Friday, March 24, 2017

SHELL COMPANIES for money laundering, tax evasion, hiding kickbacks, layering PART 26 -- CAPT AJIT VADAKAYIL






Sweat equity is a party's contribution to a project or enterprise in the form of hajaaar effort and toil, as opposed to financial equity such as paying others to perform the task.    

Sweat equity has an application in business for example where the owners put in specific intellect , effort and toil to build the business and thus creates  measurable market rate value. 

Sweat equity, in the context of real estate, refers to value-enhancing improvements made by homeowners to their properties.

 “Sweat equity shares” means such equity shares, which are issued by a Company to its directors or employees at a discount or for consideration, other than cash, for providing their specific technological know-how or making available rights in the nature of intellectual property rights or value additions

In essence, sweat equity shares are issued by a company to its employees or directors at a discounted rate or for consideration other than cash

Sunanda Pushkar was made a Director of the company on 25 February 2010, just 18 days before the IPL bid. 

There were allegations that Shashi Tharoor had misused his ministerial position to ask for a free stake in the company, and that girl friend  Sunanda was acting as a proxy for him. 

The controversy ultimately resulted in Shashi Tharoor's resignation as a minister. In her defence, Sunanda argued that she had been invited to join Rendezvous because of her "extensive international experience as a business executive, marketing manager and entrepreneur" ( BAAAP RE ! )

Only an employee or director of the company is entitled to such a stake--   while in the case of Sunanda ( before marriage  to Tharoor ) her purported role of a sales and marketing consultant with RSW ( Rendezvous Sports World ) is a clear question mark.

Rule 6 bars a company from issuing sweat equity shares of more than 15% of total paid up equity share capital in a year or shares in excess of the value of Rs. 5 crore, whichever is higher  .   This must not exceed Rs. 5 crores in value—while Sunanda Pushkar received 18% equity at a valuation of Rs. 70 crore

A separate resolution for approval of shareholders in the general meeting would be necessary if the sweat equity stake is equal to or more than 1% of the issued capital on the date of such issuance.

 In the event the ceiling is to be exceeded, prior approval of the central government would be required—there was no prior government approval.

In the instant case, the reported issue of sweat equity was for Rs. 70 crores, i.e. over and above the ceiling stipulated under the said Sweat Equity Rules and that too without prior Central Government approval.

The Companies Act also stipulates a pre-condition that at least 1 year should have elapsed from the day of commencement of business by the company on the date of issuance of sweat equity.

The Companies Act, 1956 stipulates that sweat equity shares should be of the same class as already issued by the company and such an issuance is required to be authorized by a special resolution passed in the general meeting.    

This special resolution must specify, inter alia, the number of shares, current market price, and class or classes of directors or employees to whom these equity shares are to be issued. 

Rule 4 of the aforesaid Sweat Equity Rules requires an explanatory statement to be annexed to the notice for the said general meeting, which includes the reasons/justification for the issue, the number of shares, consideration and the person's relationship with the company.

What is unique about this contractual arrangement between RSW and Sunanda Pushkar is that the sweat equity issued was supposedly ‘undilutable in perpetuity’ and that it had a lock-in period of just 2 years, whereas the Companies Act nowhere provides for “undilutable sweat equity in perpetuity’.

Rule 10 of the Sweat Equity Rules prescribes a minimum lock-in period of three years for sweat equity, which means that the equity so issued cannot get cashed out before the expiry of three years from the date of allotment.  

Pursuant to section 77A of the Companies Act, there are specific regulations regarding the buyback of shares including where the company must get the resources for the buy back and objectives, conditions and procedures for the buy back of shares.

Section 79A(c) of the Companies Act, 1956 (1 of 1956) (the “Companies Act”), states that a company may issue sweat equity shares only after completing a year since its incorporation.   Rendezvous Sports was incorporated only in August 2009 and therefore a year has not elapsed.

Shashi Tharoor stated that Rendezvous had issued sweat equity to its associates, ie. Sundanda Pushkar in lieu of a salary as this is “common practice across the world for start up ventures”.   

Maaan you fucked it up real bad !

Sweat equity allows a brainy guy t partner up with a money bag with NO brains .  

Below: Sweat equity party Moose and Dilton --  
Wonder where Sunanda baby fits in ? 
She wrangled 70-crore sweat equity or the Rs 400-crore facilitation pact

Sweat equity shares are typically used to encourage dumb work horse Moose,  Richie Rich  and brainy Dilton entrepreneurs to form start-up ventures.

Below: Money bag who gives the sweat equity

However, there are specific regulations in India which must be followed regarding the issuance of sweat equity shares.  There are wise checks and balances in the system.

As you can see ALL Company Act rules have been flouted.

Below: Third marriage couple !

On 15 January 2014, a series of intimate messages, supposedly sent by the Pakistani journalist Mehar Tarar to Tharoor, were posted on Tharoor's Twitter account.   The messages proclaimed Tarar's love for Tharoor.

Shortly before her death, Sunanda stated that she had taken upon herself "the crimes of this man [ husband Shashi Tharoor] during IPL".

 On 17 January 2014, a day after the Twitter controversy, Sunanda was found dead in room number 345 of the Leela Palace hotel in Chanakyapuri, New Delhi.  

On 1 July 2014, controversy over her death deepened when AIIMS doctor Prof Sudhir Kumar Gupta claimed that he was pressured to give a false report in the case. 

Dr Gupta, who was heading the panel that conducted the post-mortem of Sunanda, has filed an affidavit in the Central Administrative Tribunal (CAT) stating that he was pressurised by former union minister and president of AIIMS Ghulam Nabi Azad to act in an “unprofessional” manner to cover up the matter.

On 10 October 2014 the medical team probing her death concluded that she died of poisoning.   On 6 January 2015 Delhi Police reported that Sunanda was murdered and filed FIR in the regard.

In 2010, the company Rendezvous Sports World  bid for the Indian Premier League (IPL) cricket team Kochi Tuskers Kerala, which represented Tharoor's native state Kerala. Sunanda Pushkar had equity stakes in Rendezvous Sports World (RSW), heading the  consortium that owns the Kochi team.

It was later disclosed by Lalit Modi ( opening a can of worms ) that Sunanda got sweat equity of the value of Rs 70 crore for HOLD YOUR BREATH --future consultancy work

Law Minister Ravi Shankar Prasad declared that Sunanda Pushkar was not entitled to sweat fuckin’ equity as per the government rules.

Shashi Tharoor maintained that the amount had nothing to do with his active campaigning and mentoring for the Kochi team. This was less convincing as he had specifically mentioned that he had no specific gains from RSW winning Kochi Franchisee.



Mumbai Police arrested Gurunath Meiyappan ( Chennai Super Kings ) for betting and having links with bookies.  Rajasthan Royals team co-owner Raj Kundra was questioned by the Delhi Police for involvement in illegal betting. Raj baby was suspended from the IPL by the BCCI on 10 June 2013.

