pretty skeptical in their opinion about whether she actually earned all that money and whether she provided services reasonably equivalent in value to one point one million dollars nevertheless the the eleventh circuit still remanded the matter to allow miss or like the opportunity to at least put on that defense because the lower court had ruled she could not put on she could not assert the really equivalent value defense because the money came from the posse scheme in general and in the circuit could you still entitle to that defense we don't know if you're going to be able to ultimately prove it at the lower court level but you need to have that opportunity and here mr markowitz was denied that opportunity to show that the referrals he provided the services he provided to the company as far as what's before the court now we have the undisputed set of the excuse me the stipulated set of undisputed facts that myself and the receivers counsel prepared to connection with their motion for summary judgment which confirm that mr mark what's did provide referrals to the company and he was paid in exchange for those referrals we had mr mark with his decoration stating that he had devoted he had quit his prior job in fact and moved to florida so he could devote his full time to generating referrals and thereby generating income for himself but many aside we do not have the number of referrals that it faces not in the record before and that was really and sorry just credit the didn't  confirms that he did not know this was a ponzi scheme that is in the record i believe it appellant i set a record of speech twenty two twenty three that it was only after the fact that he discovered that whatever else did that this was a it you're just creating a bigger scam in therefore sending more investors and more dollars into the scam creates more havard so why should you who you know get paid for that why should you get your money back even though you're totally innocent you are creating more havoc because that is certainly the analysis of right a circuit and the reason that it should not apply here is depriving mr mark witz of the affirmative defense of california legislature wants to do so i'd respect with some of the be improper for this court to do so just like i think it is improper for the fifth circuit to do so as well and again i'll note that the majority of the cases that have  the more appropriate reasonable way to approach these is look at the quid pro quo transactions do on a case by case analysis and not the effect that the services had on the overall enterprise to create some sort ponzi schemes in the circuit i think would be inappropriate and would step on the legislature's toes i'll note that there are courts within this circuit in particular the southern district california bankruptcy court and the commercial money center that have ruled that perth pursuant to california's fraudulent transfer act you have to look at the specific transaction and that the language of the statute itself commands such a result and the exact same result was reached by the illinois district bankruptcy court in the first commercial management group case cited are brief their statute was identical to california it's connecticut district court made the same decision in the carousel richardson case based on the same statute that's been raised by other cases is to create an exception for ponzi schemes and services provided to ponzi schemes creates a slippery slope is the core going to determine that every business or  person who does it happens if you business with a company that turns out to be a ponzi scheme has to return whatever wages they earned the the universal clearinghouse case in the in utah district court said that can apply to a utility company or shipping service and the third party agent paid to recruit new investors to a ponzi scheme mike markowitz though ordinary vendor services technically allow the scene to continue the connection between those services in the crease creditor liability is interactive and ten you wait for answers out every new person you bring in just see creases the liabilities i understand that distinction your honor but the the affirmative defense available to defendants in these types of cases is good faith and reasonably quick one values so for it's not an issue about whether as an indirect transfer or then direct effect on it or a direct effect that's what the statute requires the statute provides that every defendant is entitled to assert this defense and this remark was precluded from doing so i understand we all want to stop prevent ponzi schemes and i understand that the receiver's goals here or or noble that's what they're trying to do with marshal assets to give to the victims of the ponzi scheme but the receiver's actions have to be checked that perhaps is a bad analogy but the receiver can go out and rob a bank and just take that money say well i want to give that to these these poor losing investors they have to have a legal basis for their actions and here we don't believe that they did because they don't allow this to markets that opportunity to present his defense that is available again to every other defendant who's in a similar circumstance under three four three nine point zero four and all the morning that please the court had fetes on behalf of william hoffman the court appointed receiver i'd like to start by putting taking a step back for a second to putting this case into context this case arises from a ponzi scheme in which over a thousand an investor's primarily in the los angeles area but also throughout the rest of the country lost collectively over  hundred million dollars in a scheme perpetuated over a many years investors were guaranteed promised twenty percent return on their money to invest in these a t m sale leaseback contracts and over many years many investors made substantial profits from those returns that they were paid other investors lost hundreds of thousands of dollars maybe millions of dollars individually and collectively over one hundred million dollars mr markowitz invested his own money in the scheme and therefore was receiving these guaranteed twenty percent returns on his money and he saw another opportunity and that was to was he also a victim of the scheme there were questions as to whether she had a gain or a loss on his personal investments into the scheme the receiver did not pursue summary judgment of his alleged