4878-4514-4818 

Carmen Contreras-Martinez (admitted pro hac vice) 

SAUL EWING LLP 

701 Brickell Avenue, Suite 1700 

Miami, FL 33131 

(305) 428-4500 

carmen.contreras-martinez@saul.com 

-andTurner N. Falk (admitted pro hac vice) 

SAUL EWING LLP 

Centre Square West 

1500 Market Street, 38th Floor 

Philadelphia, PA 19102-2186 

(215) 972-8415 

turner.falk@saul.com 

Counsel to Funderz.Net, LLC

Micheal W. Bishop 

Texas Bar No. 02354860 

Amber M. Carson 

Texas Bar No. 24075610 

GRAY REED 

1601 Elm Street, Suite 4600 

Dallas, Texas 75201 

(214) 954-4135 

mbishop@grayreed.com 

acarson@grayreed.com 

Counsel to Funderz.Net, LLC

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 

In re: 

DENNIS JAMES ROGERS II, 

Debtor. 

 

(Chapter 7) 

Case No. 22-30500-SWE 

AREYA HOLDER AURZADA, CHAPTER 

7 TRUSTEE FOR THE BANKRUPTCY 

ESTATE OF DENNIS JAMES ROGERS II 

Plaintiff, 

v. 

FUNDERZ.NET, LLC 

Defendant. 

 

Adv. Pro. No. 24-03028-SWE 

REPLY MEMORANDUM 

IN FURTHER SUPPORT OF DEFENDANT’S MOTION TO DISMISS

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i 

TABLE OF CONTENTS 

Page 

INTRODUCTION .......................................................................................................................... 1

ARGUMENT .................................................................................................................................. 1

A. The Debtor Did Not Own Funds in the Accounts of the Affiliated Entities ........... 1

B. Alter Ego Does Not Cause a De Facto Merger ....................................................... 3

C. The Trustee Misapplies the Ponzi Presumption of Actual Fraudulent Intent ......... 3

D. The Trustee Does Not Plead the Badges of Fraud .................................................. 5

E. The Trustee Misstates Precedent on Reasonably Equivalent Value ....................... 5

F. The Trustee Cannot Plead the Timeline Required to Show Lack of Good Faith ... 7

G. Unjust Enrichment is Inadequately Pled ................................................................. 7

H. Section 550 Limits the Trustee’s Recovery to the Value of the Transfers ............. 8

I. The Trustee Should Not Be Permitted to Cure Pleading Deficiencies Through Yet 

Another Amendment ............................................................................................... 9

CONCLUSION ............................................................................................................................. 11

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ii 

TABLE OF AUTHORITIES 

 Page(s) 

Cases 

Brown v. Phillips (In re Phillips), 

379 B.R. 765 (Bankr. N.D. Ill. 2007) ........................................................................................8 

Byman v. Denson (In re Edwards), 

537 B.R. 797 (Bankr. S.D. Tex. 2015) ..................................................................................8, 9 

Castleberry v. Branscum, 

721 S.W.2d 270 (Tex. 1987) ......................................................................................................3 

Coral Petroleum, Inc. v. Banque Paribas-London, 

797 F.2d 1351 (5th Cir. 1986) ...................................................................................................2 

Frank v. Ward (In re Ward), 

557 B.R. 508 (Bankr. N.D. Tex. 2016) ......................................................................................3 

Gardemal v. Westin Hotel Company, 

186 F.3d 588 (5th Cir. 1999) .....................................................................................................3 

Genova v. Rivera Funeral Home (In re Castillo), 

39 B.R. 45 (Bankr. D. Colo. 1984) ............................................................................................2

Hirsch v. Arthur Andersen & Co., 

72 F.3d 1085 (2d Cir. 1995).......................................................................................................4 

Janvey v. Alguire, 

628 F.3d 164 (5th Cir. 2010), superseded by 647 F.3d 585 (5th Cir. 2011) .............................4 

Janvey v. Alguire, 

846 F. Supp. 2d 662 (N.D. Tex. 2011) ......................................................................................4 

Janvey v. Brown, 

767 F.3d 430 (5th Cir. 2014) .................................................................................................5, 6 