On 25 March 2014, the Supreme Court of India told N. Srinivasan to step down from his position on his own as BCCI president in order to ensure a fair investigation into the betting and spot-fixing charges levied against his son-in-law Gurunath Meiyappan who was team principal of Chennai Super Kings, else it would pass verdict asking him to step down.  The Supreme court said it was "nauseating" that N. Srinivasan continued as BCCI chief

Lalit Kumar Modi (was the first Chairman and Commissioner of the Indian Premier League (IPL), and ran the tournament for three years until 2010.   

In 2010, Modi alleged that the Indian National Congress minister Shashi Tharoor held indirect free equity in the Kochi Tuskers Kerala IPL franchise, ultimately leading to Tharoor's resignation as a cabinet minister ( MEA ).

Sunanda baby hasn't invested a rupee, yet her 70 crore stake will keep rising, as IPL does better and the Kochi franchise builds its business.  

Other IPL Kochi financiers will have to keep infusing funds; other shareholders' stakes will diminish as fresh shares are issued.  

But Pushkar and Rendezvous's share will remain unchanged. Also, Sunanda baby can sell her stake at any point.





Khan's company Red Chillies Enterprises Private Limited (RCEPL), the agency said, is a wholly-owned subsidiary of Red Chillies International Limited based overseas in Bermuda and is co-owned by Gauri.

After the success of IPL, about two crore additional shares were issued by KRSPL out of which 50 lakh shares were issued to The Sea Island Investment Ltd (TSIIL), Mauritius and 40 lakh shares were issued to Chawla.

Bermuda earned the dubious distinction of ranking No. 1 on Oxfam's 2016 list of the world's worst corporate tax havens using shell companies . Bermuda features a zero percent corporate tax rate, as well as no personal income tax rate.

Mauritius is a popular gateway for foreign investments using shell companies , particularly those directed to India.   Mauritius has a low corporate tax rate and no withholding tax.   It also does not participate in international taxation anti-abuse and transparency initiatives, making it an attractive tax haven.



SHELL COMPANIES for money laundering, tax evasion, hiding kickbacks, layering PART 25 -- CAPT AJIT VADAKAYIL



Shell corporations are frequently used to shield identities or to hide money in cases of DELIBERATE bankruptcy , to cancel  loans take from Indian banks

People have NO idea how much money has been given away by corrupt Indian bank managers as loans .  Most of these bank managers retire ultra rich.   

Some of these bank managers even live in luxury bunglows and flats owned by the people to whom they gave loans.  They have a style of life after retirement, incongruent to the salaries they drew in their working lifetimes.


Bankruptcy is a legal status of a person or other entity that cannot repay the debts it owes to creditors. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.

Bankruptcy fraud is a white-collar crime.  Bankruptcy fraud is a crime .

The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common. All of the debtor's assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt. 

Bankruptcy offers an individual or business a chance to start fresh by forgiving debts that simply cannot be paid, while offering creditors a chance to obtain some measure of repayment based on the individual's or business' assets available for liquidation. 

In theory, the ability to file for bankruptcy can benefit an overall economy by giving persons and businesses a second chance to gain access to consumer credit and by providing creditors with a measure of debt repayment. 

Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy.

Bankruptcy fraud should be distinguished from strategic bankruptcy, which is not a criminal act since it is creates a real (not a fake) bankruptcy state.  However, it may still work against the filer. A strategic bankruptcy may occur when an otherwise solvent company makes use of the bankruptcy laws for some specific business purpose.. 

In some countries, like Sweden, it is common at least for smaller companies with deep debts, to have a bankruptcy, and close down the company, but where the owner has prepared a new company which buys important assets including the name, and continues with much smaller debts.

Rehabilitation bankruptcy allows firms and individuals the opportunity to reorganize their debt and reemerge in good fiscal condition. In this form of bankruptcy, firms and individuals will contact their creditors in an attempt to change the terms of their loans – such as principle payments or interest rates. Importantly, debt is not absolved..  

This  allows business to continue as usual. It allows individuals to keep most of their assets.  Bankruptcy is a very useful strategy, and a good tool for many people who have mounting debt. 

Generally speaking, individuals get to keep their house and car, as well as continue working and living their normal lifestyle. This strategy has been good for corporations and celebrities, but also for regular people who have fallen on hard times. Like any good tool though, rogues exploit this arrangement

Liquidation bankruptcy is where  firms are past the point of reorganization and must sell-off, liquidate and un-exempt assets to pay creditors.  Creditors receive their debts according to how they loaned out money to the firm or individual. People who declare this kind of bankruptcy are generally seeking a way to get out of their current liabilities.  

Bankruptcy fraud is an intent crime, which means that the debtor must have a “guilty mind” when committing the act. Consequently, hiding assets and lying to the bankruptcy court or trustee is criminal. On the other hand, strategic bankruptcy, planning your bankruptcy case with the assistance of a licensed attorney, is not criminal. 

For instance, selling your car to your brother for $100 is fine, if the car is actually worth $100. Selling it to your brother for $100 when it is actually worth $20,000 may be criminal. Let an experienced bankruptcy attorney advise you before making any financial transfers. 

Avoiding bankruptcy fraud is easy, simply fully disclose your financial situation and remain honest about your assets and income. In bankruptcy, honesty is the best policy

All assets must be disclosed in bankruptcy schedules whether or not the debtor believes the asset has a net value. This is because once a bankruptcy petition is filed, it is for the creditors, not the debtor, to decide whether a particular asset has value.

The future ramifications of omitting assets from schedules can be quite serious for the offending debtor. 

In the United States, a closed bankruptcy may be reopened by motion of a creditor or the U.S. trustee if a debtor attempts to later assert ownership of such an "unscheduled asset" after being discharged of all debt in the bankruptcy. 

The trustee may then seize the asset and liquidate it for the benefit of the (formerly discharged) creditors.

First, debtors conceal assets to avoid having to forfeit them. Second, individuals intentionally file false or incomplete forms. Third, individuals sometimes file multiple times using either false information or real information in several states. The fourth kind of bankruptcy fraud involves bribing a court-appointed trustee.

Commonly, the criminal will couple one of these forms of fraud with another crime, such as identity theft, mortgage fraud, money laundering, and public corruption.

Nearly 80% of all bankruptcy fraud involves the concealment of assets.

Creditors can only liquidate those assets listed by the debtor; thus, if the debtor fails to reveal certain assets, the debtor can keep the assets despite having an outstanding debt. To further conceal the assets, businesses or individuals may transfer these unrevealed assets to friends, relatives, or an associate so that the asset cannot be located.

This type of fraud raises the risk and costs associated with lending and becomes passed on to others who wish to borrow money.

