Gambling Markers: New Value or No Value?

• Published in: American Bankruptcy Institute journal Vol. 38; no. 6; pp. 34 - 35
• Main Authors: Davis, Tony M, Velez, Hector
• Format: Journal Article
• Language: English
• Published: Alexandria American Bankruptcy Institute 01.06.2019
• Subjects: Baked goods; Bankruptcy laws; Bankruptcy reorganization; Casinos; Creditors; Debt; Federal court decisions; Fraud; Gaming machines; Judges & magistrates; Judicial appointments; Legalized gambling; Las Vegas Nevada; United States > US
• ISSN: 1931-7522

[...]Mr. Roller was unable to pay anything to Jackpot before filing for bankruptcy, and Jackpot filed an unsecured proof of claim in his bankruptcy case for $150,000. Allard v. Flamingo Hilton (In re Chomakos) provides another way to value gambling chips.14 In this case, the Sixth Circuit held that the debtors received "reasonably equivalent value" for money they spent gambling, which prevented the trustee from recovering the money so spent as a fraudulent transfer.15 The casino had presented evidence to the effect that while the house always holds an advantage, that advantage is slight in blackjack, and not much more than that in slot machines.16 The court found that this slightly-less-than-even chance against the house meant that when viewed before the gambling took place, the odds were that the debtor would recover a little bit less than all the money bet.17 This small loss, when offset by the "element of entertainment value," was reasonably equivalent in value to the cash paid for the chips.18 On the other hand, the Armstrong court was inclined to believe that "the odds are clearly stacked against the troubled debtor regaining financial stability by gambling on credit in a casino. [...]unlike the debtors in Chomakos, who spent their own money to gamble, Mr. Roller borrowed the money. [...]looking at the transaction at the time of the advance, Mr. Roller stood to make a bit less than the amount of the loan from gambling, which would have left him owing (slightly) more money to Jackpot than before the advance and gambling took place. 20 See, e.g., ASARCO v. Americas Mining Corp., 396 B.R. 278, 364 (S.D. Tex. 2008) (finding that value received by debtor, $727.79 million, was not unreasonably less than $811.4 million to $853 million worth of shares transferred by the debtor because "[t]he law does not demand that a plaintiff receive an amount equal to the fair market value of the asset it transfers; the consideration must only be reasonably equivalent."); Butler Aviation Int'l Inc. v. Whyte (In re Fairchild Aircraft Corp.), 6 F.3d 1119, 1125-27 (5th Cir. 1993) (finding reasonably equivalent value where payments made by debtor to creditor of corporate affiliate kept affiliate afloat until it could be sold because selling affiliate would indirectly benefit debtor); Rubin v. Manufacturers Hanover Trust Co., 661 F.2d 979, 994 (2d Cir. 1981) ("The court need not strive for mathematical precision.