In the bankruptcy case of Kosinski, Alan D.; In re (Douglas v. Kosin¬ski), (Bankr. D. Mass. 2009) a bankruptcy court ruled that an investor’s claim could not be discharged in bankruptcy. The case involved a debtor who described himself as the “go-to-guy when it comes to achieving real estate riches in any market” and an investor who loaned money to the debtor based on false information.

The details of the case:

The plaintiff was a regular attendee of the debtor’s monthly investment club meetings. At one of these meetings, the plaintiff became interested in an investment that led to the plaintiff’s loan of $75,000 to Pavilion Realty Trust, whose only asset was a lease of commercial property occupied by a restaurant known as Boston Waves. The debtor, as the trustee of Pavilion and manager of Boston Waves, signed a note payable to the plaintiff for $75,000 plus 30 percent interest payable in one lump sum 12 months later. Before the note came due, the business had closed. After the debtor filed for bankruptcy relief, the plaintiff alleged that his claim was excepted from discharge because the debtor had falsely represented that Pavilion and Boston Waves were sound.

The bankruptcy court found that the debtor was personally liable for the $75,000 debt because he willfully mislead the investor about the value of the investment. The bankruptcy court also found that Boston Waves was completely insolvent and that the debtor knew this fact at the time that he convinced the investor to make the loan. Furthermore, the debtor’s status as a trustee and beneficiary of a trust did not shield him from personal liability because he willfully and intentionally deceived the investor about the true status of the investment.