Grayiel v. AIO Holdings, LLC

Full title: George A. GRAYIEL, Plaintiff, v. AIO HOLDINGS, LLC, et al., Defendants.

Court: United States District Court, W.D. Kentucky, Louisville Division

Date published: Dec 29, 2022

648 F. Supp. 3d 812 (W.D. Ky. 2022)

Opinion

Civil Action No. 3:15-CV-821-CHB

2022-12-29

George A. GRAYIEL, Plaintiff, v. AIO HOLDINGS, LLC, et al., Defendants.

Duvol M. Thompson, Elliot A. Magruder, Warren E. Gluck, Holland & Knight LLP, New York, NY, James M. Burd, Edward M. O'Brien, Wilson Elser Moskowitz Edelman & Dicker, LLP, Louisville, KY, Michael T. Boardman, Holland & Knight LLP, Los Angeles, CA, Richard A. Bixter, Jr., Holland & Knight LLP, Chicago, IL, for Plaintiff. F. Larkin Fore, Fore Law PLLC, Louisville, KY, for Defendants AIO Holdings, LLC, Gregory Anastas. Bryan J. Dillon, Prospect, KY, for Defendants Sarinprapa Teema, Blue Light of Kentucky Limited Liability Company.

CLARIA HORN BOOM, UNITED STATES DISTRICT COURT JUDGE

Duvol M. Thompson, Elliot A. Magruder, Warren E. Gluck, Holland & Knight LLP, New York, NY, James M. Burd, Edward M. O'Brien, Wilson Elser Moskowitz Edelman & Dicker, LLP, Louisville, KY, Michael T. Boardman, Holland & Knight LLP, Los Angeles, CA, Richard A. Bixter, Jr., Holland & Knight LLP, Chicago, IL, for Plaintiff.

F. Larkin Fore, Fore Law PLLC, Louisville, KY, for Defendants AIO Holdings, LLC, Gregory Anastas.

Bryan J. Dillon, Prospect, KY, for Defendants Sarinprapa Teema, Blue Light of Kentucky Limited Liability Company.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

CLARIA HORN BOOM, UNITED STATES DISTRICT COURT JUDGE

This matter is before the Court for disposition after a bench trial. The Court now issues its findings of fact and conclusions of law in accordance with Federal Rule of Civil Procedure 52(a)(1) and (c). For the reasons below, the Court GRANTS JUDGMENT to Plaintiff George A. Grayiel on the following claims: Count I (Actual Fraudulent Conveyance as to AIO), Count II (Actual Fraudulent Conveyance as to Teema and Second Blue Light), Count III (Constructive Fraudulent Conveyance as to AIO), Count V (Aiding and Abetting Fraud as to AIO, Anastas, and Teema), Count VI (Civil Conspiracy as to AIO, Anastas, and Teema), and Count VII (Common Law Fraud as to AIO and Anastas), and Count IX (Alter Ego/Veil Piercing as to AIO and Anastas). The Court will order additional briefing on the issue of damages.¹

1 The Court notes that Grayiel has presented some evidence on the issue of actual damages, for example, the amount of his investments and his recovery from Teema of vacant lots in the Virgin Islands. [R. 218, pp. 1-2, ¶ 3]; [R. 266, 99:1-14]. The parties also presented evidence of the revenues shared between AIO and Second Blue Light pursuant to the AIO/SBL Operating Agreement and offered argument on damages-related issues. [JX97]; [Teema Ex. 1; Teema Ex. 2]. However, because the record is incomplete, the Court will order additional evidence and briefing on these issues, as outlined herein.

This complex case arises from the fraudulent schemes of convicted con man Martin Twist and those working alongside him to evade creditors. Twist owned many entities, including Martin Twist Energy Company, LLC ("MTEC"), Blue Flame Energy Company, LLC ("Blue Flame"), Cherokee Drilling Company, LLC ("Cherokee Drilling"), Cherokee Energy Company, LLC ("Cherokee Energy"), Joerhea Realty, LLC ("Joerhea") and Seca Energy, Inc. ("Seca") (collectively, "Twist Entities"), which were all involved in a natural gas drilling operation in West Virginia. [R. 218, pp. 1-2, ¶ 3]. Grayiel fell victim to Twist's scheme, investing most of his life's savings in the oil and gas wells owned by Twist and Twist Entities and receiving returns of only a fraction of his original investment. As outlined below, AIO, Anastas, and Teema were willing confederates in Twist's fraudulent schemes, helping Twist shield assets from creditors, like Grayiel. Grayiel first sought to recover his investment by suing Twist and the Twist Entities in the Circuit Court of Putnam County, West Virginia in 2008, which ultimately awarded Judgment in his favor. On November 6, 2015, after uncovering evidence of the fraudulent nature of Twist's enterprises, and the involvement of AIO, Anastas, and Teema, Grayiel brought this action.

I. FINDINGS OF FACT

Prior to trial, the parties stipulated to many of the underlying facts. See id. at 1-15.

Additionally, due to concerns that Grayiel's memory loss caused him to testify contrary to known facts, the parties filed a Stipulated Order, [R. 249], providing that Grayiel's prior Declaration, [R. 231-1], shall be made a part of the trial record and be a supplement to his trial testimony. [R. 249, p. 2, ¶ 3].² The Stipulated Order provides additional stipulated facts and attaches a sixty-eight-page exhibit of supporting documentation. [R. 249; R. 249-1]. The Court references the parties' stipulations, as well as testimony and evidence produced at trial, in detailing its findings of fact.

2 Grayiel suffers from significant memory loss, caused by a history of brain tumors and associated medications. [R. 261, 58:20-59:10]; [R. 231-1, ¶ 3]. It was apparent to the Court that Grayiel became confused during his trial testimony, at times providing directly contradictory testimony and expressing frustration during questioning. Further, based on the parties' stipulations of fact, it is apparent that Grayiel did, at times, testify contrary to known facts. See [R. 247]. Accordingly, the Court considers both Grayiel's trial testimony and his Declaration in arriving at its findings.

a. Grayiel's Initial Investment and Loan

Plaintiff George Grayiel is a retired postal worker who presently resides in Hurricane, West Virginia. [R. 218, p. 1, ¶¶ 1-2]; [R. 231-1, p. 1, ¶ 2]; [R. 261, 58:12-19]. In 1999 or early 2000, Twist called Grayiel's home and asked if Grayiel wanted to invest in oil and gas wells. [R. 261, 59:14-16]. Grayiel had saved a significant amount of his postal worker salary by living off one paycheck a month and saving the other. Id. at 59:21-24. From January 2000 through December 2001, Grayiel invested approximately $860,000 (the "Grayiel Investment"), the majority of his life savings, in the oil and gas wells owned by Twist and various Twist Entities. [R. 218, pp. 1-2, ¶ 3]; [R. 231-1, p. 2, ¶ 4]. According to Grayiel, Twist promised the investors that they would be paid back their money "over and over again" and that the wells would last for fifty years. [R. 261, 60:4-6].

Grayiel did not invest in the natural gas assets directly but invested in subscription agreements which were to result in a partnership interest. [R. 218, p. 13, ¶ 110]; see also [JX2; JX3; JX4; JX5; JX6; JX7; JX8; JX9; JX13; JX14; JX15; JX16; JX17; JX18]. Grayiel's ownership interests were not recorded in the county clerk's office where the wells were located. [R. 218, p. 13, ¶ 110]. Grayiel had investments in the wells known as Hoff 1, Haynes 1, and Kesler 1, but does not recall investments in any of the other wells. Id. at 11, ¶ 98. In his testimony, Grayiel explained that the nature of Twist's scheme made it difficult to trace which specific wells he invested in, because Twist would "change[] that all the time. He would decide to drill a well and then decide to drill—and not do that one and do another one, so there were—there were names just—bunches of names of wells going around." [R. 261, 82:21-24]. Grayiel testified that he only ever received about $20,000 in repayment of the approximately $860,000 Grayiel Investment. Id. at 60:6-7.

Also during this time, on May 10, 2001, Grayiel loaned Twist Entities MTEC and Seca $500,000 for which Grayiel took a Note and a security interest in various oil and natural gas assets. [R. 218, p. 11, ¶ 96]; [R. 261, 60:13-61:6]; [JX10 (Loan Agreement), JX11 (UCC Financing Statement)]. Twist repaid the $500,000 loan to Grayiel on August 6, 2001, and the parties filed a release of Grayiel's security interest in the assets. [R. 218, p. 11, ¶ 97]; [R. 261, 60:22-24]; [JX12 (UCC-3 Termination of Financing)]. Grayiel testified that he believed

Twist repaid the loan to induce Grayiel to continue investing:

I didn't know at the time, but I think he paid me back because he thought I was going to continue to invest. I had learned later, you know, that that may be the reason he paid me back. He was afraid if he didn't pay me back, I would quit investing.

[R. 261, 60:25-61:6].

On November 17, 2008, Grayiel filed suit against Twist, a number of Twist Entities (such as Appalachian Energy Partners c/o Cherokee Energy), Drew Thomas, Tammy Twist Curry, and Todd Pilcher in the Circuit Court of Putnam County, West Virginia (the "Grayiel Litigation") related to his $860,000 Grayiel Investment. [JX38]. Grayiel's Complaint attached a demand letter which Grayiel's counsel had sent to Twist about one year prior, on November 1, 2007. Id. at 146-47. The demand letter notified Twist that if he failed to return Grayiel's full investment plus applicable interest, Grayiel would "proceed with any and all necessary actions" to collect his investments and remedy his damages, including referral "to appropriate governmental authorities for investigation and possible prosecution of any and all civil and criminal remedies[.]" Id. at 147.

Several years later, on August 15, 2014, the West Virginia court entered Judgment in Grayiel's favor against the Twist Entities and later against the Estate of Martin Twist, in the amount of $2,671,880.84. [R. 218, p. 11, ¶ 94]; [JX82; JX85; JX86].

b. Twist's Prior Efforts to Evade Creditors

The Court heard testimony from Lonny Armstrong, a long-time employee of Twist. Armstrong began working for Twist in January 2000. [R. 265, 75:7-8]. He explained that Twist "dubbed [him] vice president of Martin Twist Energy." Id. at 75:10-11. During his employment with Twist, Armstrong performed tasks such as opening bank accounts, forming companies, and talking to investors. Id. at 77:24-78:5. Armstrong was also involved in filing production reports for the wells with the Department of Environmental Protection. Id. at 78:12-17. Armstrong testified that he interacted with Twist "[b]asically every day ... when we were drilling, I would talk to him pretty well every day, and even when we weren't drilling, I'd talk to him in the office a lot." Id. at 77:19-23. The office where Armstrong worked housed about six or seven employees who cold-called potential investors for the oil and gas wells. Id. at 75:11-15.

