Opinion ID: 4195554
Heading Depth: 2
Heading Rank: 2

Heading: Chapter 11 Proceedings

Text: On Monday, August 20, 2007, the first business day after it filed for bankruptcy, Sentinel (still under the control of its insiders) filed an emergency motion in the bankruptcy court seeking an order approving payment of the Citadel sale proceeds to SEG 1 customers. After emergency hearings, the bankruptcy court issued an order authorizing the Bank of New York to disburse the funds, less an approximately five percent holdback. The bank did so, and the SEG 1 customers Nos. 16-1896 & 16-1916 7 received $297 million in what the parties describe as the “post-petition transfer,” with FCStone receiving a little shy of $15 million. Frederick Grede was appointed as Chapter 11 trustee. The bankruptcy court approved his appointment on August 29, 2007, within the fourteen-day window for appealing the order authorizing the post-petition transfer. See Fed. R. Bankr. P. 8002. The trustee did not appeal. A year later, however, he filed a “Motion to Clarify or in the Alternative to Vacate or Modify the Court’s August 20, 2007 Order.” In essence, the trustee argued that he should be permitted to bring avoidance actions against FCStone and the other SEG 1 customers who received, in the trustee’s view, a disproportionate payout through the post-petition transfer. A group of SEG 1 customers including FCStone opposed the trustee’s motion. At the conclusion of a hearing on the motion, the bankruptcy judge declined to vacate or modify the