Multiple filing fraud consists of filing for bankruptcy in multiple states, using the same name and information, using aliases and fake information, or some combination thereof. Multiple filings slow down the court systems’ ability to process a bankruptcy filing and liquidate the assets.

Often, multiple filings provide more cover for a debtor trying to engage in the concealment of assets.

In USA bankruptcy fraud carries a sentence of up to 20 years in prison, or a fine of up to $250,000, or both.  

In India we have managed to imprison Rajinder Sethia only for passport fraud so far. He still lives in uber luxury and flaunts his wealth .   BIG FISH in the govt attended his parties and functions 

When filing for bankruptcy, you’re expected to list all of the property that you currently own, as well as any assets that you’ve transferred to others within a particular period.   

If you knowingly omit required information when filling out your  bankruptcy paperwork, ( almost all do for a in India WEE bribe )  you could be found guilty of fraud.

Bankruptcy law attempts to mitigate the loss to your creditors by allowing them to receive a portion of your property.  You get to  exempt  (keep) assets that you’ll need to maintain a job and household. 

The remaining property belongs to what’s known as the bankruptcy “estate.”

The court-appointed official tasked with overseeing your case—will sell the nonexempt bankruptcy estate property and distribute the proceeds to your creditors.

Here are examples of actions that, if intentional, would probably be considered criminal:--

failing to list all assets on the appropriate bankruptcy schedule
concealing a property transfer that occurred before the bankruptcy (for example, giving your car to a friend)
creating a false document,
destroying or withholding documents, and
paying someone to help hide property from the court.

The consequences of engaging in such activities can be harsh. Anyone in USA who makes a knowingly false statement in association with a bankruptcy filing can be assessed fines up to $250,000 and receive up to 20 years in prison (as of October 2016).

Here are examples of fraudulent behavior that might cause a creditor to ask the court to deny you a discharge of a particular debt:----
knowingly writing a bad check
overstating income when applying for credit, or
buying luxury items on credit before filing.

Filing for bankruptcy doesn’t guarantee that all of your debt will go away.    Certain kinds of debt—called non dischargeable debts—remain your responsibility even after your bankruptcy is over. Debts resulting from fraud fall into this category.

In USA while using your credit cards for luxury items 90 days before filing for bankruptcy is presumed fraudulent, you can use credit for the necessities of life.

Fraud happens when someone lies or manipulates. In bankruptcy, fraud usually occurs at the expense of a creditor.

A common type of fraud is presumptive credit card abuse.   Using your credit cards for luxury items—such as expensive purses, jewelry, or going to the theater—during the 90 days before you file for bankruptcy is presumed fraudulent. You can, however, use credit for necessities of life, such as food and car repairs.

Other types of fraud also exist—for example, fiduciary fraud (such as fraud between business partners), larceny, and embezzlement . 

On its own, a creditor’s claim that you committed fraud doesn’t do anything. A creditor must file a lawsuit and get a fraud judgment against you.

Sometimes a creditor files a complaint (the first legal paper filed in a lawsuit) alleging fraud before you even file for bankruptcy.   Being served with a complaint is often what starts people thinking about bankruptcy. 

Here are the two types of judgement creditors can get:---

Default judgment. The court will grant a judgment by default if you fail to respond within the time required.
Trial judgment. A creditor receives a trial judgment by winning at trial.

Once a creditor has a fraud judgment against you, the debt becomes nondischargeable. This potential outcome makes it important to speak with an attorney as soon as you’re served with a lawsuit. Quick action allows you and your attorney time to take steps to prevent the issuance of a judgment. 

Proving fraud at trial isn’t easy. Your creditor must prove that:---

you knowingly made a fraudulent representation (you lied or were misleading about something, like the amount of your income or what you did with company profits)
the creditor relied on the misrepresentation (they believed your misrepresentation), and
the creditor lost money as a result.

Matters involving fraud are serious. A bankruptcy attorney can review your case and help you determine your best course of action.

A “bust-out” scheme is when somebody acquires a business, quietly sells off the assets without using the proceeds to pay creditors, and then files a bankruptcy without disclosing the sale of assets.

Bankruptcy fraud comes in four basic forms:--

concealment of property
giving false information
filing multiple bankruptcy cases, and
trustee fraud.

Those convicted of bankruptcy fraud have commonly also have committed another form of fraud such as identity theft, mortgage fraud or money laundering.

Examples of fraudulent concealment would include:--

hiding expensive jewelry or artwork with friends or family
placing cash or property in undisclosed safe deposit boxes, or
keeping assets at home without telling anybody that they exist.

The five most common allegations contained the following:---

Tax fraud
False oath or statement
Concealment of assets
Bankruptcy fraud scheme

Identity theft or use of false/multiple Social Security Numbers

In India banks were  in a frantic delusional race to grow, and at any cost, lending to or investing in any kind of assets that the "India growth story" had to offer.  

Business sponsors were only to happy to lap up the money provided by these suckers. 

But hey, most bank managers wont give a loan unless they get a kickback in a foreign bank, via a shell company

Prevention of Money Laundering Act, 2002 is an Act of the Parliament of India enacted to prevent money-laundering and to provide for confiscation of property derived from money-laundering.   

PMLA and the Rules notified there under came into force with effect from July 1, 2005. The Act and Rules notified there under impose obligation on banking companies, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information in prescribed form to Financial Intelligence Unit - India (FIU-IND).. 

The act was amended in the year 2012—but needs total revamp.

The PMLA seeks to combat money laundering in India and has three main objectives:--

To prevent and control money laundering
To confiscate and seize the property obtained from the laundered money; and
To deal with any other issue connected with money laundering in India.

Banks are mere custodians of wealth - beyond the equity capital, it is not their money - they are authorised, licensed dealers of the Reserve Bank of India.

The funds that they manage and lend are therefore a good proxy for money that belongs to the people of the country and all the legal entities they own, back-stopped, implicitly by the state of India









More than 205 rich Indians have taken bank loans and  siphoned off vast sums of money from the rest of the 1.25  billion Indians and blown it up on overpriced assets.   

Assets that were so fabulously overpriced, that these individuals have in cases siphoned off more than 60% of what they have spent.   Most often the funds have been received at exotic off-shore havens, making the money tax-free without it ever being in the ambit of the Indian tax authorities.









The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. The Code received the assent of the President of India on 28 May 2016.   

Key Features:--
Insolvency Resolution : The Code outlines separate insolvency resolution processes for individuals, companies and partnership firms.  The process may be initiated by either the debtor or the creditors. A maximum time limit, for completion of the insolvency resolution process,has been set for corporates and individuals. For companies, the process will have to be completed in 180 days, which may be extended by 90 days, if a majority of the creditors agree.

Insolvency regulator: The Code establishes the Insolvency and Bankruptcy Board of India, to oversee the insolvency proceedings in the country and regulate the entities registered under it. The Board will have 10 members, including representatives from the Ministries of Finance and Law, and the Reserve Bank of India.