Armstrong testified that Twist confided in him about various creditors' complaints, and instructed Armstrong to avoid speaking to investors and to skip payments to creditors that "weren't important." Id. at 78:22-79:2, 80:4-5. Specifically, Armstrong testified:

He always said that, you know, the investors were complaining and all that, and at one time he even—I'm not going to use the language, but he said, "F the investors." He said, "I don't owe them nothing." And that's the kind of attitude he had. All he wanted out of the investors was the money.

Id. at 79:12-17.

i. The Formation of Blue Flame

At some point, Twist asked Armstrong to start a new company in Armstrong's name. See id. at 75:22-23, 90:23-25 ("He didn't want his name on it or anything."). This appears to be the first instance of a recurring theme: Twist would evade creditors by moving assets into companies owned by people close to him, while Twist would retain absolute control over the operations and assets. Armstrong testified:

The purpose of Martin [Twist] to start it was to get away from the creditors from Cherokee Drilling, Martin Twist Energy, I guess, and try to start all new. And everything would be in my name and not his, so people wouldn't you know, go after him. And I would have first lien as far as doing a lot of things.

Id. at 76:14-18. When asked how Twist intended to use Blue Flame to start anew, Armstrong explained that, although Blue Flame was not in Twist's name, Twist "was in control of the company" and "used it to stick money in his pocket." Id. at 76:19-24. He further testified that "Cherokee Drilling was a company that we were using at the time to drill wells, and he let billings go, and [Twist] owed over a million dollars in creditors [sic]. And he wanted to get away from it, so he started Blue Flame." Id. at 77:9-12. Armstrong explained that "when the heat gets on," Twist "would change and start a new company or whatever." Id. at 77:5-6. Specifically, he testified that "You know, Cherokee got so far behind that people were suing him and coming after moneys [sic], and he didn't have it, so he wanted me to start the Blue Flame and get away from all that. And, you know, he just didn't pay people unless it was just a necessity to keep drilling." Id. at 89:18-23. Twist's accountant, Jerry Baker, completed all the necessary paperwork to form Blue Flame.³ Id. at 76:8-11.

3 Armstrong testified that he believed Jerry Baker was "an organizer and a member maybe" of Blue Flame. Id. at 90:5-6. Armstrong believed himself to be "CEO and organizer" of Blue Flame. Id. at 90:6-7. Eventually, Twist instructed Armstrong to remove Jerry Baker from Blue Flame. Id. at 91:8-10.

ii. The Armstrong Complaint

As government authorities, including the FBI, IRS, and SEC, and investors like Grayiel, began to investigate and file lawsuits against Twist and the Twist Entities, Twist developed a plan to encumber the various oil and gas assets owned by Twist and the Twist Entities (the "Natural Gas Assets") with his trusted employee, Armstrong, to place them beyond the reach of his creditors. [R. 218, p. 2, ¶ 9]. According to Armstrong, Twist called him one day with an unusual request: to be sued for $500,000. [R. 265, 91:12-15]. Twist explained that he allegedly owed Armstrong $100,000 a year for bonuses and for the ten percent production Twist had promised him. Id. At that time, Armstrong was an executive of various Twist Entities including MTEC and Cherokee Drilling. [R. 218, p. 3, ¶ 11]. Armstrong had never demanded payment of the bonus and, in fact, was unsure that he was owed a bonus. Id. at 91:24-92:7. Twist explained to Armstrong that the lawsuit would ensure that Armstrong had "first lien on all the equipment, all the business, you know, and everything[,] [a]nd it was basically getting away from creditors." Id. at 91:19-23.

Around May of 2005, Twist enlisted the help of Thomas McAdam, a Louisville attorney who Twist had known since they attended high school together in Louisville, Kentucky. [R. 218, p. 2, ¶ 10]; [R. 265, 23:12-16, 25:10-11]. Twist asked McAdam for help filing a lawsuit in which he could give an employee, whom he owed some money to, "a judgment against him so that he could file a lien against some of his assets." [R. 265, 25:13-17]. Through this complaint, Twist intended for Armstrong, a trusted employee, to obtain a judgment lien over the Natural Gas Assets to protect them from creditors, like Grayiel. [R. 218, p. 3, ¶ 15]. Twist informed McAdam that Armstrong "would be an easier creditor to deal with than some of the other people that were—he said they were hounding him for money." [R. 265, 26:15-17]. McAdam further testified that he thought

Twist "felt like he was under—or he gave me the impression that he felt like he was under pressure from these creditors, and he wanted [Armstrong] to have a priority in time on the claims against the assets of the gas leases." Id. at 26:18-21. Armstrong testified that Twist ordered him to pay McAdam two checks of $1,000 each to retain him for the suit, which Twist promised to repay but never did. Id. at 92:23-93:8.

McAdam drafted a complaint for Lonny Armstrong (the "Armstrong Complaint").⁴ [R. 218, p. 3, ¶ 11]. McAdam testified that Twist (not Armstrong) provided him with the information to put in the Armstrong Complaint. [R. 265, 27:2-9]. Armstrong likewise testified that the allegation that Twist owed him $500,000 came from Twist. Id. at 94:2-5. The Armstrong Complaint sought damages in the amount of $500,000 and a right to a percentage of royalties from the Natural Gas Assets on the grounds that Twist owed Armstrong an annual bonus and royalty payments under their employment agreement. [R. 218, p. 3, ¶¶ 13-14]; [JX19]. The Armstrong Complaint was never filed. Id. at ¶ 16; [R. 265, 27:20-21]. Instead, Twist simultaneously attempted to evade creditors through a different route: transferring ownership of the Natural Gas Assets to other Twist Entities and later to another "friendly" creditor, Gregory Anastas, and his company, AIO Holdings, LLC ("AIO"). As Armstrong explained, the 2005 scheme involving Armstrong "later ... just kind of dropped by the wayside, and that's when AIO come into play." Id. at 93:1-2; [R. 218, p.3, ¶¶ 16-17].

4 Anastas was unaware of the Armstrong Complaint until the present litigation. [R. 218, ¶ 13].

iii. Gregory Anastas and the AIO Loan

Gregory Anastas moved from California to Kentucky around 2004. [R. 264, 104:8-21, 106:3-5]. Anastas explained that he decided to move to Kentucky after a change in California law caused his mail order business to shut down. Id. at 104:16-25, 106:8-9. Anastas claimed to have about $2,500,000 to $3,000,000 on hand after selling his house and a business in California and decided to open a liquor store in Kentucky around February 2005, having previous experience in the industry. Id. at 106:9-24. Anastas opened two more liquor stores at the end of 2006, and a fourth store by 2009. Id. at 107:3-4. An intervening change in Kentucky law rendered his liquor business unprofitable, and Anastas ended up shutting all four liquor stores down. Id. at 109:4-16.

Around 2005, while Anastas was reentering the liquor store business, he was also looking for investment opportunities in other industries. Id. at 110:1-7. Anastas's father, Samir Anastas, told Twist to contact his son about possibly investing in the oil and gas wells. Id. at 110:15-19; [R. 262, 38:5-15]. Anastas testified that Twist provided him with a subscription agreement, but Anastas was uninterested in signing such an agreement because "it basically just said how many ways [Twist] was going to get your money and you had no way to get it back." [R. 264, 110:24-111:5]. Anastas testified that he told Twist he would only be interested in a loan agreement that Twist secured with his assets. Id. at 111:6-9. Anastas explained why he felt more comfortable as a lender than an investor:

I do understand priority. I understand the fact that lenders come first before owner's equity. Even in the lender, the first in line comes first before the second in line. It's just like when you own a home. Like, if you have a first deed of

trust or a second deed of trust and then you're the equity owner at the end, if it goes into foreclosure, the first deed of trust is going to get theirs first. If there's money left over, it goes to the second. If there's money left over, it goes to the equity holder.

Id. at 111:10-18. Anastas has a finance degree from the University of Southern California ("USC") and has previously taken out SBA loans, commercial loans, and residential loans. Id. at 112:24-113:6.

Armstrong testified that he met Gregory and Samir Anastas for the first and only time around 2005 to 2006, when they visited West Virginia. [R. 265, 85:22-25]. According to Armstrong, he and Twist met the Anastases at the Belknap Number 1 well, where Armstrong "blew the well off" (to demonstrate that it was a good well), and the Anastases were impressed. Id. at 81:25-82:1, 84:12-14. Armstrong further testified that Twist pivoted from the Armstrong Complaint and instead pursued a $2,000,000 loan from Anastas and lien on the Natural Gas Assets to evade creditors:

[T]he way Martin [Twist] explained it was that he was going to get a lien through Anastas for $2 million and it was going to be the same principal and the same scenario that he was suing me for $500,000, only more money, and yet he would have control of it. And all it was getting away from the creditors and stuff.

Id. at 95:5-9.

On June 20, 2005, Anastas formed AIO Holdings, LLC to effectuate a loan to Twist. [R. 218, p. 4, ¶ 23]. AIO is owned entirely by Advantage Investments, LLC ("Advantage Investments"). Id. at ¶ 26. Anastas solely owns Advantage Investments, a Kentucky limited liability company initially formed in 1999, which had no employees and, per Anastas, functioned solely to make capital contributions from Anastas for loans to other entities affiliated with Anastas, such as AIO. Id. at ¶ 21; [R. 264, 130:12-14]; [JX1]. AIO had no employees and no operations other than certain agreements in connection with the Natural Gas Assets. [R. 218, p. 4, ¶ 24]. Anastas is unaware of, and does not recall ever signing, an operating agreement for AIO. Id. at ¶ 25. Around this same time, on July 5, 2005, the Pedley law firm (defined below) drafted an operating agreement for AIO that lists Advantage Investments and a Twist entity, Offshore Energy, LLC, as members of AIO. [R. 218, p. 4, ¶¶ 26-29]; [JX102, p. 36]; [JX102].

Two days after AIO's formation, on June 22, 2005, Twist, MTEC, Cherokee Energy, Cherokee Drilling, and Seca (collectively, the "AIO Borrowers") entered into a Revolving Promissory Note ("AIO Note") authorizing the AIO Borrowers to draw up to $2,000,000 on a line of credit ("AIO Loan") from AIO. [R. 218, p. 5, ¶ 37]; [JX20]. The AIO Note was drafted by the law firm of Pedley, Zielke, Gordinier & Pence ("Pedley"). [R. 264, 112:1-5]. Anastas testified that, despite his finance degree from USC and his years of experience as a business owner, he did not understand that it may be a bad idea for a borrower and lender to use the same lawyer to effectuate the transaction. Id. at 113:13-20. Rather, he believed it was beneficial for both parties because it saved legal fees. Id. at 113:25-114:2. He explained, "attorneys are expensive, and the less you can use them, a lot of times the better. Courts are expensive. All this is expensive, yeah. Whenever I can reduce that cost, I try my best."⁵ Id. at

5 Notably, Anastas failed to adhere to these principles in arriving at the Agreed Judgment, discussed infra Section I(b)(iv), in which he and Twist decided to file a lawsuit rather than settle privately, even though the parties had already agreed to the outcome.