profit that we pursued summ judgment only i was to the referral fees so there's a question as to whether he was a net winner or a net loser from the scheme but he did recruit his family members and friends to come to the scheme to jump to invest in the scheme and by doing so was paid approximately seven hundred fifty thousand dollars and admits that he expanded and the number of people the number of victims affected by this the losses suffered by all of them collectively including the seven hundred fifty thousand dollars of other people's money that was paid to him for these referrals mr fitz was the resistance to this summary judgment record i didn't know was that in essence the resistance to the summary judgment motion that you filed i didn't know is that when mr m which is papers said effectively yes ok he didn't know that this was a this was a ponzi scheme and and to be fair the receiver has not contested that he invested his own money we have not allege that his actions were in vats faith however he did obtain an enormous amount of money seven hundred fifty thousand dollars at the expense of the losing investors in this ponzi scheme who we're now trying to recover the funds and distribute that provide a recovery to those investors mr mr  markowitz claims that he was denied the right to present the defense of reasonably equivalent value that is not the case this was a motion for summary judgment discovery had been conducted discovery had closed he had every opportunity to gather evidence of whatever value he alleges he provided and to present that in opposition to the receiver's motion for summary judgment types of evidence would show value in this situation well we believe that there there can be no true evidence of value in this context we believe that the fifth circuit correctly decided the issue and that as a as a matter of law bringing new victims to a ponzi scheme cannot provide value so even if you're acting good faith investing your own money you don't believe it's a pon scheme if you expand the scheme by bringing new investors in and we receive a referral fee and therefore there is a diminution to the estate as a result of that transaction if you look at it as a transaction by transaction basis what happened is you bring a new investor in that person puts in their money let's say they invest twenty thousand dollars because this is a ponzi scheme automatically you've got a debt to that person of at least twenty thousand dollars and then you've paid a referral fee on top of it to the agent in this case mr markowitz let's say he's paid five thousand dollars so twenty thousand dollars that's come in you've got a corresponding debt to that investor and now you've paid five thousand dollars on top of it you've you diminish the estate by at least five thousand dollars and you do that over and over and over and you get a very circuit held in the warfield case and what other courts have held as well however it's even if the court were inclined to follow the eleventh circuit we we believe in this case the proper result is still to affirm because mr markowitz did not present any evidence at the district court level of any value that he provided in exchange for the seven hundred fifty thousand dollars and certainly not reasonably equivalent alue to that sum of money the only evidence he put forth was a declaration stating that he referred friends and evidence as to what the terms were of those transactions and so there was no basis for judge of taro at the district court to see that there had to find that there was a genuine issue of fact as to that issue and so the court properly help that as a matter of law in the in the record before it there was no reasonably equivalent value i also like to address a couple of the cases cited by by counsel in the in re commercial money case which is the bankruptcy court for the southern district of california and that case is somewhat notable because it's the only court i believe in the ninth circuit that has looked at this specific issue under the california uniform voidable transactions act and that case is distinguishable because the defendant specifically put on evidence as to the the standard commissions in the industry that it was in and what it was paid and how the payments it received were consistent with industry standards it was a third party surety that had provided surety bonds in connection with and an investment scheme and so the court noted that that it  submitted evidence of those commissions being standard with the industry finally the the slippery slope argument as your honor has as noted is not compelling in that there's a  very clear distinction between someone who provides a referral and therefore directly expands the scheme exacerbates the losses suffered by the investors and a third party utility provider or landlord or vendor who is simply providing a standard transaction commercial transaction in which services are are exchanged you know there's a there's a market rate obviously anybody can do that out in the industry i mean i mean out it out in the in the marketplace so there's a clear distinction between the  sort of attenuated kind of perpetuation of the scheme that these sort of general vendors provide and the direct causal connection between referring a new victim to the scheme and the loss that's that's raised that results from that transaction and the referral fee paid there are no further questions and said thank you thank you provides that he did refer friends and family and that the referrals became such a big part of his lifestyle of his income that he quit his other employment and focus full time on that we do not get into the the issue of how many referrals we provided what you've provided paid because this was on the receivers motion for summary judgment is our position that that evidence was enough to was in a tribal issue of fact and allow us to go forward as far as the the warfield case and then the of course counsel's argument is that instead of  absolutely is the affirmative defense set forth in the statute provides that if it is a title to that good faith easily proven value defense the argument that it doesn't apply in ponzi schemes is contrary to the statute other circumstance fraudulent transfer actions the defendant is entitled to show that their services they provided or recently quit want to what they receive but there is no different rule or there should be a different rule with respect to