Burtch v. Voyager Pacific Opportunity Fund II, LLC

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

In re: ) Ch. 7

)

BW Industries, Inc., et al., ) Case No. 23-10844 (MFW) ) (Jointly Administered)

Debtors. )

)

)

Jeoffrey L. Burtch, in his ) capacity as Chapter 7 Trustee ) for the bankruptcy estates of ) BW Industries, Inc., et al., )

)

Plaintiff, )

)

v. ) Adv. No. 25-51045 (MFW)

)

Voyager Pacific Opportunity ) Fund II, LLC, )

)

Defendant. ) Rel. Docs. 16, 17, 19, 20, 21,

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MEMORANDUM OPINION¹

Before the Court is the Trustee's Motion for Reconsideration of this Court's Memorandum Opinion and Order dated January 22, 2026, granting in part Voyager's Motion to Dismiss the Trustee's Complaint. For the reasons stated below, the Court will deny the motion.

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I. BACKGROUND

Bitwise and its affiliates (the "Debtors") had revenues of less than $5 million per year but were allegedly spending more than $50 million per year,²leading to, inter alia, cash flow issues.³To help resolve the problem, the Debtors obtained a loan of $750,000 from Voyager Pacific Opportunity Fund II, LLC ("Voyager") on December 12, 2022.⁴The loan was represented by a note (the "Voyager Note") whose terms required the Debtors to repay the loan plus a "Fixed Loan Fee" of $25,000 four days later (by December 16, 2022).⁵The Debtors repaid Voyager $779,917.81 on December 23, 2022.⁶

The Debtors' financial situation did not improve and on June 28, 2023, the Debtors filed a chapter 7 petition. Jeoffrey Burtch was appointed as the chapter 7 trustee ("Trustee").⁷On June 27, 2025, the Trustee sued Voyager to avoid the Voyager Note transaction and the Debtors' December 23, 2022, payment as fraudulent transfers.⁸

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In Counts 1 and 2, the Trustee sought to avoid the Debtor's

"Obligations" defined by the Trustee as the "contractual terms requiring payment of interest at a rate of 304% per annum" as a constructively or actually fraudulent transfer under sections 544(b) and 548 of the Bankruptcy Code and sections 3439.04 and 3439.05 of the California Civil Code.⁹In Counts 3 and 4, the Trustee sought to avoid the "Transfer," defined by the Trustee as the $779,917.81 that the Debtors wired to Voyager to satisfy the Voyager Note and its related fees, as a constructively or actual fraudulent transfer under sections 544(b) and 548 of the Bankruptcy Code and sections 3439.04 and 3439.05 of the California Civil Code.¹⁰In Count 5 the Trustee sought to recover the Transfer and in Count 6 the Trustee sought to disallow Voyager's claims.¹¹

Voyager filed a motion to dismiss Counts 3, 4, and 6, which the Trustee opposed.¹²After consideration of the parties' briefs, the Court entered a Memorandum Opinion and Order dated January 22, 2026, granting the motion with respect to Counts 3

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and 6, but denying it as to Count 4.¹³ The Trustee filed the instant motion for reconsideration of the Court's order dismissing Count 3, which Voyager opposed.¹⁴ Briefing is complete and the matter is ripe for decision.

II. JURISDICTION

The Court has subject matter jurisdiction over this adversary proceeding.¹⁵The Trustee consented to entry of a final order or judgment by this Court.¹⁶Voyager did not state whether it consented to the entry of a final order or judgment by this Court, which according to the local rules constitutes consent.¹⁷

III. DISCUSSION

A. Standard of Review The Court may reconsider its prior orders if there has been a change in controlling law, newly discovered evidence, or is a need to correct a clear error of law or fact to prevent manifest

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injustice.¹⁸The movant must show more than disagreement with a prior ruling; it must show that the legal error was a "wholesale disregard, misapplication or failure to recognize controlling precedent."¹⁹A motion for reconsideration is not a vehicle for repeating rejected arguments.²⁰

B. Application to this Case In this case, the Trustee does not assert that there has been a change in controlling law or newly discovered evidence. Rather, the Trustee asserts that the Court clearly erred in dismissing Count 3 which sought to avoid the Transfer as constructively fraudulent. He contends that because the underlying Obligation to make the payment is still subject to avoidance, it was clear error for the Court to hold that Voyager is entitled to retain any portion of that payment. In support, the Trustee makes the same arguments and cites the same legal authority that he cited in response to the Motion to Dismiss.²¹

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He admits that the Court found his authority distinguishable and not persuasive.²²

The Court is not persuaded by the Trustee's second attempt to argue its position on dismissal of Count 3. First, the Trustee is incorrect in stating that the Court held that Voyager

"is entitled to retain" any portion of the Transfer.²³The Court only granted the Motion to Dismiss the Trustee's claim in Count 3 that the Transfer was avoidable as a constructively fraudulent transfer.²⁴The Court denied the Motion to Dismiss Count 4 and, therefore, to the extent that the Trustee can establish that the Transfer was actually fraudulent, that Transfer may yet be avoided.