114:1-4. When asked why Anastas agreed to offer the Twist Entities a credit line of up to $2,000.000, Anastas testified:

A. Martin was—he actually showed me a list, like a—what would that be called? ... Valuation. A valuation list, I guess, of like, all the assets he was supposedly in control of and what assets he could hock or, you know—what's the word I'm looking for? Encumber. So what assets he could encumber. And that is what was—I was going on.

Q. So is it your understanding, then, at this time that the assets that were controlled by these entities were worth up to or above $2 million? Is that correct? A. That is correct, yeah.

[R. 264, 143:21-6].

On July 8, 2005, Robert Fleu, an attorney for Pedley, sent an email to Twist attaching various loan and security documents in connection with the AIO Loan and Note. [R. 218, p. 4, ¶ 30]; [Pl. Ex. 52]. Twist forwarded the email and the attached documents⁶ to Anastas. [R. 218, pp. 4-5, ¶¶ 30-31]; [Pl. Ex. 52]. The documents included the AIO Note, a West Virginia deed of trust and security agreement, and releases of the deed of trust (the "Release Documents"). [R. 218, p. 5, ¶ 32]; [Pl. Ex. 52].

6 The first set of documents attached to the Fleu email included a promissory note offering AIO's assets as collateral for the loan from Advantage Investments and a release of such security agreement. [R. 218, pp. 4-5, ¶ 31]; [Pl. Ex. 52]. The promissory note was never signed. Id. In fact, Anastas is unaware of any signed documents evidencing the loan between his companies and describes the payment terms as "informal." [R. 218, p. 5, ¶¶ 35-36].

At some point Twist recommended Charles B. Dollison ("Chud Dollison"), a West Virginia lawyer, to assist with the security documents. [R. 264, 114:13-16]; see also [R. 218, pp. 5-6, ¶ 38]. On August 15, 2005, MTEC (as Grantor), AIO (as Lender), and Chud Dollison (as Trustee for the benefit of AIO) entered into a Credit Line Deed of Trust, Mortgage, Security Agreement, Assignment of Production, and Financing Statement (the "Deed of Trust"). [R. 218, pp. 5-6, ¶ 38]; [JX24]. Per the Deed of Trust, MTEC pledged all its right, title and interest to the Natural Gas Assets and related property to secure the $2,000,000 AIO Note. [JX24]. The Deed of Trust was filed in three different West Virginia counties: Roane County and Jackson County on September 27, 2005, and in Kanawha County the next day. [JX21; JX22; JX23]; [R. 218, p. 6]. The related UCC Financing Statements encumbering the personal property of MTEC, Cherokee Drilling and Seca were filed with the West Virginia Secretary of State on September 30, 2005, and the Kentucky Secretary of State on October 12, 2005, [JX25; JX27 JX29; JX30]. Although attorney Dollison assisted AIO on the Deed of Trust, Anastas has no recollection of ever communicating with Dollison and does not know who paid his legal fees. [R. 218, p. 6, ¶ 39].

On September 30, 2005, Fleu, with the Pedley firm, emailed Twist with the subject line "Changes in the Release Documents" asking Twist to ensure the documents said what he wanted. [JX28]. Twist forwarded the e-mail to Anastas. Id. On October 5, 2005, Anastas replied to Twist and Mr. Fleu, stating:

Both releases originally were to be limited in nature. To accommodate Martin so that if he wanted to hock his assets (that I have not financed) he could do so. If I was moving to [sic] slow for him on wells 2 through 5.

I need these releases to be limited in scope. I need to know that these releases do NOT :

1. fully [sic] release the loan agreements until there has been proof of payment.

2. give [sic] up title and interest to the wells that the funds (loans) were used to drill

3. that [sic] they give up NO equity interest in any of the partnerships that the general partner has assigned for consideration of the loans

This was the agreement that I understood from Martin a few months back, when these were written up.

Martin this also allows you to file this release if you choose to raise additional financing and also will save my ass as far as security interest is concerned.

Robert [Fleu] I know we have not spoken yet but if you have any questions please give me a call.

[R. 218, p. 5, ¶ 33]; [JX28 (emphasis in original)]. According to Anastas, at this time, he felt the Pedley firm was working to benefit Twist rather than AIO. [R. 264, 115:1-8]. Further, despite Fleu serving as the primary Pedley attorney representing AIO in connection with the AIO Loan, that email was Anastas's first communication with Fleu. [R. 218, p. 5, ¶ 33-34]; [JX28].

As part of the AIO Loan, between July 2005 and November 2005, Anastas loaned $360,000 through various increments to the Twist Entities. [R. 218, p. 4, ¶ 22]; [JX103]. Anastas confirmed that he never loaned Twist the full $2,000,000 authorized under the AIO Loan. [R. 264, 117:11-17]. Meanwhile, Armstrong formed Exploration Escrow, LLC ("Exploration Escrow"), at the request of Twist, and subsequently opened a bank account under the same name at Summit Bank in West Virginia. [R. 218, p. 6, ¶¶ 40-41]; [R. 265, 85:9-12, 85:24-86:10]; [JX32 (Articles of Organization of Exploration Escrow)]. Twist informed Armstrong to "[k]eep all the moneys [sic] I get from Anastas in this account. Nobody else's ever." [R. 265, 85:13-14]. Armstrong ultimately deposited a total of $360,000 from AIO. [R. 218, p. 6, ¶ 41]; [JX103]; [R. 274, p. 1, ¶ 1].

Shortly after AIO advanced funds under the AIO Loan, Twist and the Twist Entities repaid $110,000 to AIO, leaving a remaining balance of $250,000 plus interest owed to AIO. [R. 218, p. 6, ¶ 42]. Anastas testified this quick repayment followed by additional Twist requests for more loans made Anastas suspect a Ponzi scheme:

A. Mr. Twist repaid me [$]110,000 of the [$360,000], which was really odd to me. I didn't understand it, really. So it made me suspicious of what was going on. It made me feel like I was entering into—because he repaid it and then he asked for more money shortly after, and I felt like I was being played a little bit. Like, I felt like I was—it was like a little bit of a Ponzi scheme. And I talked to a few people around me, and they somewhat agreed with that feeling.

Q. So did you exercise your right and stop loaning him money?

A. Oh yeah, absolutely. So I went to him, and I said—I told him, "Martin, I'm done loaning. I'm not going to continue with this. It doesn't feel right to me. And I'd like to be paid back." And he promptly stopped giving me anything or stopped paying me at all.

[R. 264, 116:20-117:8] (emphasis added).

On September 8, 2006, Twist transferred certain Natural Gas Assets from MTEC, Cherokee Energy, Blue Flame, Seca, and Cherokee Drilling to Joerhea and Beasley Realty, LLC ("Beasley"), entities under Twist's control. [R. 218, p. 3, ¶ 18]; [JX34]. Joerhea was a Twist Entity owned by

Twist's half-brother with special needs. Id. at 8, ¶ 59.

iv. The AIO Complaint and Agreed Judgment

In 2008, Twist informed Anastas that "he was worried somebody might be after him" and suggested AIO hire Thomas McAdam (Twist's high school friend who drafted the Armstrong Complaint) to assist Anastas in foreclosing against Twist and the Twist Entities under the AIO Loan. [R. 264, 118:14-119:2]; see supra Section I(b)(ii). Twist explained he "had a friend [McAdam] that could get it done." Id. at 118:14-17. Anastas agreed to use McAdam, because "this was all moving forward in the right direction of me getting the assets so I could get my money out of it and be done with the whole thing." Id. at 118:17-20.

According to McAdam, Twist called him and stated that he had "a similar situation" to the Armstrong Complaint, where he owed AIO money and "wanted them to foreclose on the liens against these gas leases." [R. 265, 28:10-18]. When asked why Twist wanted AIO to foreclose on the oil and gas wells, McAdam explained it was because other creditors or investors were "hounding" Twist, and Twist wanted the assets encumbered by AIO:

A. Well, he explained to me that AIO was very cooperative with him and, you know, sort of would let him be in a position of debtor-in-possession operator that would secure their interests in the thing based upon the money that he had gotten from them and that that would—the same as in the previous situation [the Armstrong Complaint], that would foreclose anybody else from deciding to sue him because the equity, the assets, would all be tied up with liens. Basically, it was just foreclosing a lien that he'd already agreed to.

...

Q. So you're saying that he wanted the foreclosure to go forward because of the other creditors?

A. Yes. He said—well, I don't know if they were creditors. I think they were dissatisfied investors or something, but he wasn't real particular about it. He said that they were hounding him and that he just wanted to make sure that AIO was protected in their investment.

Id. at 28:21-29:4, 29:8-14. McAdam further explained that all parties understood the outcome of the "friendly" lawsuit before it was even filed:

Q. And at all times during—at the outset of the case, it was always understood that this was going to be a consent judgment?

A. Yes. As I recall, there was some discussion early in the thing about whether or not Bryan [Dillon] was going to represent AIO and I was going to represent Martin or vice versa. I mean, it was a friendly lawsuit. It was not adversarial, technically, at all.

Id. at 35:18-23. Finally, when asked whether there were ever any discussions about effecting the foreclosure outside the court process, McAdam stated that he did not believe so. Id. at 60:2-4.

McAdam prepared the complaint ("AIO Complaint") and filed it on September 23, 2008 against the AIO Borrowers and Joerhea, a Twist Entity that has been assigned certain of the Natural Gas Assets in 2005, (the "AIO Foreclosure Defendants") in the Circuit Court of Jefferson County, Kentucky (the "Circuit Court" or "Foreclosure Court"), seeking damages not to exceed $2,000,000 outstanding under the AIO Note, plus accumulated interest. [JX35]; [R. 218, pp. 6-7, ¶¶ 43, 46, 51]. McAdam testified that he received all the factual allegations and documents used to draft the AIO Complaint from Twist. [R. 265,

30:13-15, 31:4-7]. He did not receive any documents from Anastas. Id. at 31:6-7. There is no calculation of damages in the AIO Complaint, and the Complaint fails to mention that, at the time of the filing, the principal indebtedness under the AIO Note was only $250,000 plus interest at two percent per month—not $2,000,000. [R. 218, p. 6, ¶ 48]; [JX35]. The AIO Complaint also sought entry of a foreclosure judgment against the AIO Foreclosure Defendants, which would grant AIO possession of, title to, and control over the Natural Gas Assets. [R. 218, p. 7, ¶ 49].

Anastas agreed with McAdam serving as AIO's attorney, and Anastas verified and signed the AIO Complaint. Id. at 6, ¶¶ 44-45. However, Anastas does not recall ever communicating with McAdam prior to the filing of the AIO Complaint. Id. at ¶ 45. On September 12, 2008, Twist sent Anastas an email, attaching a draft of the AIO Complaint, and stating:

[G]reg, please take a look at the AIO complaint prepared & to be filed, by attorney, tony mcadam, on [M]onday. (attached) [D]o you have any suggestions, changes or additions? [I]f not, we need to meet and have your signature both on it, and the retainer agreement. (sent under separate cover) [T]he defendants will want to sign an agreed judgment, call me over the weekend if you have time. [T]ime is of the essence. [M]any thanks Martin.