Jimmy Swaggart Ministries v. Hayes (In re Hannover Corp.), 

310 F.3d 796 (5th Cir. 2002) .....................................................................................................6 

Jones v. Robinson Prop. Grp., LP, 

427 F.3d 987 (5th Cir. 2005) ...................................................................................................10 

Life Partners Creditors’ Tr. v. Cowley (In re Life Partners Holdings, Inc.), 

926 F.3d 103 (5th Cir. 2019) .....................................................................................................4 

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4878-4514-4818 

Matter of Southmark Corp., 

49 F.3d 1111 (5th Cir. 1995) .....................................................................................................2 

Stettner v. Smith (In re IFS Financial Corp.), 

669 F.3d 255 (5th Cir. 2012) .....................................................................................................2 

Stripling v. Jordan Production Co., LLC, 

234 F. 3d 863 (5th Cir. 2000) ....................................................................................................9 

In re TOCFHBI, Inc., 

413 B.R. 523 (Bankr. N.D. Tex. 2009) ......................................................................................7 

Tow v. Speer, 

No. CV H-11-3700, 2015 WL 12765414 (S.D. Tex. Aug. 17, 2015) ...................................8, 9 

Trauner v. Delta Air Lines, Inc. (In re Think Retail Sols., LLC), 

Case No. 15-56153-BEM, 42-43 (Bankr. N.D. Ga. Jul. 5, 2019) ..............................................6 

Statutes 

11 U.S.C. § 544 ............................................................................................................................8, 9 

11 U.S.C. § 548 ................................................................................................................................9 

11 U.S.C. § 550 ........................................................................................................................3, 8, 9 

Texas Uniform Fraudulent Transfer Act ......................................................................................8, 9 

Other Authorities 

Fed. R. Civ. P. 9(b) ..........................................................................................................................5 

Fed. R. Civ. P. 12(b)(6)....................................................................................................................9 

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4878-4514-4818 

Defendant Funderz.net, LLC (“Funderz”) files this Reply in support of its motion 

(the “Motion”)1 to dismiss the Amended Complaint filed by Areya Holder Aurzada, Chapter 7 

Trustee for the Bankruptcy Estate of Dennis James Rogers II and respectfully states as follows: 

INTRODUCTION 

1. Funderz’s Motion showed that the Amended Complaint did not plead a Ponzi 

scheme or actual fraud, alleged Transfers of non-Debtor property, and highlighted the limited 

impact of an alter ego finding. In the Response, the Trustee puts forth new theories for liability, 

alleging that the Debtor owned funds titled in the names of Affiliated Entities, and misquotes or 

misapplies case law to make arguments contrary to binding precedent. As set forth in the Motion 

and this Reply, the Amended Complaint has not corrected any of the deficiencies in the initial 

Complaint. It must be dismissed with prejudice. 

ARGUMENT 

A. The Debtor Did Not Own Funds in the Accounts of the Affiliated Entities 

2. The Trustee’s Response concedes that Transfers in excess of $3.8 million were 

made to Funderz out of accounts titled in the names of the Affiliated Entities, not the Debtor. 

These Transfers cannot be avoided because they are not transfers of property of the Debtor. 

3. The Amended Complaint pleads that the Affiliated Entities should be considered 

alter egos and their separateness should be disregarded. It does not plead that the Debtor owned 

the funds in their accounts. This alone is sufficient to disregard the Trustee’s newly-raised 

argument that the Debtor owned the funds transferred from Affiliated Entities. 

4. The Trustee also misapplies the law on deemed ownership, inverting the policy 

purposes behind it to attempt to obtain a windfall for the estate. The cited cases hold that a debtor 

is an owner for transfer avoidance purposes when the non-debtor’s transfer diminishes the debtor’s 

1

 All capitalized defined terms have the same meaning as in the Motion. 

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estate: “the primary consideration in determining if funds are property of the debtor’s estate is 

whether the payment of those funds diminished the resources from which the debtor’s creditors 

could have sought payment.” Stettner v. Smith (In re IFS Financial Corp.), 669 F.3d 255, 263 

(5th Cir. 2012). 