Second, the Court did not decide the merits of the Trustee's claim to avoid the Transfer as constructively fraudulent. Rather, it held that the Trustee had failed to state a claim for avoidance of $750,000 of the Transfer because the Trustee's Complaint admits that Voyager actually gave that amount to the Debtor.²⁵The Court, therefore, concluded that the Trustee had failed to establish that the Debtor had received less than

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reasonably equivalent value for the Transfer.²⁶ Third, in its Memorandum Opinion, the Court did address the caselaw cited by the Trustee in support of its opposition to the Motion to Dismiss and now in support of its Motion for Reconsideration.²⁷The Court found that caselaw was distinguishable and did not support the Trustee's position.²⁸ The Trustee's continued reliance on that authority does not persuade the Court that it made a clear error of law. For example, the Trustee argues that the TSIC Court held that the avoidance of the underlying transaction eliminated any debt and, therefore, the payment in satisfaction of that debt could not be reasonably equivalent.²⁹In its Memorandum Opinion, the Court addressed this same argument and found the TSIC case distinguishable (and still does) because the "underlying transaction" that was avoided in TSIC was a promise not to sue in the future, not an antecedent debt, and therefore not reasonably

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equivalent to the millions of dollars the debtor paid in severance payments.³⁰In contrast to the promise of a future benefit in TSIC, the Trustee admits that Voyager gave actual value ($750,000) to the Debtors before the Transfer (i.e., repayment) was made.³¹

Similarly, the Court rejects the Trustee's argument that the HDD Rotary Sales case does not support the Court's ruling because that decision was rendered only after a full trial on the merits.³²In this case, no trial is necessary because the Trustee has admitted that reasonably equivalent value was given by Voyager when it wired $750,000 to the Debtors.³³That admission mandates the conclusion that the Trustee has failed to state a claim for avoidance of the Transfer as a constructively fraudulent transfer.³⁴

The Trustee does, however, raise one argument that he failed to raise in his opposition to Voyager's Motion to Dismiss. The

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Trustee contends that, even if Voyager gave the Debtor $750,000 in value, Voyager still has the burden of proving that the Transfer was received by it in good faith.³⁵He contends that the Court concluded in its Memorandum Opinion that there was no basis for any finding of good faith at this stage of the proceeding. The Court rejects this argument. The Court's comment on Voyager's burden to show good faith was made in the context of the Court's conclusion that the Trustee had stated a plausible claim that the Transfer may be avoided as actually fraudulent.³⁶In contrast, the Court concluded that the Trustee had not stated a plausible claim for avoidance of the Transfer as constructively fraudulent.³⁷

The provision of the statute on which the Trustee relies, section 548(c), is applicable only "to the extent that a transfer or obligation [is] voidable under" section 548.³⁸Because the Trustee has failed to state a claim that the Transfer is voidable under section 548(a)(1)(B) as constructively fraudulent, section

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548(c) does not apply. Further, section 548(c) creates a defense to the avoidance of a transfer that is avoidable under section 548 by granting a lien in the transferred property or allowing the retention of a voidable transfer to the extent that the transferee gave value and acted in good faith.³⁹That section does not, as the Trustee suggests, require that the Defendant prove it acted in good faith before the Trustee proves that the Transfer is avoidable.⁴⁰

Further, the authority cited by the Trustee to support his argument that Voyager has the burden to show that it acted in good faith to warrant dismissal of Count 3 is distinguishable.⁴¹ In the Agricultural Research case, the Ninth Circuit concluded that the transfer in question was actually fraudulent and,

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therefore, held that it need not address whether it was constructively fraudulent.⁴²Therefore, its statement that the transferee was required to prove its good faith to defeat a constructively fraudulent transfer is dicta. Similarly, the Bayou Group case does not support the Trustee's argument because the Court in that case held that the section 548(c) good faith defense only applied after the debtor proves the transfer is avoidable as actually or constructively fraudulent.⁴³ Because the Court has determined that Voyager has not stated a claim for avoidance of the Transfer as constructively fraudulent, the Court concludes that Voyager was not required to prove its loan to the Debtor was in good faith with respect to that claim.⁴⁴

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V. CONCLUSION

Because the Trustee has failed to raise any new facts or law to support his argument that the Court made a clear error of law, the Court will deny the Trustee's Motion for Reconsideration of this Court's Memorandum Opinion and Order granting Voyager's Motion to dismiss Count 3 of the Trustee's Complaint. The Court will issue an Order consistent with this Opinion. Dated: September 15, 2026 BY THE COURT:

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Mary F. Walrath

United States Bankruptcy Judge

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