Id. at 7, ¶ 50 (emphasis added); [Pl. Ex. 58]. Although the email references a retainer agreement, Anastas cannot recall ever signing an agreement to retain McAdam as AIO's counsel. [R. 264, 157:20-158:2].

On October 30, 2008, about a month after the filing of the AIO Complaint, the AIO Foreclosure Defendants and AIO entered into an Agreed Judgment under which AIO was granted immediate and sole possession, control of, and title to the Natural Gas Assets in satisfaction of the $2,000,000 AIO Note. [R. 218, p. 7, ¶ 52]; [JX36]. As part of the Agreed Judgment, the AIO Foreclosure Defendants were "released from any further liability to Plaintiff, [AIO], under the [AIO Note]." [JX36]. The Agreed Judgment specifically provided:

(1) Plaintiff [AIO] is granted a Judgment against the Defendants [MTEC], Martin Twist, [Cherokee Energy], [Cherokee Drilling], [SECA], and [Joerhea], immediate possession, title and control of certain drilling leases, personal property, and other assets, which were pledged as security for the line of credit extended by Plaintiff [AIO] to the Defendant [MTEC], more specifically described in Plaintiff's Exhibit A, attached to its Complaint, and further attached to this Judgment. Plaintiff [AIO] shall have immediate sole possession of all said drilling leases, personal property, and other assets, as listed.

(2) The Defendants, [MTEC], Martin R. Twist, Individually, [Cherokee Energy], [Cherokee Drilling], [SECA], and [Joerhea] are hereby released from any further liability to Plaintiff, [AIO], under the promissory note which is the subject of this lawsuit.

[JX36]. Although the Agreed Judgment did not list the face amount of the $2,000,000 AIO Note, it expressly referenced the AIO Note and attached it to the Agreed Judgment. Id. Notably, the Agreed Judgment, like the AIO Complaint, failed to state that AIO was only owed $250,000 plus interest. See id.; [JX35]. The Agreed Judgment was signed by Circuit Court Judge Barry L. Willett, Anastas, McAdam (as attorney for AIO), Twist, Joerhea E. Beasley (Twist's brother with special needs who was a member of MTEC, Cherokee Drilling, Cherokee Energy, SECA,

and Joerhea), and Bryan Dillon (as attorney for the AIO Foreclosure Defendants). [JX36]. The Circuit Court entered the Agreed Judgment on December 2, 2008, and it was later recorded in Kentucky and West Virginia. [R. 218, p. 7, ¶ 53]. No appeal of the Agreed Judgment was ever taken by any of the parties. Id. at 13, ¶ 111.

Pursuant to the Agreed Judgment, the AIO Foreclosure Defendants transferred all their right, title, and interest in the Natural Gas Assets to AIO. Id. at 7, ¶ 54. On January 1, 2009, Joerhea executed an Assignment and Bill of Sale wherein Joerhea assigned its entire interest in the Natural Gas Assets to AIO. Id. at 8, ¶ 60; [JX45]. Neither AIO nor Anastas ever performed a valuation of the Natural Gas Assets or an accounting of the outstanding indebtedness in connection with the Agreed Judgment. [R. 218, p. 7, ¶¶ 55, 57]. Further, no party submitted a determination of the amount of liability owed to AIO to the Foreclosure Court. Id. at ¶ 56. As of August 2011, Anastas had never seen a production report for the Natural Gas Assets owned by AIO, had never met with the landowners where the Natural Gas Assets are located, and never kept written corporate records of AIO's operations. Id. at ¶¶ 70-71, 73. Further, AIO and Anastas had no involvement in the day-to-day operation of the Natural Gas Assets prior to entry of the Agreed Judgment, although AIO had some limited involvement after the entry of the Agreed Judgment. Id. at ¶ 72. Anastas understood that even though AIO was only owed $250,000 plus interest under the AIO Note, the Agreed Judgment gave him the rights to all the Natural Gas Assets, which he believed to be valued at around $2,000,000. [R. 262, 16:21-25; 17:15-18]. He testified that anyone in the public who saw the Agreed Judgment would see that AIO had a judgment for nearly all the Natural Gas Assets:

Q. So essentially anyone — anyone in the public if they saw the Agreed Judgment that was entered on the court's dockets, they would see AIO had a judgment for nearly all the Natural Gas Assets, correct?

A. Correct.

Id. at 19:9-13.

Grayiel introduced an expert report by Christopher B. Meadors on the value of the wells at the time of the Agreed Judgment. [JX95]. Meadors is a certified public accountant and licensed attorney in the state of Texas with more than fifteen years of experience advising clients on "complex financial investigations, forensic accounting and anti-fraud matters." Id. at 3. Meadors concluded that the value of the assets transferred to AIO as a result of the Agreed Judgment "were worth substantially more than the debt owed to AIO at the time of the transfer." Id. Meadors specifically determined that the value of the Natural Gas Assets, including the gas wells themselves and the tangible assets transferred to AIO, totaled at least $721,607 on the date of the Agreed Judgment. Id. at 21. Meadors went on to calculate the present value of the Natural Gas Assets, as of the date of his report, October 6, 2017, as at least $1,058,333. Id. at 22. Defendants produced their own expert report by Michael T. May, a registered professional geologist. [JX96]. May's report criticizes Meadors' analysis, arguing that his approach was "fatally flawed" because he did not consider Decline Curve Analysis and did not properly account for several necessary factors in reaching his conclusion. See id. at 1-9. However, it does not appear, and Defendants do not argue, that May offers a contrary valuation of the Natural Gas Assets. See id.; see also [R. 280; R. 281]. c. AIO Enters into an Operating Agreement with a Twist Entity and Evidence of Twist's Control Over AIO

Anastas, upon acquiring ownership of the Natural Gas Assets through the Foreclosure Judgment, immediately ceded operational and economic control of the assets to Twist. See [R. 264, 116:25-117:1]. In fact, even before the parties executed the Agreed Judgment, Twist and Anastas had an understanding that, while AIO would receive the Natural Gas Assets, Twist would retain operational and economic control until AIO had been paid in full, at which time the Natural Gas Assets would revert back to the Twist Entities. [R. 218, p. 8, ¶ 58]. None of this was disclosed to the Circuit Court or included in the terms of the Agreed Judgment. [JX36]. During his trial testimony, Anastas admitted that this "side" agreement was not memorialized in the Agreed Judgment:

Q. So essentially because you now owned all of the natural gas assets, none of Mr. Twist's other creditors could get to them, correct?

A. Yeah. I'm first in line. That's correct.

Q. You said you understood priority, but this is more than priority because you took all the assets, right?

A. No, it's not more than priority. It's just priority. I took them until I was paid back and that's priority.

Q. I mean, in this—based on this judgment, you owned everything.

A. Yeah. But the agreement was I would hold them until I was paid back and release them back. That's what I—that's the discussion I had with Martin.

Q. Is that what it says in this Agreed Judgment?

A. It does not say this in the Agreed Judgment.

[R. 262, 19:17-20:6]. Accordingly, on December 4, 2008, two days after entry of the Agreed Judgment, AIO and Twist entity 530 West Main, LLC executed an Operating Agreement (the "530/AIO Operating Agreement"), which Anastas signed on behalf of AIO. Id. at ¶¶ 61, 63; [JX39]. The 530/AIO Operating Agreement provided, in relevant part:

1. 530 West Main will receive all gross revenues generated by any of the oil and gas wells, leases, vehicles, equipment and other property listed in the attached Plaintiff's Exhibit A-1 through Plaintiff's Exhibit A-10, from which it will pay all operating expenses associated with said assets. The remaining balance, after payment of all expenses, which shall be called the "net revenue[,]" shall be divided between 530 West Main and AIO on a 50-50 basis.

[...]

5. Any amount due to AIO under paragraph 1 of this agreement shall be held in escrow by 530 West Main to cover anticipated expenses and attorney's fees, until said escrow amount reaches $500,000.00, at which time distributions will be made to AIO, if gross revenues are sufficient to make such distributions.

[JX39, p. 1] (emphasis added). Put simply, the 530/AIO Operating Agreement allowed 530 West Main to retain all the net revenues from the Natural Gas Assets in escrow until the net revenues reached $500,000, and only then would 530 West Main pay AIO half the net revenue. See id. When asked why he would agree to a deal giving Twist complete control over the well revenues (which AIO/Anastas purportedly owned), Anastas failed to provide any logical rationale, merely stating: "I made a pretty big mistake[.]" [R. 262, 22:7-10]. According to Anastas, neither he nor AIO received any consequential well revenue until after Twist's death more than five years later. [R. 218, p. 8, ¶ 64]. Anastas claims he consulted with an attorney about

alternative plans but made no other effort to determine if there were other qualified operators for the Natural Gas Assets. [R. 218, p. 8, ¶ 62].

On the same day the 530/AIO Operating Agreement was executed, 530 West Main signed a Natural Gas Gathering Contract (the "Gathering Contract") with Blue Light of Kentucky LLC ("First Blue Light"), another Twist entity. Id. at ¶ 65. The Gathering Contract provided that First Blue Light had "certain pipelines, right of ways, and pipeline taps" that 530 West Main required to transport the gas production from the wells to market. [JX40, p. 1]. Through the Gathering Contract, 530 West Main and AIO paid First Blue Light a "gathering fee" of one dollar per gross dekatherm of gas delivered into the market. Id. Anastas had no knowledge of First Blue Light's operational activities and did not sign the Gathering Contract. See id.; see also [R. 218, p. 8, ¶ 66].