Insolvency professionals: The insolvency process will be managed by licensed professionals. These professionals will also control the assets of the debtor during the insolvency process.

Bankruptcy and Insolvency Adjudicator: The Code proposes two separate tribunals to oversee the process of insolvency resolution, for individuals and companies: (i) the National Company Law Tribunal for Companies and Limited Liability Partnership firms; and (ii) the Debt Recovery Tribunal for individuals and partnerships.

The new bankruptcy law promises to make it easier to wind up a failing business and recover debts in India.

The country’s banks are currently struggling with bad loans after the crash in commodity prices and slowdown in infrastructure projects affected corporates’ balance sheets and their capacity to settle debt.

Nonperforming assets at Indian banks  are at 9% of total loans

The bill proposes the setting up of a new entity, the Insolvency and Bankruptcy Board of India, which will regulate insolvency professionals and information companies — those which will store all the credit information of corporates.

The new law MUST create a new class of insolvency professionals who will help sick companies and banks with a smooth takeover of the insolvent company and manage the liquidation process.

The Bankruptcy Code proposes two authorities to deal with insolvency. The National Company Law Tribunal will adjudicate cases for companies and limited liability partnerships, while the Debt Recovery Tribunal will do the same for individual and partnership firms.

The code proposes to protect the workers in case of insolvency, paying their salaries for up to 24 months will get first priority during the liquidation of assets.

The code comes as a relief to workers and employees who are left unpaid by defaulting companies who have siphoned off money using shell companies and left employees in the lurch. 

Vijaya Mallya baby lost support because he paid off his foreign employees ( but not Indian ) and then continued with his cocky KING OF GOOD TIMES shit. 



In the event of an insolvent debtor having assets abroad, India’s federal government can enter into an agreement with an overseas country to ensure enforcement of the law.

Currently, it takes an average of more than 6 years to resolve insolvency in India and the recovery rate of debt is pathetic compared with other countries

The new law introduces a time limit on the bankruptcy process. In the case of a default, the time-limit is 180 days, within which the resolution has to be completed. This can be extended by another 90 days by the adjudicator, depending on the process.






How do bank mangers become top socialites ?

How do they get admission into ELITE clubs. 

How do they attend fancy dinners and parties ? 

Some are members of FREE MASON clubs..

Why do we allow sitting judges to be members of Freemason clubs ?

False information usually comes in the form of giving misleading or incomplete information about yourself, your property, or your debts. Everyone who files a bankruptcy case must list income, assets, and liabilities in the proper schedule—and the information must be complete and accurate to a fault.  

For example, filing a bankruptcy in USA  under a false name or social security number to conceal misconduct would constitute fraud.

Multiple bankruptcy filings can be fraudulent if you file them with the goal of deceiving creditors about your identity or assets.   All consecutive filings aren’t fraudulent, however—sometimes there can be good reasons to file more than one case.  

But when someone files cases in multiple states to confuse the court and creditors, or repeatedly files and dismisses bankruptcy cases to avoid a home foreclosure, that person could be found to have committed fraud. 

This statute consists of nine crimes, all of which require proof of "knowingly and fraudulently" doing something in a bankruptcy context, namely: ---

(1) concealing property of the debtor's estate from the court; 

(2) making a false oath; 

(3) committing perjury; 

(4) presenting a false proof of claim against a debtor's estate; 

(5) receiving property from the debtor's estate with the intent to circumvent bankruptcy proceedings; 

(6) taking a kickback for forbearing on a claim against the debtor; 

(7) while acting as an agent, transferring or concealing property of an individual debtor or corporation; 

(8) "cooking the books" to hide a debtor's financial affairs; and 

(9) withholding property or financial affairs from the trustee or court.  

Other situations are trickier, such as a debtor perpetrating an investor pyramid fraud (Ponzi scheme) or a debtor concealing or grossly undervaluing an estate asset.  Sometimes fraudulent planning, cover-ups, insider transfers, and long-term asset structuring has been in process for months or years prior to the bankruptcy. 

Looting can be one of the most brazen types of bankruptcy fraud.  A bankruptcy looting scheme typically involves a debtor's failing company selling its assets pre-petition to a non-failing company without disclosing to the court the debtor's involvement in the transaction.  

The debtor often carries out the fraud by representing that a disinterested buyer has been located, when in fact the buyer is a mere extension, "shell", or agent of the debtor.  By design, the terms of the sale appear legitimate, not unreasonably beneficial to the debtor, and are met with satisfaction by the creditors.  

The company then either closes its doors or files a  bankruptcy to liquidate and administer any remaining estate.  Although looting could theoretically occur during a sale process within a bankruptcy case,  --the Bankruptcy Code affords a process that should enable creditors to determine whether any sale is reasonable, in good-faith, and proposed at arms’ length.

Bankruptcy fraud is a multi billion dollar industry.  The number of ways debtors defraud creditors and the courts is seemingly countless and growing each year.  Although some types of fraud are more complex than others, effective bankruptcy counsel must be able to recognize and react to situations involving fraud.  

Depending upon the complexity of the situation, recruiting an expert may be a vitally important component to the success of a case.  

A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors.   Most of the Ponzi companies go DELIBERATELY bankrupt.  

The Ponzi scheme generates returns for older investors by acquiring new investors. This is similar to a pyramid scheme in that both are based on using new investors' funds to pay the earlier backers. 

For both Ponzi schemes and pyramid schemes, eventually there isn't enough money to go around, and the schemes unravel. Companies that engage in a Ponzi scheme focus all of their energy into attracting new clients to make investments. 

This new income is used to pay original investors their returns, marked as a profit from a legitimate transaction. Ponzi schemes rely on a constant flow of new investments to continue to provide returns to older investors. When this flow runs out, the scheme falls apart. 

All the while money is siphoned off via shell companies by a complex process of LAYERING ..

Regardless of the technology used in the Ponzi scheme, most share similar characteristics:

1. A guaranteed promise of high returns with little risk

2. Consistent flow of returns regardless of market conditions

3. Investments that have not been registered with the Securities and Exchange Commission (SEC)

4. Investment strategies that are a secret or described as too complex

5. Clients not allowed to view official paperwork for their investment

6. Clients facing difficulties removing their money

A pyramid scheme does not involve the selling of products. Rather, it relies on the constant inflow of money from additional investors that works its way to the top of the pyramid.. An individual or a company initiates a pyramid scheme by recruiting investors with an offer of guaranteed high returns. 

As the scheme begins, the earliest investors do receive a high rate of return, but these gains are paid for by new recruits and are not a return on any real investment. From the moment the scam is initiated, a pyramid scheme's liabilities begin to exceed its assets.

 The only way it can generate wealth is by promising extraordinary returns to new recruits; the only way these returns receive payment is by getting additional investors. Invariably these schemes lose steam and the pyramid collapses. 

