The Problem of Imputed Ownership

Abstract

Fraudulent transfer law has long served as one of the principal bulwarks of private law. It prevents those who seek to evade legal liability from putting their assets out of reach. Today, however, most assets are intangible. Transactions happen in the blink of an eye, and they take place entirely on corporate books. It is relatively easy to make it appear that the entities subject to legal liability are not the ones transferring the assets. 

This new-found ability to manipulate assets does not necessarily render fraudulent transfer law ineffective. To be sure, fraudulent transfer law will cease to work effectively if courts are wedded to notions of ownership that arose when most property was tangible and lay in the hands of flesh-and-blood individuals. But fraudulent transfer law does not require courts to respect the way that those seeking to avoid legal liability structure their transactions. Courts can impute ownership even when there are none of the traditional markers of ownership. But one still needs to explain why imputing ownership makes sense in some cases and not others. 

This paper takes advantage of recent crypto bankruptcies to work through this problem of imputed ownership. Quite apart from the considerable stakes in the crypto world, where the market capitalization of bitcoin alone is $1.9 trillion, the crypto world is a useful starting place to investigate fraudulent transfer law, as it presents the problem in an unusually pure environment, one in which objective markers of ownership are completely absent. From this vantage point, it becomes apparent that before courts can apply fraudulent transfer law, they must choose between two competing accounts of its first principles. It also becomes possible to see how this choice should be made.