5. Deemed ownership ensures that a debtor cannot insulate himself from creditors 

while placing all his assets in technically-separate entities: “it is essential that the debtor have an 

interest in the property transferred so that the estate is thereby diminished.” Coral Petroleum, Inc. 

v. Banque Paribas-London, 797 F.2d 1351, 1355-56 (5th Cir. 1986) quoting Genova v. Rivera 

Funeral Home (In re Castillo), 39 B.R. 45, 46 (Bankr. D. Colo. 1984). “[I]f funds cannot be used 

to pay the debtor’s creditors, then they generally are not deemed an asset of the debtor's estate” for 

avoidance purposes. Matter of Southmark Corp., 49 F.3d 1111, 1117 (5th Cir. 1995). 

6. In all the cases cited above, the debtor commingled funds with those allegedly 

owned by non-debtors. In this case, the Amended Complaint pleads that no commingling 

occurred: the Debtor and Affiliated Entities used separate bank accounts for separate transactions. 

7. The Debtor did not deplete his personal funds to place money into the Affiliated 

Entity bank accounts. Instead, the opposite occurred: the Affiliated Entities made Transfers 

reducing the amount owed by the Debtor to Funderz. The Trustee concedes that “the Trustee does 

not assert that the transfers to Funderz were transferred other than the single time they were 

transferred to Funderz.” Response ¶ 54. 

8. This concession demonstrates that the Debtor did not disadvantage himself and his 

estate when the Affiliated Entities made the Affiliated Entity Transfers. The Affiliated Entity 

Transfers reduced the amount the Debtor owed on his personal guaranty, bolstering the estate. The 

Debtor cannot be the de facto owner of funds in the Affiliated Entities. Transfers from these 

entities were not transfers of the property of the Debtor. 

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B. Alter Ego Does Not Cause a De Facto Merger 

9. The Response admits that Frank v. Ward (In re Ward), 557 B.R. 508, 516 n.9 

(Bankr. N.D. Tex. 2016) states that “alter ego is only an imposition of liability” and not a de facto

merger of entities.2

 The Response cites no case finding de facto merger. 

10. Despite the Response’s argument to the contrary, Gardemal v. Westin Hotel 

Company, 186 F.3d 588 (5th Cir. 1999) does address whether this principle is limited (as in an 

“imposition of liability” theory) or unlimited (as in a de facto merger theory). The Fifth Circuit 

clearly held for limited imposition of liability: “the law will likewise disregard them so far as is 

necessary to protect individual and corporate creditors.” Id. at 593 n.2 citing Castleberry v. 

Branscum, 721 S.W.2d 270, 271 (Tex. 1987) (emphasis added). 

11. The Trustee must first prove the Debtor was liable for a debt (here, avoidance 

recovery under Section 550), then show that it would be proper for that debt to be assessed against 

Affiliated Entities that are alleged alter egos. What the Trustee cannot do is take Transfers made 

by the Affiliated Entities, turn them into liabilities of the Debtor and then assess them against the 

Affiliated Entities. This process – exactly what the Trustee seeks to achieve – is de facto merger, 

prohibited under applicable Texas law. All claims arising from the Affiliated Entity Transfers 

cannot be recovered from Funderz and must be dismissed. 

C. The Trustee Misapplies the Ponzi Presumption of Actual Fraudulent Intent 

12. The Amended Complaint pleads that “Rogers has plead guilty to securities fraud.” 

Am. Compl. ¶ 17. The Response materially changes this allegation, falsely stating that “Rogers 

has been convicted of securities fraud and has admitted operating a Ponzi scheme.” Response 

¶ 1 (emphasis added). The Court must disregard unproven facts outside the Amended Complaint. 

2

 As Ward explained, under the controlling “imposition of liability” theory of alter ego, “the assets of the non-debtor 

entity may become liable for the payment of a specific debt owed by the Debtor (because alter ego is a remedy to 

assist in the collection of a proven debt against the Debtor), but the Debtor and the non-debtor remain legally distinct 

entities.” Id. at 515–16. 