A pyramid scheme is a variation of the Ponzi scheme, which offers a promise of high investment returns that are not available from traditional types of investment. In practice, the structure of pyramid schemes induces others to recruit victims and collect money that eventually makes its way to the top of the pyramid. 

In a typical setup, one person recruits a second person to invest a certain amount of money. The second person recovers his investment by recruiting people under him to invest in the scheme. 

The more people he can recruit under him, the greater his profit and a certain percentage of the profits of all recruiters work their way up the pyramid to enrich the recruiters before him. Each person must recruit a certain number of people. 

The process continues until there are fewer people at the bottom of pyramid, and it collapses under its own weight. Generally, only the people near the top of the pyramid make any significant profits, and people near the bottom never recover their investments. 

But hey, the nice money gets siphoned off and it just disappears in a complex web of layering by shell companies

A Ponzi scheme (pyramid) invoices soliciting investments by promising interest rates well above the market rate. Early investors recover their investments with the promised rate of return and encourage others to invest. 

As the pyramid begins to crumble, investors are unable to recover their original investments and interest is no longer paid.  In USA Chapter 11 cases are filed to allow the debtor to continue the scheme.

Advanced Fee Swindle: This is a variation of a Ponzi scheme. Either through advertisements or direct contact, individuals or businesses in financial trouble are contacted and offered generous loans. The loans require an advanced fee to guarantee the loan and start the loan processing. 

The perspective borrower is assured "nothing will go wrong–the loan is done as soon as you send in the advanced fee." Of course, once the fee is sent, something does go wrong and the borrower is in even deeper financial trouble.

Red Flags/Common Characteristics:--
• Numerous contacts from investors/creditors about the case
• List of creditors, schedules and statement of financial affairs show mostly
unsecured debt owed to numerous individuals
• No prospectus or the prospectus provided is untruthful
• Numerous complex investment vehicles, such as limited partnerships
• Enormous management or general partnership fees to insider controlled companies
• Monthly operating reports show receipts from individuals
• Income is from individuals with little or no other outside income shown
• Lulling letters to investors explaining that the delay in their interest/loan/deal payment is outside the control of the manager and, if they will be patient or continue to send money, the problems will be resolved

One of the biggest credit management risks that business leaders face is something many may not have considered: business-to-business (B2B) fraud, including bankruptcy fraud.

Business to consumer (B2C) is business or transactions conducted directly between a company and consumers who are the end-users of its products or services.

B2B marketing is exactly what it sounds like: businesses marketing products or services to other businesses. B2B is more focused on tending to the needs of other businesses; however the demand for the product made by these businesses is likely dependent on consumer market trends.

 B2B fraud occurs when a member of a business you have contracted with purposefully and deceitfully defrauds your company by taking advantage of the credit you have lent without intent to pay.

A fraudster creates a shell company, one that has been set up with the sole purpose of committing B2B fraud, including money laundering. These companies are completely illegitimate and their owners very rarely actually sell goods or provide services.  

They do not even have physical addresses, and if they do, they exist solely to trick business professionals or consumers into thinking they are authentic.

Individuals and groups committing these types of frauds will often display many of the same characteristics. The following are some of the red flags you should watch for:

Companies without long histories — Typically, companies with longer track records are safer business partners because they will have more credit history and references to work from. The shorter the life of the company, the less you will have to work with.

Suspicious changes in ownership — If you see a well-established company with good credit that a new group, trying to hide the change in ownership, has recently taken over, this should raise a red flag. It may be an indicator that members of the new leadership are committing fraud.

Questionable financial statements — If you ever find any mistakes or suspicious items on a company’s financial statement, take a good hard look before doing business with its decision-makers. This can be a sign something is amiss.

Fraudulent credit references — When an applicant lists false references, this is a huge red flag — something is not right. Leaders of these businesses may have very poor credit histories or they may be committing some kind of fraud; in either situation, they are not your ideal credit partners.

Schedules without receivables — If a company’s schedule does not list any receivables during the credit check phase, this may mean it is simply a fraudulent shell company that is not providing any goods or services to customers. Check this company twice before extending a line of credit.

Using proper analytics to thoroughly evaluate a new business before extending credit is a vitally important step in avoiding these B2B scams.

While auditors and financial analysts are in the process of reducing bankruptcy fraud and money laundering, completely nullifying these issues may never be possible without a uniform structure of financial regulations.

Paper documents with sensitive company data can be easily misplaced, destroyed or altered.. Paper checks are often at the heart of the issue, with nearly half of payment fraud cases linked back to this payment tool.

The great majority of bankruptcy fraud – almost 80% – is concealment of assets.   If a creditor bank, can only liquidate assets listed by the debtor than the debtor assumes he or she could get away with keeping some of the assets if he or she hides them.

In order to hide assets, debtors have transferred assets to friends, relatives or an associate to keep assets from being found. 

Bankruptcy can be a safe haven for companies and individuals in need but when the system is abused, it raises both the risk and the cost associated with lending. That cost ends up being passed to future users of the bankruptcy law.

One type of bankruptcy fraud scheme which is actually perpetrated by a third party is called a “petition mill.”  Petition mills promise to keep tenants who are having a hard time paying rent from eviction. 

They make themselves look like a consulting service, but what they actually do is file the tenant for bankruptcy, unbeknownst to the tenant, and drags out the case, charging large fees, emptying the tenant’s bank account, and ruining his or her credit score.

A petition mill is a fraud in which the perpetrator poses as a financial advisor, sometimes as a credit counselor or paralegal, filing hastily prepared bankruptcy documents in the name of victims who come to the advisor as clients. 

The bankruptcy filing is often both incomplete and inappropriate for the victim's condition; and, often, the victim does not even realize that a bankruptcy has been filed.

Victims are people in financial trouble who believe they are becoming clients of a professional operation. The fraudster promises to make the foreclosures, evictions, repossessions, high interest rates on loans, and other debt problems go away.

The victim pays a large initial fee for the fraudster's services, and the fraudster usually has the victim sign blank documents. Sometimes the victim is also told to make their usual payments directly to the fraudulent advisor instead of the real creditors, or to transfer their real estate to the fraudster.

The payments are stolen by the fraudster instead of being used to pay victims' debts, and real estate is often deeded in fractional shares to other victims unknowingly under bankruptcy, complicating ownership to make foreclosures even more difficult by having multiple (fraudulent) bankruptcies involved in the property.

In other petition mill schemes, the fraudster simply creates summary bankruptcy filings for the victim. The victim is then told to file pro se in court and deny that anyone helped prepare the documents.