Even before the 530/AIO Operating Agreement, the record demonstrates Twist had extensive control over AIO. For example, on October 9, 2007, Twist sent Anastas emails attaching various AIO corporate documents and reminding Anastas of AIO's tax and corporate filing requirements under Delaware law, stating "[if] you have any questions, call me." Id. at 9, ¶ 67; [Pl. Ex. 54]. The email also informed Anastas "you owe the 'delaware secretary of state' [sic] $699.00 ... you owe 'NARI' [sic] $318.00 ... only YOUR confidential name, address, and phone # are listed with NARI ... you have ordered a copy of the 'certificate of formation' from delaware [sic] for $85." [Pl. Ex. 54]. Similarly, on September 3, 2008, just before the AIO Complaint was filed, Twist emailed Anastas a list of dates relevant to AIO's operations and business dealings:

the california action was in 8/05

the delaware filing of AIO was 6/20/05

the date that pedley prepared the note and mortgage for AIO was 7/5/05

the filing of our Indiana federal action was 11/24/05

which is the earliest date that the california court deemed that we had notice the deed of trust for chud dollison was prepared 9/15/05

and filed with the kanawha county clerk on 9/27/05

[Pl. Ex. 55]. Anastas explained that Twist had an interest in AIO remaining in good standing "to help facilitate me getting my money back[.] I told Martin as soon as I get my money back, I'll hand you over all these assets. I really don't care about all these assets." [R. 218, p. 9, ¶ 69].

i. Attempted Sale of the Natural Gas Assets in 2012

Further evidence of Twist's unusual involvement with AIO, his lender, arises from the 2012 attempted sale of the Natural Gas Assets, where the proposed terms had Anastas and Twist splitting the $500,000 sale proceeds 50-50. Anastas testified that he was getting "fed up" with Twist and began searching for someone else to operate or purchase the Natural Gas Assets. [R. 264, 125:23-126:9]. He hired a West Virginia firm, Greer Law, to try to find a buyer for the wells. Id. However, Twist then told Anastas to stop searching, and that Twist could find someone to buy the wells. Id. at 126:5-9. Once again, Anastas followed Twist's lead. Anastas hired Vince Mallon, a Louisville attorney, to represent him in the potential purchase of the Natural Gas Assets by Reserve Oil and Gas ("Reserve Oil"). [R. 264, 126:11-17]. On April 27, 2012, Reserve Oil sent a Letter of Intent regarding "Purchase of Certain Assets of AIO LLC and Affiliates." [JX57]. The letter was addressed to Twist, not Anastas. See id. Importantly, the letter provided:

This is a letter of intent ("Letter") outlining the basic terms and conditions under which Reserve Oil & Gas Inc. ("Purchaser") will purchase certain assets (the "Assets") of AIO LLC and its affiliates (collectively, "Seller") which is owned, in part, directly or indirectly, by Martin Twist ("Shareholder").

Id. at 1 (emphasis added). Anastas testified that he objected to the letter being directed to Twist, so Reserve Oil drafted a new letter addressed to Anastas. [R. 264, 126:18-127:5]; [JX56]. On June 29, 2012, Twist forwarded Anastas an email thread between Twist, Mallon, and Bryan Prosek, discussing a potential purchase of the Natural Gas Assets by Reserve Oil. [R. 218, p. 9, ¶ 74]; [JX59]. Within this email chain, Twist sent an email to Mallon, stating:

[I] am gathering the info that [Reserve Oil] requested. [I] have instructed them to make 2 checks, with 50% of the proceeds going to AIO & the other 50% going to 530 West Main Properties, LLC. [T]he name of the entity that will be acquiring AIO simultaneously with the closing is Blue Light of Kentucky LLC, a Ky LLC, with offices at 530 West Main Street, Louisville, Ky 40202[.]

[JX59]. Anastas wholly failed to explain why Twist would be entitled to 50% of the sale proceeds when AIO owned the Natural Gas Assets 100%. Rather, he merely stated that splitting the proceeds with Twist would allow him to recoup the principal amount of his investment—$250,000 (apparently satisfied to forego any accumulated interest). [R. 264, 127:20-23]. This sale never went through.

ii. The Martin Litigation

Further evidence of Twist's control over AIO relates to a West Virginia lawsuit. From about 2009 to 2012, Twist served as AIO's chief decisionmaker related to a lawsuit filed by a landowner, Thomas Martin, against AIO in the Circuit Court of Jackson County, West Virginia. Martin v. AIO Holdings, LLC, Case No. 09C31 (W. Va. Cir. Ct.) (the "Martin Litigation"). In that matter, Twist retained Scott H. Kaminski to represent AIO. [R. 218, p. 9, ¶ 77]; [Pl. Ex. 121, 17:10-14]. Kaminski had previously represented Twist and related individuals and entities in other lawsuits, including the lawsuit filed by Grayiel in West Virginia. [Pl. Ex. 121, 22:6-23:12]; See supra Section I(c)(ii). Anastas was not aware of Kaminski's prior representation of Twist in the Grayiel lawsuit against Twist. Id. at 10, ¶ 78.

Kaminski testified that his representation of AIO began "in approximately March of 2009 when [he] received a phone call from Martin Twist" asking him to represent AIO. Id. at 17:15-18. Twist told Kaminski that the "authorized agent" for AIO was Todd Pilcher, Twist's son-in-law. Id. at ¶ 84; [Pl. Ex. 121, 20:16-18]. All legal invoices for Kaminski's services on behalf of AIO were sent directly to Twist; Anastas was not involved in Kaminski's payment. [R. 218, p. 10, ¶ 81]. In fact, Kaminski first communicated with Anastas in July or August of 2011, approximately two years after the Martin Litigation began. Id. at ¶ 83; [Pl. Ex. 121, 16:17-19, 40:13-15]. Anastas testified that he was not privy to the Martin litigation, a lawsuit against his company AIO, until he was informed late in that litigation that he needed to be deposed. [R. 264, 125:1-2]. He explained that he believed the 530 West Main Operating Agreement somehow delegated to Twist the handling of all litigation involving the Natural Gas Assets. See id. at 125:3-7.

After several independent contractors, including Todd Pilcher, refused or were unavailable to testify, Twist requested that Anastas appear as corporate representative

for AIO in the Martin Litigation. [R. 218, p. 10, ¶ 7]. Anastas was deposed in the Martin Litigation on September 14, 2011. [JX52]. At his deposition, Anastas explained that he did not know who had retained Mr. Kaminski, who had been managing the lawsuit on behalf of AIO, or how anyone else would have been authorized to answer interrogatories on behalf of AIO. Id. at 18:8-19:1, 19:13-16. Anastas further testified:

Q. So, was two million dollars, the full two million dollars actually paid out?

A. It wasn't, no.

Q. How much of that was actually paid out to him?

A. Well, between the two, was the three-hundred-fifty and I think seven-hundred-fifty for the equipment. I'm not sure, though. It's been a long time.

Q. So, approximately 1.1 million?

A. Yeah, approximately.

Id. at 22:21-23:6. Finally, Anastas testified:

Q. Okay. What relationship does 1-50, 530 West Main Street Properties, LLC have with A.I.O. Holdings?

A. I don't know of any.

Q. Are you familiar with that company at all?

A. No. I think I saw it on a document once or something just recently.

Q. You're not a member, have any relationship whatsoever with 530 West Main?

A. Nothing.

...

Q. Does Martin Twist have any involvement whatsoever in A.I.O. Holdings?

A. No.

Q. No managerial discretion?

A. No.

Q. Does he consult with you at all on any of that?

A. Never.

Id. at 24:8-16, 26:4-11.

When asked about his Martin deposition on cross-examination at this trial, Anastas conceded that he had previously lied under oath when he testified that he had loaned Twist $1,100,000. [R. 262, 66:6-13, 71:6-10]. He stated that he could not recall why he lied, but "absolutely [didn't] deny" that his lie gave the impression that the Agreed Judgment was appropriate. Id. at 73:25-74:22. Grayiel's counsel further questioned Anastas about his previous testimony that he had no relationship with 530 West Main, even though, at that point in time, the 530/AIO West Main Operating Agreement had been in existence for three years. Id. at 79:16-80:1, 80:7-9. Anastas responded: "I don't know. Maybe I had a lapse in memory. I don't know." Id. at 80:2-3. Finally, when asked on cross-examination about his prior testimony that Twist had no involvement whatsoever with AIO, Anastas admitted that Twist controlled AIO's litigation and AIO's property but claimed that his deposition answers were not outright lies. Id. at 80:20-84:9. It is plain that Anastas intentionally lied at several points during his deposition in the Martin Litigation in ways that bolstered the validity of the AIO Loan and Agreed Judgment.

Anastas testified that after his deposition, he contacted Kaminski to inform him that he lied during the deposition. [R. 262, 114:24-115:10]. He explained:

I'm an infallible human being and I try to reflect on those. And when I have the insight and fortitude to do so, I try to call myself out on that. And so when I was heading home after that deposition, I called Mr. Kaminski and I told him that I needed to change some of my testimony; that it wasn't true.

Id. at 115:5-10. However, Anastas never informed the court or the plaintiff in Martin of his lies:

Q. You testified a little earlier today that in your deposition in the Martin litigation that you lied about making a $1.1 million loan—that you lied about AIO making a $1.1 million loan to the Twist entities; is that correct?

A. That is correct, yes.

Q. Okay. And that you felt badly about that and afterwards you called your lawyer and corrected that and told Mr. Kaminski that that testimony was a lie; is that correct?

A. Yes, Your Honor.

Q. Okay. Did you go back and correct the record? Did you go back and inform the Court that your testimony was incorrect?

A. All I did was call Mr. Kaminski and let him know that.

Q. Okay. But to your knowledge, you did not correct that for the record with the Court or with plaintiff's counsel or Mr. Martin; is that correct?

A. Yeah. I just told Mr. Kaminski. I don't know what he did with that information. I don't know what happened after that.

[R. 265, 10:1-17].

Kaminski was unaware of the 530/AIO Operating Agreement until Anastas emailed it to him in October 2011. [R. 217-1, 75:9-12]. Kaminski testified that the 530/AIO Operating Agreement made clear to him "that there had been an agreement between Martin Twist and Greg Anastas" whereby Twist would operate the Thomas Martin well. Id. at 75:14-18. Kaminski realized that Twist and Todd Pilcher had "misrepresented their rights relative to the Thomas Martin wells." Id. at 77:13-16. When Kaminski learned of Twist's control over the Natural Gas Assets, he immediately contacted the disciplinary committee for the State of West Virginia and withdrew from the Martin Litigation. [R. 218, p. 10, ¶¶ 85-86]. He then withdrew from all matters related to Martin Twist. Id. at 78:14-24.

Finally, on June 29, 2012, Anastas sent Twist an email requesting Twist's comments on the proposed settlement agreement between AIO and Thomas Martin. [R. 218, p. 10, ¶ 80]; [JX60]. In the email, Anastas stated: "Martin, Can you please review the attached settlement agreement with Mr. Martin and make sure that everything looks in order. Please type any changes on the document and email it back to me." [JX60].

d. Teema

Defendant Sarinprapa Teema permanently moved to the United States from her native Thailand in 2009. [R. 266, 67:24-68:8]. She lived in New York and Philadelphia before moving to Louisville, Kentucky. Id. at 68:21-69:2. Teema testified that she came to Louisville because Twist offered her a job taking care of Twist's son. Id. at 69:3-5. Twist provided Teema room and board at his house, along with a salary. Id. at 69:25-70:5. Twist and Teema later began a romantic relationship. Id. at 71:7-13. The two became engaged and conceived a child together—T.T., who is presently nine years old. Id. at 66:21-25, 71:14-20, 72:17-20. Teema became a United States citizen around 2013. Id. at 71:21-24. Around December 2011, Teema's duties expanded beyond taking care of Twist's older son, to helping Twist pay household and company bills out of Twist's accounts. Id. at 71:4-6; 75:14-24, 77:6-8, 116:18-24; see also [R. 267, 8:7-12]. She eventually became a signatory on some of the accounts. Id. at 76:1-2; see also [JX11]. Teema had a two percent ownership interest in two Twist Entities, Joerhea and Beasley,

which she received around 2011 or 2012. [R. 267, 10:12-25].

e. Twist's Federal Indictment and Imprisonment

On February 7, 2012, Twist was indicted for tax evasion. [R. 218, p. 10, ¶ 87]. The Indictment charged that Twist "concealed assets through inter-account transfers in order to keep his business bank account balances low and prevent IRS collection enforcement activity" and "transferred real estate and business holdings to nominee owners in order to remove his name as owner and to prevent IRS collection enforcement activity." [JX55, pp. 1-2]. The Indictment further charged:

From 2004 through 2008 [Twist] used business accounts to fund his personal life style [sic] including $20,000 to $40,000 in monthly expenses that included personal aircraft travel, extravagant dining, private school tuition, vacations, luxury vehicles, and entertainment expenses. More particularly, [Twist] made approximately $1 million in personal expenditures from business accounts between 2004 and 2008.