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13. The Ponzi presumption may only be applied if the “enterprise operated as a Ponzi 

scheme’”, and upon such a showing the presumption applies to all persons involved “without 

proving which of the entities involved in the scheme was the transferor.” Life Partners Creditors’ 

Tr. v. Cowley (In re Life Partners Holdings, Inc.), 926 F.3d 103, 119 (5th Cir. 2019) quoting 

Janvey v. Alguire, 846 F. Supp. 2d 662, 672 (N.D. Tex. 2011).3

14. The Ponzi presumption applies to enterprises where the entities involved generate 

a false impression of profitability to create a constant stream of new investors to pay old investors. 

Any transfer from any entities involved in that enterprise may be avoided as actually fraudulent, 

without the necessity of proving which involved entity made the transfer. 

15. These principles show that the Ponzi presumption does not apply to the instant case. 

Funderz loaned money to OMTC, an entity that was on the Fuel Fraud side of the Debtor’s 

schemes. The Amended Complaint and plea deal attached to it do not allege any payment of older 

investors or creditors out of new investors or creditors of the Fuel Fraud, but do make this 

allegation for the separate Water Fraud. The Water Fraud involved different Affiliated Entities. 

16. The Amended Complaint also fails to plead the key aspect of a Ponzi scheme 

related to Funderz’s lending: promises of high returns from profits. Funderz did not lend to get 

above-market returns on a speculative investment based on promises of massive, fake profits. It 

loaned money at the market rate for high-risk lending, after being solicited by the Debtor in its role 

as a lender. Like a traditional loan, and unlike a Ponzi investment, the loan was supposedly secured 

- by fuel rights the Debtor and Affiliated Entities never possessed. 

3

 For an enterprise to “operate as a Ponzi scheme”: 

The corporation gives the appearance of being profitable by obtaining new investors and using those 

investments to pay for the high premiums promised to earlier investors. The effect of such a scheme 

is to put the corporation farther and farther into debt by incurring more and more liability and to 

give the corporation the false appearance of profitability in order to obtain new investors. 

Janvey v. Alguire, 628 F.3d 164 (5th Cir. 2010), superseded by 647 F.3d 585 (5th Cir. 2011) quoting Hirsch v. Arthur 

Andersen & Co., 72 F.3d 1085, 1088 n.3 (2d Cir. 1995)) (alteration in original). 

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17. Funderz did not act like a Ponzi participant responding to the kind of incentives that 

justify the Ponzi presumption. It was a high-risk lender lending money at relevant rates for its 

industry, allegedly secured by assets. The Amended Complaint does not allege that any person 

made a Ponzi-like investment into the OMTC-facilitated Fuel Fraud. The Ponzi presumption does 

not apply, and the Trustee has not pled actual fraudulent intent. 

D. The Trustee Does Not Plead the Badges of Fraud 

18. The Trustee neglected to plead the badges of fraud. The Amended Complaint does 

not plead inadequate consideration: OMTC and the Debtor entered into a normal loan contract 

with Funderz, agreeing to terms therein, and OMTC received the promised loan funds in exchange. 

When Funderz received the Transfers, it reduced the debt accordingly, providing exactly-equal 

consideration at both the inception of the transaction and upon receipt of the Transfers. 

19. The Amended Complaint does not plead any relevant facts to establish a timeline 

to show when the Debtor’s financial condition or the cumulative effect of transactions 

overwhelmed the Debtor. Without this specificity as required by Rule 9(b), Funderz cannot assess 

or defend itself from these allegations. 

20. Further, even if these two badges are present in the Amended Complaint, they are 

insufficient given that all other badges of fraud demonstrate a lack of fraudulent intent and a tense, 

but commercial, repayment process to Funderz. Because the Trustee does not plead sufficient 

badges of fraud, the Amended Complaint does not demonstrate actual fraudulent intent. 

E. The Trustee Misstates Precedent on Reasonably Equivalent Value 

21. The Response alleges that the constructive fraud claims are viable because 

“investments in Ponzi schemes do not add value, they only create debt.” To do so, the Response 

distorts Janvey v. Brown, 767 F.3d 430 (5th Cir. 2014). First, that case only addressed “reasonably 

equivalent value” through the lens of the “good faith taker for value” defense, not the “lack of 

reasonably equivalent value” element of the affirmative avoidance claim. The “reasonably 

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equivalent value” analysis used in assessing a prima facie fraudulent transfer claim looks at value 

from the debtor/transferor’s perspective. But “the value analysis for the good-faith defense is 

viewed from Defendant's perspective and the question is “[h]ow much did the transferee ‘give?’ 