The following are warning signs of a petition mill scheme in USA :--

Pro se bankruptcy petition where the debtor says no one assisted him/her, but the debtor is clearly unfamiliar with the bankruptcy system
Pro se petition filed despite the debtor denying filing bankruptcy
Debtor failing to attend the section 341 meeting, where creditors and the United States Trustee first meet with the debtor
"Face sheet" (suspiciously small) filing with a single creditor listed, usually the mortgagee or the landlord
Debtor facing eviction, foreclosure, or repossession notice
Pattern of pro se debtors with identical paperwork form, style, and general content
Pattern of complaints from mortgagees or landlords
Debtors or others being solicited by petition mills that stress stopping evictions, etc.
Complaints by debtor that he has been making rent/mortgage/car payments to a third party (instead of to the original creditors)
Advertising in budget papers and using flyers to advertise bankruptcy and divorce assistance at a low, fixed fee
Implications that attorneys are supervising or approving the service
Requests for payment of filing fee in installments
Assets or liabilities not scheduled (filed in proper format)
Failure to properly fill out or file schedules
Use of chapter 7 (complete liquidation) when chapter 13 (reorganization) is clearly feasible

Multiple filing fraud consists of filing for bankruptcy in multiple states, using the same name and information, using aliases and fake information, or some combination thereof. Multiple filings slow down the court systems’ ability to process a bankruptcy filing and liquidate the assets. Often, multiple filings provide more cover for a debtor trying to engage in the concealment of assets.   

This type of bankruptcy fraud can include attempting to file in multiple states under the same name or using aliases and fake information – or some combination. This keeps the court system from being able to process bankruptcy filing and liquidating assets. Sometimes debtors try to file multiple times in order to conceal assets.

Multiple filings will slow down the overall processing of a bankruptcy claim, and will prevent liquidation of assets from occurring sooner.   Generally, then, multiple filings will be used as a kind of mask, or a block to provide more time for concealment of assets. They confuse the bankruptcy system, without necessarily setting off any fraud alerts.

 While the multiple filings would slow down the actual functioning of the court, and the processing of bankruptcy, they would also tip off a fraud investigation that it's likely there is another type of bankruptcy fraud going on. In their own way, then, multiple filings actually act as fraud alerts, assuming they can be successfully connected with the same party.

When people or organizations have more debts than they can manage, they sometimes file for bankruptcy in a federal bankruptcy court. When you file for bankruptcy, your creditors can no longer on their own try to sue you or collect your property to satisfy unpaid debts. 

Instead, your creditors must go to the bankruptcy court in which you've filed your bankruptcy petition, where the judge will determine how much property you have, how much you owe, and who gets repaid. The process is designed to allow debtors a new start by getting out from under crushing debts.

When someone who has filed for bankruptcy or any other person conceals assets, makes false statements under penalty of perjury (orally or in writing), files a false claim, destroys or conceals financial records relevant to the case, or gives or takes a bribe, that person has committed criminal bankruptcy fraud, a federal crime.

Bankruptcy fraud can also be a civil wrong. The difference between criminal and civil fraud centers on the actor's intent: Criminal fraud requires proving that the defendant acted with a knowing and fraudulent intent, while civil fraud involves less deception and cheating.

Probably the most common form of criminal bankruptcy fraud occurs when someone filing for bankruptcy tries to hide or conceal assets, or otherwise tries to prevent the bankruptcy court from finding out exactly what the debtor owns. When you file for bankruptcy, the court will inventory all of your property and lump it together into what is called a bankruptcy estate. 

Court officials do this to determine how much you can pay to your creditors, or how much you can afford to pay them as part of a repayment plan. People will sometimes try to hide property from the court in an effort to prevent the court from using it to pay off the creditors, or try to hide how much they can afford to pay.

Bankruptcy fraud can  occur when a debtor attempts to bribe a creditor. Creditors are not required to file a claim against the debtor after the debtor files for bankruptcy. The debtor might, for example, try to convince a creditor not to file a claim by offering a cash payment if the creditor agrees not to file a claim.

You cannot accidentally commit bankruptcy fraud. If, for example, you accidentally forget to inform the bankruptcy court about the classic car your father gave you because he stored it in his garage and you never had physical possession, this isn't bankruptcy fraud. 

Criminal fraud involves knowingly misleading the court, hiding assets, or taking actions you know are fraudulent. So, knowingly concealing the car by trying to hide it in your father's garage would be bankruptcy fraud, whereas forgetting the car was given to you as a gift would not be.

Another type of bankruptcy fraud preys on consumers who are facing eviction or foreclosure. The scam involves a company that charges consumers a fee to stop the foreclosure or eviction process. 

However, what these scammers typically do is, after they've been paid, file a bankruptcy case in the consumer's name, often without notifying the consumer or even asking permission. Though this delays the foreclosure or eviction for a short time, it doesn't stop it because as soon as the court learns that you weren't a participant in the filing, it will dismiss the case. 

After that, the foreclosure will resume and the scammers will be nowhere to be found, having already left with the money.  Bankruptcy fraud is a broad category that includes a range of activity designed to take advantage of the bankruptcy process. 

Destroying important documents, making false statements to the court or court officials, filing for bankruptcy in different states simultaneously, or starting a business with the intent to buy items on credit and avoid paying by filing for bankruptcy are all forms of bankruptcy fraud. 

Also, creditors can commit bankruptcy fraud if, for example, they file false claims or make false statements about the debtor's repayments.

Occasionally, trustees, attorneys, or other officers of the court embezzle funds that are part of the bankruptcy estate. These acts are also considered bankruptcy fraud

Bankruptcy fraud can be punished with either civil or criminal penalties. When a person files for bankruptcy, the court appoints a bankruptcy trustee, a person who administers the case. If the trustee believes the debtor committed fraudulent actions, it can ask the court to impose a civil penalty. These penalties do not involve potential jail sentences or other criminal penalties.

However, if the fraud is serious enough, the trustee might refer the case to federal prosecutors. They can then investigate the claim and may file a criminal case against the debtor. Criminal penalties are more serious, involving jail, fines, and other penalties.

Forfeiture of discharge rights. Bankruptcy allows you a fresh start because, once you finish the bankruptcy process, your creditors can no longer take collections actions against you. This is known as a debt discharge. 

If you commit bankruptcy fraud the court may deny you a discharge, meaning your creditors can sue you, foreclose on your property, or take any other collection actions the bankruptcy would otherwise protect you from.

Loss of exemptions. When you file for bankruptcy you have to tell the court about everything you own, but that doesn't mean everything you own can be used to pay back your creditors. Some of your property will be exempt, meaning you get to keep it no matter how much you owe.

However, if you commit bankruptcy fraud the court may choose to deny those exemptions and let your creditors take the property that would otherwise have been yours.

Bankruptcy fraud is a very serious situation. Any time your actions could lead to civil or criminal fraud, you need to speak to an experienced criminal defense attorney in your area immediately. Even if you already have a bankruptcy attorney, you may also need to speak to a criminal defense lawyer. 