Id. at 3. The Indictment mentioned Blue Flame, Cherokee Drilling, MTEC, Joerhea Realty, and Beasley Realty, but did not mention Anastas, AIO or Advantage Investments. Id. at 2. Twist pleaded guilty on July 9, 2013. Id. at ¶ 88; [JX70 (Plea Agreement)]. In his plea agreement, Twist specifically admitted that "he caused Blue Flame Energy to be created in the name of a nominee to conceal assets from the IRS." [JX70, p. 2].

Teema testified that, despite living with Twist and having his child during this time, she did not know that Twist had been indicted until she attended the hearing in July 2013. [R. 266, 107:15-22, 113:8-11]. Even so, Teema was copied on email correspondence from Twist to his criminal defense attorney, Scott Cox, dated November 26, 2012. [Pl. Ex. 123]. Plaintiff's Exhibit 123 does not include the body of the email, but the subject line reads "7-05-2012 IRS letter saying that I 'have a good history of timely filing & timely paying.'!" Id. When asked about the email on cross-examination, Teema testified that she knew the email was being sent to an attorney who represented Twist in the matter, but she did not know he was a criminal attorney. [R. 266, 112:23-113:2]. She explained that she did not ask Twist about the email because Twist sent or forwarded her many of his emails because his laptop was broken, and he wanted to have a copy. [R. 267, 18:20-22]. On October 18, 2013, Twist was sentenced, and he reported to federal prison on December 6, 2013. [R. 218, p. 10, ¶ 88]; [JX71 (Transcript of Sentencing)]. His plea agreement and the transcript of his sentencing proceeding likewise fail to mention Anastas or AIO. [JX70; JX71]

f. Organization of Second Blue Light and Right of Way Agreement

On October 1, 2012, about a month and a half after the birth of Twist and Teema's son, Teema incorporated Blue Light of Kentucky Limited Liability Company ("Second Blue Light") with assistance from Twist. [R. 218, p. 10, ¶ 89]. Second Blue Light's name is nearly identical to First Blue Light's name—Blue Light of Kentucky LLC, the Twist company that received the Natural Gas Assets revenues pursuant to the Gathering Contract and 530/AIO Operating Agreement. See id. at 8, ¶ 65; [JX39; JX40]. When asked about this similarity on cross-examination, Teema testified that she thought Blue Light of Kentucky Limited Liability Company was a good name because it sounded like First Blue Light. [R. 266, 151:20-25]. When Second Blue Light was formed, it did not have its own bank account. Id. at 152:1-5. Rather, around November 2012, Second Blue

Light began using First Blue Light's bank account at First Capital Bank. Id. at 6-16. Teema testified that Twist continued to control this account even after the formation of Second Blue Light. Id. at 153:6-8. In fact, she testified further that Twist controlled Second Blue Light until his death, including making some withdrawals from the First Blue Light/Second Blue Light account. Id. at 156:22-157:23.

According to Teema, the purpose of Second Blue Light was "[t]o help me to have a job. Have my own company. Have my own income." [R. 218, p. 11, ¶ 90]. During trial, she expounded upon why she formed Second Blue Light:

Because I had a child with Mr. Twist and I didn't have a job or my own income, and Mr. Twist is—you know, he's old, and you never know when that thing can happen. And for my secure [sic] and help me take care if he's not around. So we set up the company to have my income and take care of my son and myself.

[R. 266, 77:23-78:2]. On cross-examination, Grayiel's counsel asked Teema if Second Blue Light was formed so that when Twist died, she could keep any money from Twist's assets. Id. at 116:2-4. Teema answered, "I believe so. It's like family transfer the asset to family [sic] generation to generation is what I believe." Id. at 116:5-6.

Shortly after the formation of Second Blue Light, on December 7, 2012, Second Blue Light entered into an Assignment of Right of Way Agreement ("Right of Way Agreement") with First Blue Light. [JX100]. The Right of Way Agreement provides that, "for good and valuable consideration," First Blue Light assigned all its "right, title and interest in and to the gas pipeline, taps and related facilities" constructed under a prior agreement with an individual named Sylvia Cavender. Id. The Right of Way Agreement was signed by Martin Twist on behalf of First Blue Light and Teema on behalf of Second Blue Light. Id.

Although the Right of Way Agreement recited that consideration was exchanged, Teema testified that Second Blue Light paid no consideration for the right of ways. Teema described the Right of Way Agreement as "an inheritance" passed from First Blue Light to Second Blue Light. [R. 266, 137:7-9]. On cross examination, Teema testified as follows:

Q. And is this agreement [the Right of Way Agreement] the basis for your belief that [S]econd Blue Light has the right to receive money from the [N]atural [G]as [A]ssets?

A. I believe that to form the [S]econd Blue Light and to have the right to operate it as well.

Q. I'm sorry. I'm going to ask it again just so I understand your answer. This assignment document that's in front of you, Joint Exhibit 100, that document is the basis for your belief that [S]econd Blue Light has the right to receive payment from the [N]atural [G]as [A]ssets; right?

A. Yes.

Id. at 134:3-14. Teema doubled down on her belief that the Right of Way Agreement served as an "inheritance" in her later testimony:

Q. Ms. Teema, we were just discussing Joint Exhibit 100, and that's the assignment of the right-of-way, right, which you labeled—that's an inheritance for you; right?

A. Yes.

Q. And that's an inheritance passed from [F]irst Blue Light to [S]econd Blue Light; right?

A. Yes.

Q. And [F]irst Blue Light is a Twist company; right?

A. Yes.

Q. And you testified that in this document, [S]econd Blue Light paid no consideration for the assets in the assignment; right?

A. Yes.

Q. So how could it be that Mr. Twist could give you something and there was nothing in return?

A. What you mean [sic] give me something, nothing in return?

Q. Well, Ms. Teema, this assignment of the right-of-way, you agree that it transfers that [N]atural [G]as [A]ssets from [F]irst Blue Light to [S]econd Blue Light; right?

A. Yes.

Q. And you agree that [S]econd Blue Light didn't pay anything in return for the transfer of these valuable assets; right?

A. Yes. I believe it's just his intention for me to inherit, seeing I had a child with him.

Q. Right. So he's trying to help you set up your future; right?

A. Yes, and he know [sic] that I don't have money to pay or to set up something. So you think that Mr. Twist expect [sic] me to pay him?

Id. at 137:3-138:4.

On March 26, 2013, Teema and Twist sent a letter to Jerry Blevins at First Capital Bank of Kentucky, asking him to connect six bank accounts "to be viewed and transferred between online, on the cash management website." [JX66]. The bank accounts to be connected were: T/B Management, LLC, Beasley, 530 West Main, Second Blue Light, Joerhea, and an account under the name of Twist's older son. Id. Teema testified that these accounts were linked because "[i]t was just easier to do online transaction by just look on the screen [sic] and do all that. Like I said, you know, you don't have to call the bank and tell them that I need this transaction to this transaction. [sic]" [R. 266, 89:20-23].

g. Twist's Death and the AIO/SBL Operating Agreement

On February 23, 2014, shortly after reporting to federal prison, Twist died. [R. 266, 100:1-2, 123:25-124:2]. Initially, Teema served as executrix of Twist's estate. Id. at 95:10-11, 97:22-98:8. As Executrix, Teema filed an Inventory and Appraisement of Estate, which listed the estimated values of Twist's assets. [JX84]. According to this document, the total estimated value of Twist's assets was $255,955. Id. The document listed the estimated value of Beasley as $0, Joerhea as $196,000, and 530 West Main as $4,000. Id. Around April 21, 2014, Grayiel filed a Statement of Claim against Twist's Estate in the Jefferson District Court based upon his West Virginia Judgments. [R. 231-1]; [JX38]; [JX82]; [JX85]; [JX87]. At or around that time, Grayiel first became aware that the Twist estate contained nearly no assets, and that the revenues from the Natural Gas Assets were not part of Twist's Estate. [R. 231-1, p. 4, ¶ 12]. Grayiel never executed on the West Virginia Judgments against Twist and the Twist Entities named as judgment debtors. [R. 218, p. 13, ¶ 112]. On March 13, 2015, the Jefferson District Court granted Teema's Motion to Withdraw as Executrix and appointed a public administrator. [JX90]. Second Blue Light was not listed on the inventory of assets for Twist's estate, which Teema prepared. [R. 266, 121:1-6].

Anastas testified that he first met Teema at Twist's funeral, and spoke to both her and Tammy Twist, Martin Twist's daughter, about operating the oil and gas

wells. [R. 264, 121:2-8]. Teema testified that she did not know AIO owned the gas wells prior to this conversation; she believed Twist still owned the wells. [R. 266, 75:1-10]. Anastas explained that he decided to enter into an agreement with Teema over a better offer from Tammy, who told Anastas she would "get [Anastas] paid back quicker" and take less of a split, because of the "bad taste" he had in his mouth with Twist. Id. at 122:13-19. Anastas failed to explain why his feelings about Twist negatively affected his view of Tammy, Twist's daughter, but not Teema, Twist's fiancé and the mother of his child. See id.

AIO and Second Blue Light, through Anastas and Teema, then entered into an Operating Agreement (the "AIO/SBL Operating Agreement") on March 31, 2014. [JX83]. Bryan Dillon, Teema's lawyer in this case, drafted the AIO/SBL Operating Agreement on behalf of both parties. [R. 267, 23:2-6]. The AIO/SBL Operating Agreement provided that Second Blue Light would operate the wells and pay AIO 50% of the net proceeds (even though AIO owned the assets 100%). [JX83, p. 1, ¶¶ 1-2]. It further provided that such payments would be credited to Second Blue Light toward purchasing the Natural Gas Assets. Specifically, the AIO/SBL Operating Agreement provided:

4. All amounts paid by Blue Light to AIO ... shall be credited towards the purchase of the items set out in the attached Exhibit pages A-1 through A-10. The "Purchase Price" shall be $466,392 as of March 31, 2014. The unpaid balance (after credit is given for the payments made by Blue Light to AIO under Paragraph 2 and otherwise) shall accrue interest at the rate of 5% per annum from and after March 31, 2014.