The concern here ... is for the transferee's side of the exchange, not the transferor's gain.”” Trauner 

v. Delta Air Lines, Inc. (In re Think Retail Sols., LLC), Case No. 15-56153-BEM, 42-43 (Bankr. 

N.D. Ga. Jul. 5, 2019) citing Jimmy Swaggart Ministries v. Hayes (In re Hannover Corp.), 310 

F.3d 796, 802 (5th Cir. 2002) (applying UFTA provision under Georgia law). 

22. Second, that case addressed only actual fraud: “It is well-established that the 

Stanford principles operated the Stanford entities as a Ponzi scheme, and the existence of the Ponzi 

scheme establishes fraudulent intent.” Brown, 767 F.3d at 439. 

23. Third, that court held that the underlying investment contracts were void: “Here, 

we conclude that there is no valid claim for interest; the CDs issued by SIB are void and 

unenforceable. This is because “[t]o allow an [investor] to enforce his contract to recover 

promised returns in excess of his undertaking would be to further the debtors' fraudulent scheme 

as the expense of other [investors].” Id. at 441. (emphasis added). The Response omits the 

highlighted portion of the quote, misstating the binding precedent: the entire reason the Brown

court found that no value had been provided was that the underlying investments, traditional Ponzi 

“investments” and not loans, were void. Id. There are no cases – the Trustee certainly cites none 

– holding that a loan offered on market terms to a fraudulent schemer is void. 

24. Funderz’ loan is not void; it applied the Transfers to reduce the debt owed, 

providing reasonably equivalent value per se. Seen from the Debtor’s perspective, each Transfer 

reduced his liability. Seen from Funderz’s perspective, it received one dollar for each dollar of 

enforceable debt it satisfied. From either angle, Funderz provided reasonably equivalent value. 

The Amended Complaint pleads facts that show that, for both analyses, reasonably equivalent 

value was conveyed. The constructive fraud claims must be dismissed. 

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F. The Trustee Cannot Plead the Timeline Required to Show Lack of Good Faith 

25. As set forth in the Motion, the Amended Complaint does not even attempt to plead 

when Funderz was on inquiry notice of the alleged avoidability of the Transfers. The Amended 

Complaint alleges that Funderz sued the Debtor and OMTC on some unspecified date, received 

the Transfers on or before August 12, 2020, and then “At some later point, as set forth in their 

amended petitions [in the suit], Funderz specifically knew that Rogers used their funds to pay other 

investors and state so in sworn pleadings.” Am. Compl. ¶ 24. 

26. Even if this type of knowledge put Funderz on inquiry notice, the Amended 

Complaint does not actually plead that Funderz had this knowledge at the time it received any of 

the Transfers. Without this most basic timeline, which is allegedly shown by public pleadings the 

Trustee has declined to cite, the Amended Complaint cannot plead a lack of good faith. 

G. Unjust Enrichment is Inadequately Pled 

27. The Trustee agrees that unjust enrichment cannot stand if a valid contract is in 

place. Response ¶ 56. The Amended Complaint does not allege that the Funderz contract is void. 

28. The Response does not newly allege the contract is void, but mentions that 

“underlying contracts may be void and unenforceable for a variety of reasons.” Response ¶ 56. 

An allegation that certain facts may or may not be true pending other unpled facts is not a wellpled allegation. The Amended Complaint pleads that a contract existed, so the Trustee cannot 

recover in unjust enrichment. 

29. The Trustee alleges that the in pari delico defense against unjust enrichment is highly 

fact-specific. True, but here the Amended Complaint itself specifically pleads the Debtor’s improper 

conduct in making the Transfers, and these allegations must be taken as true at this stage.4

4

 For this reason, the Trustee’s citation to In re TOCFHBI, Inc., 413 B.R. 523, 537 (Bankr. N.D. Tex. 2009), analyzing 

a genuine dispute over facts at the summary judgment stage, is inapposite. 

