In re Video Depot, Ltd.

Jeffrey Arlynn, president and controller of Video Depot, Ltd. (debtor), ran up gambling debts at the Las Vegas Hilton (creditor) that he typically paid off quickly, until a $225,000 debt in May 1990 went unpaid. In June 1990, Video Depot bought a $65,000 cashier's check made payable directly to Hilton, which Arlynn (along with a personal $10,000 check) handed over toward his gambling debt. Video Depot filed for bankruptcy that September, and the bankruptcy trustee sought to recover the $65,000 as a fraudulent transfer under section 550(a); the parties agreed it was a fraudulent transfer, but Hilton argued it wasn't the initial transferee — claiming Arlynn personally received the funds from Video Depot first, before passing them to Hilton, making Hilton only a later, protected subsequent transferee. The bankruptcy court and district court both held Hilton was the initial transferee, and Hilton appealed.