[...]

7. After full payment of the Purchase Price by Blue Light to AIO, AIO shall immediately convey to Blue Light all of the property listed in the attached Exhibit pages A-1 through A-10[.]

Id. at 1-2, ¶¶ 4, 7. Put simply, AIO and Second Blue Light agreed to split the net proceeds from the Natural Gas Assets until AIO was paid $466,392, at which point AIO would convey the Natural Gas Assets to Second Blue Light. See id. at 1-2, ¶¶ 1-2, 4, 7; see also [R. 264, 123:25-126:2]. The AIO/SBL Operating Agreement stated that Second Blue Light "has been operating the Wells" and "the parties hereto desire that Blue Light continue to operate the Wells with a view towards ultimately acquiring the Wells along with all other property identified on the attached Exhibit[.]" [JX83, p. 1]. Anastas testified that, at the time of executing the AIO/SBL Operating Agreement, he would not have said that Second Blue Light had been operating the wells. [R. 262, 95:8-10].

At trial, Teema explained that her role in "operating" the wells on behalf of Second Blue Light is minimal and involves paying bills from her home computer. She testified that she did not know how the wells physically operate and stated "[a]ll I know is, like, I sit in the office and I do the work from my computer and send the check out." [R. 266, 117:19-24]. Specifically, she has to pay Jonathan Rager in West Virginia to keep an eye on the wells, and if there is a problem, she will pay Rager to fix it. Id. at 119:18-23. Her work "operating" the wells takes only about two to three hours a month. [R. 267, 59:2-4]. However, per the net profit sharing under the AIO/SBL Operating Agreement, Teema nets on average about $2,750 per month for her 2-3 hours of work each month. Id. at 58:19-24. This equates to at least $900/hour for her work sending checks from her home computer. See id. Her compensation for "operating" Second

Blue Light far exceeds that of her day job: she makes around $30,000 per year as a nail technician, which Teema admits is more difficult than her work on behalf of Second Blue Light and requires her to work every day rather than once a month. Id. at 61:5-11. On cross-examination, Teema admitted that it would be ridiculous for AIO to pay anyone else that high hourly rate to "operate" the wells. Id. at 62:8-13.

The AIO/SBL Operating Agreement continues to the present day. Based on the revenue tables provided, Second Blue Light and AIO have each profited over $250,000 from the Natural Gas Assets between 2014 and late 2021. [JX97]. At this point, Anastas has been paid back the outstanding $250,000 principal balance on the AIO Loan, but believes he is still owed interest. [R. 262, 98:24-99:10].

h. Grayiel's Investigation and this Lawsuit

From approximately 2006 through 2010, Grayiel attempted to learn about the production of the wells he had invested in from the West Virginia state tax department and the Department of Environmental Protection ("DEP"), but only found limited information as to the production. [R. 218, p. 12, ¶ 100]. Grayiel was also interviewed under oath by the IRS, the FBI, and the SEC about Twist's activities sometime between 2001 and 2008. Id. at ¶ 106. Grayiel asked the agencies about the nature of the investigations, but they refused to provide information about the ongoing investigations. [R. 231-1, p. 2, ¶¶ 6-7]. Around that time, Grayiel contacted the West Virginia Department of Environmental Protection and the West Virginia State Tax Department about the wells, but they could not find the requested records. Id. at ¶ 8. Grayiel filed a Freedom of Information Act ("FOIA") request for the records, which was denied. Id. Grayiel went to the Kanawha and Roane County courthouses to look up information about the wells but could not make sense of the documents. Id. at 4, ¶ 9. He also contacted the West Virginia Secretary of State for information. Id. Steptoe & Johnson LLP ("Steptoe"), former counsel for Grayiel in his prior litigation against Twist, became aware of the liens filed by AIO against the Natural Gas Assets and the Agreed Judgment based on a search of public records during the time Steptoe represented Grayiel. [R. 247, p. 1, ¶ 1]. Holland & Knight, Grayiel's current counsel, was provided this information by Steptoe when it began representing Grayiel in approximately September 2014. Id. Both Steptoe and Holland & Knight conveyed this information to Grayiel. Id. at 1-2, ¶ 2. And Grayiel testified he relied upon the Agreed Judgment, believing it was legitimate, in seeking recovery against Twist and other Twist Entities, not AIO. He testified: "The assignment and the judgment looked legitimate, so at that time I didn't—I thought it was okay, and I didn't file any lawsuit [against AIO]." [R. 264, 55:16-20]. He also testified in his Declaration that he "presumed that the courts' judgment and subsequent assignment were legitimate" and therefore did not initially attempt to collect on his investment from AIO. [R. 231-1, pp. 4-5].

Grayiel testified he did not discover the fraudulent nature of the Agreed Judgment until his conversations with Armstrong in the summer of 2015. [R. 231-1, p. 6, ¶ 19]. Grayiel had two conversations with Armstrong in the summer of 2015 about the transfer of the Natural Gas Assets to AIO. [R. 218, p. 12, ¶ 109]. According to Armstrong, when he met with Grayiel and his counsel, they already knew about AIO having an interest in the oil and gas wells but believed they did not have enough information to sue AIO. [R. 265, 102:12-22]. Armstrong then showed Grayiel and his

counsel a copy of the Armstrong Complaint and explained to the pair that the AIO Loan and Agreed Judgment were meant to accomplish the same goal as the Armstrong Complaint: evading Twist's creditors. Id. at 103:5-20. Armstrong explained how Twist's dealings with Anastas and AIO, culminating in the Agreed Judgment, followed the same blueprint as other Twist schemes:

[I]t was basically set up, like I said, to get rid of creditors, start a new company, nothing in Martin's name, and if anything happened, then, you know, it became whoever's name was on it. I mean, he put stuff in other people's name. You know, like some of the equipment he put in his stepbrother's name and so on. But it would clear him of doing—any credit in any lawsuits and so forth, and he would still be in charge and still control the moneys.

Id. at 104:2-9. When asked whether there was any indication that Grayiel or his counsel knew of the fraudulent nature of AIO's Judgment prior to their conversations with Armstrong, Armstrong testified "Oh, no. No. A lot of stuff I knew that they did not know, and it kind of opened their eyes on certain situations, and we discussed a lot of issues." Id. at 105:21-106:3. He further stated, "I think he was surprised, and I guess you call it a light bulb went off and realized what was going on or more information that he didn't know." [R. 266, 12:17-19]. Grayiel confirmed that "[w]ithout Armstrong coming forward to inform me of the plan to shield Twist's assets from creditors such as myself, there is no possible way that I could have learned of the fraud committed by Twist and the Defendants and that I had claims against the Defendants." [R. 231-1, p. 5, ¶ 20]. Consistent with this account, handwritten notes that appear to have been taken by Grayiel during his conversation with Armstrong state: "Lonnie told me Twist had an assi[gn]ment on the wells, property, gas production, etc. to keep people from attaching to them with A.I.O., a Del[a]ware LLC" and "Lonnie believes if gas production money is going through A.I.O., it is comming [sic] back to Twist." [R. 249-1, p.3].

Grayiel filed this suit on November 6, 2015, shortly after his conversations with Armstrong. [R. 1].⁷ On May 22, 2017, Judge Russell denied the Defendants' first Motion for Summary Judgment, [R. 45], finding that Grayiel sufficiently described a need for additional discovery to defer consideration of Defendants' Motion until the close of discovery. [R. 80]. On July 5, 2017, the Court granted Grayiel leave to file an Amended Complaint that contained the following counts: Count I: Avoidance of Fraudulent Transfer-Actual Fraud (as to AIO); Count II: Avoidance of Fraudulent Transfer-Actual Fraud (as to Teema and Second Blue Light); Count III: Avoidance of Fraudulent Transfer-Constructive Fraud (as to AIO); Count IV: Avoidance of Fraudulent Transfer-Constructive Fraud (as to Teema and Second Blue Light); Count V: Aiding and Abetting Tortious Conduct (as to AIO, Gregory Anastas, Samir Anastas, and Teema); Count VI: Civil Conspiracy to Aid and Abet Fraud and a Fraudulent Transfer (as to AIO, Gregory Anastas, Samir Anastas, and Teema); Count VII: Fraud (as to AIO, Gregory Anastas, Samir Anastas, and Teema); Count VIII: Wrongful Conversion (as to AIO, Gregory Anastas, Samir Anastas, and

7 The present lawsuit is the first time Grayiel has sued AIO or Anastas. [R. 218, p. 12, ¶ 102]. At the time of his deposition in 2017, Grayiel had never met or corresponded with Anastas or Teema, but he saw Teema once before in the audience for a hearing on the Martin Twist estate. Id. at 103-04.

Teema); Count IX: Alter Ego of Twist (as to AIO) and Veil Piercing (as to Gregory Anastas). [R. 86, pp. 20-34].

The parties subsequently filed cross Motions for Summary Judgment, [R. 125; R. 128]. This Court entered a Memorandum Opinion and Order on April 7, 2020, granting in part and denying in part Defendants' Motion for Summary Judgment and denying Plaintiff's Motion for Summary Judgment. [R. 170, p. 65]. Specifically, the Court granted summary judgment as to the following claims: Count IV as to all defendants; Count V as to Samir Anastas only; Count VI as to Samir Anastas only; Count VII as to Samir Anastas and Teema only; Count VIII as to all defendants. Id. All counts against Samir Anastas were dismissed. See id.

II. CONCLUSIONS OF LAW

As an initial matter, the Court has jurisdiction pursuant to 28 U.S.C. § 1332 because the matter is between citizens of different states, and the amount in controversy exceeds $75,000.⁸

8 In their post-trial filing, AIO and Anastas argue, eight years into this litigation, that the Court should abstain from deciding whether the state court Agreed Judgment was fraudulent, because doing so would raise federalism concerns. Accordingly, they argue these issues are better raised in state court. This argument deserves no more than a footnote. First, on the basis of diversity jurisdiction, these issues are properly raised before a federal court. Second, this argument is raised far too late in the litigation to be at all convincing; not only would it be unnecessary to remand this case to state court, it would also be incredibly inefficient. And third, AIO and Anastas's invocation of Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971) and its progeny is completely misplaced; Younger abstention cautions against federal courts' attempts to enjoin pending state court proceedings. See id. at 41, 91 S.Ct. 746. Moreover, the Court finds persuasive Grayiel's response that "[i]f AIO's and Anastas' argument was taken to its logical conclusion, it would mean that no federal court would be able to adjudicate fraudulent transfer litigation if the fraudulent transfer at issue was effectuated by public state court filings outside of a federal court's jurisdiction, whether it be by judgment, deed or UCC filings." [R. 286, p. 8]. Accordingly, the Court rejects AIO and Anastas's late-stage argument.

a. Statute of Limitations

The Court will begin by analyzing whether Grayiel's claims are barred by the applicable statutes of limitations. "Where, as here, our subject matter jurisdiction is based on diversity of citizenship, we apply the substantive law of the forum state, including state statutes of limitations and tolling provisions. Accordingly, Kentucky's statute of limitations ... and its provisions for tolling apply[.]" Irwin v. O'Bryan, 791 F. App'x 588, 590 (6th Cir. 2019) (internal citations and quotation marks omitted). In its prior Order, the Court determined the appropriate statute of limitations under Kentucky law as to each of Plaintiff's claims. [R. 170, pp. 30-38]. To summarize, KRS § 413.120(11) provides a five-year statute of limitations for Counts I, II, and III (fraudulent conveyance), Count V (aiding and abetting fraud), and Count VII (common law fraud). A one-year statute of limitations applies to Count VI (civil conspiracy). The Court will address the timeliness of each claim in turn.

i. Fraudulent Conveyance, Fraud, and Aiding and Abetting Fraud (Counts I, II, III, V, and VII)

The statute of limitations for fraudulent conveyance, fraud, and aiding and abetting fraud is set out in KRS § 413.120(11) (previously § 413.120(12)), which states: "The following actions shall be commenced within five (5) years after the cause of action accrued: ... (11) An action for relief or damages on the ground of fraud or mistake." Ky. Rev. Stat. Ann.