Some bankruptcy attorneys are not experienced with the criminal justice process, and only a lawyer who specializes in criminal law is able to provide you with the advice you need to protect yourself during a criminal prosecution for bankruptcy fraud.

Bankruptcy fraud is a serious offense. Bankruptcy cases where fraud is proven are, at minimum, thrown out of court. The filer will likely also face penalties and stiff fines. Because fraud is a federal offense, these penalties climb quickly and in some cases, are capped with criminal prosecution

A person who commits bankruptcy fraud will have his or her case thrown out of court. In most situations, depending on the size of the debt and the severity of the crime, the court will refuse to discharge the debts, and the filer will remain liable for them.

In order to pay creditors, the court also has the right to liquidate the person's assets. In some cases, a deal will be struck where, for example, a plaintiff will agree to accept half of the debt in exchange for avoiding half of the jail time associated with the fraud.

The whole idea behind the law of bankruptcy fraud is that your intent to defraud must be punished. As such, obvious mistakes and omissions are not punished.

With that said, if you left something out of your case's paperwork, the bankruptcy court will probably require you to refile large portions of it – often you'll have to start the whole thing over again if mistakes are serious enough. 

This can result in drastically increasing the total amount of time and money you put into the case. The court will also ask you to explain the mistakes and will want to verify how they took place before letting you proceed.

Avoiding bankruptcy fraud (and the cost of non-fraudulent errors) is reason enough to do the paperwork right the first time. To ensure you move through the bankruptcy process without problems and do not make costly mistakes or omissions, it is a good idea to consult with a bankruptcy lawyer for advice.

The bankruptcy system is based on the theory that a debtor will make full disclosure of all assets and liabilities so that the final disposition is in accordance with the requirements of the law. 

Unfortunately, at times both debtors and creditors try to obtain more than they are entitled to under the Bankruptcy Code. 

There are a number of criminal statutes that prohibit this type conduct.
Although concealing assets or making false statements in a bankruptcy proceeding make up the majority of bankruptcy frauds, there are a number of fraud schemes that are more complicated or are primarily designed for reasons other than maximizing the retention of assets in bankruptcy. 

Such schemes often use the automatic stay provided by the Bankruptcy Code to conceal an earlier crime, maximize profit from an ongoing fraud scheme or buy time while the perpetrator finds a way to avoid victims or leave town.

Lulling techniques are used to forestall creditors. Goods are sold to retailers at below cost for cash. Afterwards, a bankruptcy petition is filed. Schedules filed by the debtor after the bankruptcy filing report trade debt owed to consumer products manufacturers with inventory unusually low compared to the date the debt was incurred.

Retail Bustouts: The merchant rents retail space and does not pay rent or suppliers. He files bankruptcy to stop eviction and to gain additional time to run the illegal operation. Oftentimes, retail stores are part of the distributor bustouts because they provide outlets for the consumable goods. (Examples include retail jewelry stores, oriental rug stores and discount stores.

Individuals contemplating bankruptcy run up large consumer credit card debt and then file bankruptcy. The purchases and cash advances occur within a short period of time. Frequently, the same individual files bankruptcy several times, using false social security numbers and aliases. 

Or the fraudulent perpetrator assumes another person's name or social security number. False statements are usually made on credit applications, and the assets acquired from the fraud are concealed when the bankruptcy is filed.

Classic "bustout" or planned bankruptcy where goods are moved out the back door with the plan of filing for bankruptcy are usually charged as concealment "in contemplation of bankruptcy."

Parallel Entities: A long-standing company experiences financial problems. Insiders of the company create a new business in the same industry just prior to or soon after the bankruptcy filing. In some cases, the debtor sells some of its assets to the new entity for a fraction of their value just prior to the bankruptcy. The non-debtor entity is usually not disclosed. 

The insiders operate the debtor until they have successfully transferred the debtor's inventory, receivables, customers and goodwill to the new company. In addition, the insiders may use the debtor to purchase goods and services for the new company with the intent of never repaying the  administrative creditors. This is usually a lawyer-assisted fraud.

Business transactions are complex and purposefully confusing, which makes fraudulent conveyance actions expensive and difficult to prove. This type of scheme is used in all types of industries.

"White Knight" Bleedouts: A business consultant is hired by a troubled business to assist it in acquiring new financing and streamlining operations. On occasion, the "white knight" is given an ownership interest in the business. The consultant takes control of the financial operations of the business and uses his position to convert company assets. 

Often this includes failing to pay withholding taxes, failing to make pension fund contributions, diversion of receivables, paying personal expenses with company funds, taking excessive salary and bonuses and, in some situations, paying false invoices to entities or individuals related to the consultant.

Red Flags/Common Characteristics:--

• Recent changes of ownership/new players
• People with no prior involvement in the business have money transferred to them, both pre-petition and during the bankruptcy
• Changes in accounting or cash flow practices for no apparent business reason
• Payment stream to a certain creditor suddenly balloons
• Sudden decrease in inventory; sharp increase in aged receivables
• Inventory, equipment and machinery are sold a short time before the case is filed
• Capital infusions of corporate officers suddenly renamed "loans" and paid back
• Excessive salaries and bonuses
• Complicated asset transfers with no apparent purpose
• Depleted pension funds
• Leveraged buyouts
• Employee contributions for health care and pension funds have been deducted and converted by the debtor
• A new company is formed just prior to or immediately after the bankruptcy case is filed

Rent or equity skimming involves acquiring title to multiple properties with no intention of paying the mortgages. The perpetrator then collects the proceeds from the property. A bankruptcy is filed to stall the foreclosure and to allow the perpetrator to continue his scheme.

Rent/Equity Skim: The perpetrator acquires partnership interest or title to the property, but does not assume the mortgages. He puts his management company in control of the property. 

The management company collects rent, receives exorbitant management fees, does not maintain the facilities and makes no payments to the secured lenders. The mortgagee is contacted by the perpetrator who attempts to extort the lender to buy out his interest. 

When the lender attempts to foreclose, the perpetrator deeds the property to a corporate entity which files bankruptcy. The transfer of title is repeated several times, with bankruptcies filed to cover all the transfers.

Property Title Skim: This fraud is similar to the one described above. The major difference is that the perpetrator convinces the victim to deed his home over to him for little or no cash. The victim then pays rent to the perpetrator who does not pay the existing mortgage or seek new financing. 
Bankruptcies are filed to delay foreclosure.

In some instances, the perpetrator will deed a fractional interest of the property to other bankruptcy estates, without their knowledge. This complicates and delays foreclosure.

Red Flags/Common Characteristics----
• Failure to make mortgage payments
• Transfer of entire or fractional interest shortly before foreclosure
• Multiple fractional interests in real property listed on the schedules
• Frequent Quit Claim Deeds transferring interest in the property
• Numerous D.B.A.'s and individuals in chain of title
• Use of mail drop boxes as business address
• Post-petition transfers into a bankruptcy estate
• New corporation formed holding a single asset.
• Schedules amended to dramatically increase the number of pieces of real property owned.