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30. For these reasons, unjust enrichment is unavailable to the Trustee, and even if available, 

is barred by the Debtor’s misconduct pled in the Amended Complaint.

H. Section 550 Limits the Trustee’s Recovery to the Value of the Transfers 

31. The Trustee seeks attorney’s fees and alleges that the estate may recover them under 

the Texas Uniform Fraudulent Transfer Act (“TUFTA”). It cannot do so. Funderz’s position is 

simple and dictated by the Bankruptcy Code: the Trustee’s recovery on avoidance claims is set by 

Section 550, which has no provision for attorney’s fees. See 11 U.S.C. § 550. 

32. It is black letter law that avoidance and recovery are separate claims: “Even though 

an action to avoid a transfer may be, and often is, brought in conjunction with an action to recover 

the property transferred or its value, a court must evaluate the two bases of relief separately.” 

Brown v. Phillips (In re Phillips), 379 B.R. 765, 780 (Bankr. N.D. Ill. 2007) (citing cases). 

33. For this reason, the Trustee cannot recover under TUFTA, only avoid whatever 

TUFTA would permit a creditor to avoid pursuant to the delegation of power in Section 544. Once 

a transfer is avoided, the Trustee’s recovery is controlled by Section 550. 

34. Tow v. Speer, No. CV H-11-3700, 2015 WL 12765414, at *10 (S.D. Tex. Aug. 17, 

2015), cited by the Trustee, notes that the chapter 7 trustee obtained attorneys’ fees on a judgment 

on claims including TUFTA claims, but does not even mention what these other claims might be. 

35. Instead, that case suggests that some of the successful, unidentified, claims did not 

permit the recovery of attorneys’ fees: “When a plaintiff seeks attorneys' fees in a case involving 

multiple claims, at least one of which supports a fee award and at least one of which does not, the 

plaintiff must offer evidence segregating the hours worked between these claims.” Id. at 11-12. 

36. The Trustee cites only one case directly holding that fees under TUFTA may be 

collected in a Section 544 proceeding: Byman v. Denson (In re Edwards), 537 B.R. 797, (Bankr. 

S.D. Tex. 2015). That single non-binding case from another bankruptcy district does not dictate 

what this Court must do. That decision’s reasoning on allowance of attorney fees is extremely 

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cursory, such that the entire analysis is this: “A bankruptcy trustee pursues the recovery of 

avoidable transfers on behalf of a bankruptcy estate to ensure that no single creditor receives a 

disproportionate share of a debtor's available assets. It would be an injustice to force creditors to 

pay for the right to be treated equally under the law.” Id. at 806. This discussion does not address 

the legal fact that recovery is made under Section 550. The Court may not craft a remedy contrary 

to the Bankruptcy Code, which limits recovery to the “value of the property transferred.” 

37. Even taken as written, Byman should give this Court pause: the Trustee is 

admittedly attempting to recover from the non-Debtor Affiliated Entities for Transfers they made. 

It is inequitable to assess attorneys’ fees against Funderz for attempts to recover from non-Debtors 

for the benefit of the Debtor’s creditors and to the potential detriment of the creditors of the 

Affiliated Entities. 

38. Additionally, as Tow highlights, recovery of fees must be made on a claim-by-claim 

basis. Even if fees are recoverable when using TUFTA pursuant to Section 544, they cannot be 

recovered under Section 548 or for unjust enrichment. Even if the Trustee may recover fees, the 

Court must limit the Trustee’s recovery on any claims not dismissed to those permitted by TUFTA 

alone. 

I. The Trustee Should Not Be Permitted to Cure Pleading Deficiencies Through Yet 

Another Amendment 

39. The Trustee submits that any of the serious deficiencies identified in the Motion 

and this Reply can be remedied by amendment. The Court should not permit such amendment, 

which has not been properly requested merely by an aside in the Response. Leave to amend should 

be denied when amendment would be futile, as determined by “the same standard of legal 

sufficiency as applies under Rule 12(b)(6).” Stripling v. Jordan Production Co., LLC, 234 F. 3d 

863, 873 (5th Cir. 2000). Amendment may also be denied for “undue delay, bad faith or dilatory 

motive on the part of the movant, repeated failures to cure deficiencies by amendments previously 

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allowed, [or] undue prejudice to the opposing party.” Jones v. Robinson Prop. Grp., LP, 427 F.3d 

987, 994 (5th Cir. 2005). 

