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New Florida Law May Protect Charities Against Ponzi Scheme Clawback Claims

 Last Friday, Florida Governor Rick Scott signed HB 95. This bill amends § 726.109 of the Florida Statutes by adding this broad defense to a claim to avoid a charitable contribution as a fraudulent transfer:

"The transfer of a charitable contribution that is received in good faith by a qualified religious or charitable entity or organization is not a fraudulent transfer[.]"

However, this broad protection for charitable contributions has several limits:

  • The defense only applies to a constructive fraudulent transfer claim.
  • A contribution by a natural person within 2 years before a bankruptcy or the filing of a lawsuit to recover the contribution is still a fraudulent transfer unless either:

1. The transfer was consistent with the practices of the debtor in making the charitable contribution; or

2. The transfer was received in good faith and the amount of the charitable contribution did not exceed 15 percent of the gross annual income of the debtor for the year in which the transfer of the charitable contribution was made.

  • The law applies only to transfers made after July 1, 2013.

This may sound familiar because it is similar to a law enacted in Minnesota last year (seeThe Ponzi Scheme Blog of April 13, 2012, "Legislative Protection for Charities Caught by Ponzi Clawbacks" for a review of that law). The new Florida limits are also similar to the limits on the recovery of charitable contributions found in Bankruptcy Code § 564(a)(2).

It will be interesting to see if other states follow the leads of Minnesota and Florida in protecting charities from fraudulent transfer claims.

Florida HB 95 is here.

Read additional articles at The Ponzi Scheme Blog

Kathy Bazoian Phelps is the co-author of The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes  (LexisNexis 2012), along with Hon. Steven Rhodes.  The Ponzi Book, recently reviewed by the ABI Journal and Commercial Crime International, is available for purchase at, and more information about the book can be found at

Watch Kathy's interview on the The Not So Legal Show.

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