Bankruptcy Fraud By The Debtor--
Debtor fraud is the most common type of bankruptcy fraud. The system is used to allow the debtor to conceal and transfer assets from his creditors/victims and to receive a bankruptcy discharge of his pre-petition debts.

Concealment and False Statements--
The concealment of assets and related false statements constitute over 75 percent of all bankruptcy crimes, according to the latest FBI statistics. A debtor who fails to list assets on his/her bankruptcy schedules commits both the crime of concealment and false statement. 

By concealing assets, the debtor attempts to preserve property for future use and to deprive creditors of their fair share of assets. Concealment may take the form of omission of assets in their entirety or the gross undervaluation of assets.

Transfer of Assets Post-petition: Debtor sells or transfers assets without court approval. If the debtor does seek court approval, the debtor does not disclose his relationship to or agreements with the purchaser. 

For example, the debtor sells the property below its value to a straw buyer who agrees to convey it back to him. A similar situation occurs when the purchaser agrees to give the debtor part of the purchase price "under" the table and court approval is sought for the purchase at a lower price to allow for the transfer.

Red Flags/Common Characteristics--
• Claims of theft or large gambling loss just before bankruptcy
• Inability to account for property listed on insurance policies or personal financial statements in existence before bankruptcy
• Incomplete schedules–frequent amendments in response to creditor questions
• Unexplained change in financial circumstances
• Debtor shows no ownership interest in residence
• Tax returns not filed for the relevant years
• Debtor "confused" about his assets and financial affairs
• Unsecured debt does not reconcile with assets listed, e.g., large number of medical bills, but no lawsuit listed
• Failure to list prior bankruptcies

Collusive Involuntary Bankruptcy--
There has been an increase in collusive involuntary bankruptcies in which creditors file an involuntary case at the debtor’s direction or with his approval. The collusive bankruptcy is often part of a larger scheme, frequently involving real estate foreclosures.

Examples of Collusive Involuntary--
Collusive Involuntary: The perpetrator gets his co-conspirators to file an involuntary against him or his corporate entity. The involuntary is used if the debtor has been prohibited from filing for a period of time. 

A bustout or bleedout perpetrator may use an involuntary to conceal his involvement in a corporation where he is involved in a number of pending corporate bankruptcies. The bankruptcy system is used to gain the benefit of the automatic stay without having to disclose any information about the debtor during the involuntary period.

Red Flags/Common Characteristics--
• Debtor subject to a 180-day bar on refiling suddenly has an involuntary filed against him
• Creditors have recently acquired the claim asserted in the involuntary
• Professional” creditors who reappear in suspicious sounding deals
• Same attorney is involved in the voluntary and involuntary bankruptcies
• Creditors are “former” long-term business associates of the debtor’s insider
• Insider has filed voluntary bankruptcy cases for at least several corporate or partnership  entities in a short period of time, and the cases filed are suspicious

Serial Filers--
The debtor, typically an individual, files numerous cases to take advantage of the automatic stay to prevent eviction, foreclosure and collection on other debts. The petitions usually contain false social security numbers, variations of the debtor's name or fictitious names.

Red Flags/Common Characteristics--
• Debtor has filed a high number of cases in a short period of time
• Debtor does not disclose prior bankruptcy cases
• Debtor uses different counsel to file each case
• Chapter 13 ( US ) cases never completed because of failure to fund-plan
• Debtor had been prohibited from filing a case

Bankruptcy Fraud Warning Signs--
1. Concealment of assets
2. Serial bankruptcy cases
3. Failure to keep usual business records
4. Incomplete or missing books and records
5. Conduct well outside ordinary business or industry standards and  practices
6. Unusual depletion of assets shortly before the bankruptcy filing
7. Recent departure of debtor's officers, directors or general  partners
8. Unanswered questions or incomplete information on debtor’s  schedules and statement of financial affairs
9. Frequent amendments to schedules, statements of financial  affairs and monthly operating reports
10. Inconsistencies among recent financial statements, tax returns  and debtor's schedules and Statements of financial affairs
11. Absence of knowledgeable officers to testify
12. Inability to contact principals of debtor at debtor’s stated location
14. Frequent dealings in cash rather than recorded transactions
15. Sudden depletion of inventory post-petition without plausible explanation
16. Inflated salaries, payments of bonuses or cash withdrawals byofficers, directors, shareholders or other insiders
17. Transfer of property to insiders, shareholders and relatives shortly before bankruptcy
18. Payoff of loans to directors, officers, shareholders, relatives or other insiders shortly before filing.
19. Transactions with non-debtor subsidiaries, parent companies or affiliated corporations owned by the same or related persons or entity
20. A history of prior litigation or post-petition litigation involving breech of contracts, fraud misrepresentations, etc
21. Complicated corporate structures and relationships.
22. Creditor confusion concerning corporate structure.
23. Fire, theft or loss prior to or after filing.
24. Failure to pay withholding and sales tax.
25. Startup of a similar business near the time of bankruptcy filing.

Shell companies are often associated with fraud. Although they are legal entities that do have a legitimate function in business operations, shell companies are also used by criminals to facilitate fraudulent activities. 

Such activities include money laundering, billing schemes, fictitious service schemes, bankruptcy fraud, tax evasion, and market manipulation. Scandals involve anywhere from thousands to millions of dollars. 

While shell companies are frequently linked to multiple forms of scams, law officials are unable to prosecute all cases because state agencies do not collect enough ownership information on company formation documents. Thus, they leave no paper trail for the government to trace back to a particular individual or individuals.

Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws.

Even if the effect of securities fraud is not enough to cause bankruptcy, a lesser level can wipe out holders of common stock because of the leverage of value of shares upon the difference between assets and liabilities. Such fraud has been known as watered stock, analogous to the practice of force-feeding livestock great amounts of water to inflate their weight before sale to dealers.

False Forms----
Victims are people in financial trouble who believe they are becoming clients of a professional operation. The fraudster promises to make the foreclosures, evictions, repossessions, high interest rates on loans, and other debt problems go away. 

The victim pays a large initial fee for the fraudster's services, and the fraudster usually has the victim sign blank documents. Sometimes the victim is also told to make their usual payments directly to the fraudulent advisor instead of the real creditors, or to transfer their real estate to the fraudster. 

The payments are stolen by the fraudster instead of being used to pay victims' debts, and real estate is often deeded in fractional shares to other victims unknowingly under bankruptcy, complicating ownership to make foreclosures even more difficult by having multiple (fraudulent) bankruptcies involved in the property.

In other petition mill schemes, the fraudster simply creates summary bankruptcy filings for the victim. The victim is then told to file pro se in court and deny that anyone helped prepare the documents.