40. Many of the deficiencies in the Amended Complaint – primarily those related to 

estate property, entity separateness and the impact of an alter ego finding – are purely legal. No 

factual repleading can correct them, so amendment would be futile. Here, the Trustee has 

repeatedly failed to cure deficiencies: the initial Complaint and Amended Complaint are nearly 

identical; in the face of Funderz’ first motion to dismiss the Trustee filed an Amended Complaint 

with nearly all of the same pleading issues as in the original. 

41. The Trustee has also employed a constantly-shifting theory for Funderz’s liability 

for the Affiliated Entity Transfers: in Amended Complaint, liability was based on the incorrect 

assumption of de facto merger. In the Response, liability is now based upon the Debtor’s alleged 

“ownership” of Affiliated Entity funds. The Trustee has also filed a motion for substantive 

consolidation of the Affiliated Entities in the main bankruptcy case, seeking to use the Court’s 

equitable powers to effect a deemed retroactive merger of the Affiliated Entities and the Debtor. 

42. Each of these theories was raised only in response to a meaningful legal response 

from Funderz. The Trustee filed the consolidation motion after seeing the alter ego arguments in 

Funderz’s initial motion to dismiss. Upon seeing Funderz’s response to that motion, the Trustee 

created the new “deemed ownership” argument first raised in the Response. This does not 

demonstrate a Trustee diligently pursuing mutually-exclusive theories at the same time. The 

progression of theories has caused Funderz severe prejudice, dragging out the process of this 

litigation and incurring costs for both Funderz and the estate. As it stands, Funderz must, out of 

an exercise of diligence, address each argument the Trustee appears to make, even as it abandons 

that argument for a newer one. 

43. Funderz submits that it is not liable to the Trustee on account of the Transfers. 

Funderz wants the Trustee to decide on a theory, make the best argument possible, and bring that 

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argument and supporting facts before the Court for adjudication. The Court must dismiss the 

Trustee’s ill-pled claims without leave to amend. 

CONCLUSION 

WHEREFORE, for the reasons discussed above and, in the Motion, the Amended 

Complaint must be dismissed with prejudice. 

Dated: October 21, 2024 SAUL EWING LLP 

/s/ Micheal W. Bishop 

Carmen Contreras-Martinez (admitted pro hac vice)

701 Brickell Avenue, Suite 1700 

Miami, FL 33131 

(305) 428-4500 

carmen.contreras-martinez@saul.com 

-andTurner N. Falk (admitted pro hac vice)

Centre Square West 

1500 Market Street, 38th Floor 

Philadelphia, PA 19102-2186 

(215) 972-8415 

turner.falk@saul.com 

-andGRAY REED 

Micheal W. Bishop (TX Bar No. 02354860) 

Amber M. Carson (TX Bar No. 24075610) 

1601 Elm Street, Suite 4600 

Dallas, Texas 75201 

(214) 954-4135 

mbishop@grayreed.com 

acarson@grayreed.com 

Counsel to Funderz.Net, LLC

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4878-4514-4818 

CERTIFICATE OF SERVICE 

I certify that on October 21, 2024, I caused a copy of the foregoing document to be served 

via electronic mail to the counsel listed below and via the Electronic Case Filing System for the 

United States Bankruptcy Court for the Northern District of Texas. 

David B. Miller 

SCHNEIDER MILLER REYNOLDS, P.C. 

300 N. Coit Road, Suite 1125 

Richardson, Texas 75080 

david@schneidlaw.com 

-andT. Micah Dortch 

Dortch Lindstrom Livingston Law Group 

2613 Dallas Parkway, Suite 220 

Plano, TX 75093 

micah@dll-law.com 

Special Counsel for the Trustee Areya Holder Aurzada 

/s/ Micheal W. Bishop 

Micheal W. Bishop 

Case 24-03028-swe Doc 33 Filed 10/21/24 Entered 10/21/24 12:30:04 Desc Main

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