§ 413.120. "Nevertheless, where it would not have been reasonable for the plaintiff to have discovered the injury on the actual date the fraud was perpetrated, the limitations period does not begin to toll until the date that the fraud was discovered or, through the exercise of reasonable diligence, should have been discovered." First Fid. Mortg. v. Robertson, No. 2010-CA-000990-MR, 2011 WL 3361583 at *2, 2011 Ky. App. Unpub. LEXIS 581, at *5 (Ky. Ct. App. Aug. 5, 2011) (citing KRS § 413.130(3); Hernandez v. Daniel, 471 S.W.2d 25, 26 (Ky. 1971)). The discovery rule is codified in KRS § 413.130(3), which states:

In an action for relief or damages for fraud or mistake, referred to in subsection (11) of KRS 413.120, the cause of action shall not be deemed to have accrued until the discovery of the fraud or mistake. However, the action shall be commenced within ten (10) years after the time of making the contract or the perpetration of the fraud.

Ky. Rev. Stat. Ann. § 413.130(3). Therefore, "[i]n addition to codifying the discovery rule, [KRS § 413.130(3)] imposes a 10-year limit within which a fraud claim must be brought. It is properly characterized as a statute of repose[.]" Dodd v. Dyke Indus., 518 F. Supp. 2d 970, 973 (W.D. Ky. 2007).

"In order to enlarge the five-year statute of limitations to ten years, on a charge of fraud, [a plaintiff] must allege and prove the fraud was not discovered within the five-year period and also allege and prove the fraud could not have been discovered within that period by the exercise of reasonable diligence." Madison Cnty. v. Arnett, 360 S.W.2d 208, 210 (Ky. 1962); see also White v. Whitaker Bank, Inc., No. 2007-CA-001624-MR, 2008 Ky. App. Unpub. LEXIS 95, at *9 (Ky. Ct. App. Aug. 29, 2008) (quoting Skaggs v. Vaughn, 550 S.W.2d 574, 577 (Ky. Ct. App. 1977)) ("If the five-year period of KRS 413.120(12) has elapsed, the plaintiff must allege and prove that the fraud or mistake was not only not discovered within the five-year period, but that it could not have been discovered sooner by the exercise of reasonable diligence."). "Kentucky courts define 'reasonable diligence' for purposes of the discovery rule as meaning 'that a plaintiff must be as diligent as the great majority of persons would [be] in the same or similar circumstances[.]'" Nat'l Union Fire Ins. Co. v. Bowling Green Recycling LLC, No. 1:15-CV-00024-GNS-HBB, 2017 WL 6508359, at *5, 2017 U.S. Dist. LEXIS 209296, at *10 (W.D. Ky. Dec. 19, 2017) (quoting R.T. Vanderbilt Co. v. Franklin, 290 S.W.3d 654, 659 (Ky. Ct. App. 2009)).

The Sixth Circuit analyzed an analogous discovery rule under Ohio's Uniform Fraudulent Transfers Act ("UFTA") in In re Fair Fin. Co., 834 F.3d 651, 673-74 (6th Cir. 2016). Ohio's discovery rule tolls the statute of limitations "until an injured party 'discovers or, in the exercise of reasonable care, should have discovered' her injury." Id. at 672 (quoting Invr's REIT One v. Jacobs, 46 Ohio St.3d 176, 546 N.E.2d 206, 209-11 (1989)). The Sixth Circuit examined case law across many different states, as well as the purpose of the UFTA and general discovery rule principles, and concluded that "discovery for purposes of a fraudulent transfer claim requires both knowledge of the transfer and knowledge of the transfer's fraudulent nature." Id. at 673 (emphasis added). The court went on to note that the overall purpose of the Ohio UFTA is to "discourage fraud and provide aggrieved creditors with a means to recover assets wrongfully placed beyond their reach." Id. at 674. Accordingly,

to require a claimant to bring suit within one year of discovering a transfer, without having discovered facts that would

put the claimant on notice as to the transfer's fraudulent nature, would be to interpret [the discovery rule] in a manner that is directly at odds with the animating purpose of the UFTA. Because, "[i]f the statute were to begin to run when the transfer was made, without regard as to whether the claimant discovered or could have discovered the fraudulent nature of the transfer, those successful at concealing a fraudulent transfer would be rewarded' and those injured would have their claims lapse before even becoming aware of the damage[.]"

Id. (quoting Freitag v. McGhie, 133 Wash.2d 816, 947 P.2d 1186, 1190 (1997)).

The Madison County v. Arnett court likewise held that a cause of action does not accrue until the fraudulent nature of a filing is known. 360 S.W.2d at 209. In Arnett, the Kentucky Court of Appeals analyzed whether the discovery rule codified at KRS § 413.130(3) enlarged the limitations period where the plaintiff, Madison County, did not discover that a county clerk fraudulently filed voluntary settlements and knowingly omitted the true figures from his filings until seven years after it occurred. Id. Specifically, the plaintiff argued that it did not discover, and could not have discovered, the fraudulent nature of defendant's settlements for the calendar years 1949, 1950, 1951, and 1952 until an audit was performed on December 1, 1959. Id. at 209-10. The Arnett court summarized that argument:

Appellant maintains that reasonable diligence was used, i.e., an examination of each settlement was made by the county treasurer and thereafter a thorough check was carried out by the Auditor of Public Accounts, and that no errors were or could have been discovered at the time because the figures were either falsified or concealed. It is pointed out that only when the Auditor of Public Accounts brought to light errors in 1958, concerning the settlements of 1953 through 1956, did appellant become aware of appellee's artful bookkeeping methods, so as to be placed on notice of his derelictions and to take steps to uncover the alleged fraud committed in respect to the settlements which are the subject of this controversy.

Id. The Kentucky Court of Appeals found that, because the defendant fraudulently concealed/omitted the true figures from his filings, the discovery rule applied and extended the limitations period to ten years, rendering the suit timely. Id. at 211.

Here, Grayiel has demonstrated that he did not discover, and could not have reasonably discovered, the fraud involving Anastas and AIO within the five-year statute of limitations. To the first point, when asked whether there was any indication that Grayiel or his counsel knew of the fraudulent nature of AIO's Judgment prior to their conversations with Armstrong in 2015, Armstrong convincingly testified, "Oh, no. No. A lot of stuff I knew that they did not know, and it kind of opened their eyes on certain situations, and we discussed a lot of issues." [R. 265, 105:21-106:3]. He continued, "I think [Grayiel] was surprised, and I guess you call it a light bulb went off and realized what was going on or more information that he didn't know." [R. 266, 12:17-19]. The Court finds Armstrong's testimony on this point very credible. Grayiel testified likewise. [R. 231-1, p. 5, ¶¶ 19-20].

Further, Grayiel exercised reasonable diligence in investigating any fraud by the Defendants in this action. After making his investments, Grayiel was interviewed by the FBI, IRS, and SEC about his relationship with Twist and the Twist Entities. [R. 231-1, p. 3, ¶ 6]. Grayiel inquired with the agencies about the nature of their investigations,

but they refused to answer Grayiel's questions since the investigations were ongoing. Id. Grayiel then contacted the West Virginia State Auditor's Office, which informed him that he would need to file suit against Twist to recover his investment. Id. at ¶ 7. Still lacking clarity on the situation, Grayiel attempted to investigate the production records of the wells, but found that, after a certain point, the production records were no longer being filed. Id. at ¶ 8. Grayiel sought the records from the West Virginia Department of Environmental Protection and the West Virginia State Tax Department, but those records could not be found. Id. Undeterred, Grayiel filed a FOIA request, which was denied. Id. Around this time, Grayiel traveled to the Kanawha and Roane County courthouses to research the lease information for the wells. Id. at 4, ¶ 9. He also contacted the West Virginia Secretary of State for information on the Twist entities. Id. Steptoe, the original firm representing Grayiel in his suit against Twist, was aware of the Agreed Judgment transferring the Natural Gas Assets to AIO and informed Grayiel of the same. [R. 247, p. 1, ¶ 1]. Around September 2014, Grayiel retained Holland & Knight, [id.], and asked them to focus on whether Twist's Natural Gas Assets or any other assets were improperly transferred to AIO or anyone else. [R. 231-1, p. 4, ¶ 13; R. 247, p. 1, ¶ 2]. Grayiel explained that, although they were aware of the Agreed Judgment and related documents, "like the rest of the world, I did not assume there had been a fraud on the Court system and presumed the court's judgment and subsequent assignment were legitimate." [R. 231-1, pp. 4-5, ¶ 12]. Given the various avenues Grayiel explored to recover on his assets, it is plain that he was at least "as diligent as the great majority of persons would [be] in the same or similar circumstances[.]" Nat'l Union Fire Ins., 2017 WL 6508359, at *5, 2017 U.S. Dist. LEXIS 209296, at *10.

Further, the record demonstrates that, like the claimant in Arnett, Grayiel did not have a reason to question the validity of the Agreed Judgment, a publicly filed document signed by the Jefferson Circuit Judge, until Armstrong provided additional information about the fraud. See 360 S.W.2d at 209-10; see also [R. 231-1, pp. 3-6]. Although Grayiel knew that AIO had obtained the Natural Gas Assets through the Agreed Judgment, he did not know that AIO had worked alongside Twist to effectuate a sham settlement and lawsuit through which Twist retained possession and control over the Natural Gas Assets, while ensuring unfriendly creditors, like Grayiel, could not recover against Twist's estate. See generally infra Section II(b). As Grayiel explained:

At first, like the rest of the world, I did not assume that there had been a fraud on the Court system and presumed that the courts' judgment and subsequent assignment were legitimate.... While I tried to follow events diligently and investigate my investment, I am not aware of any public information or records that would have provided me with information that the transfer of the Natural gas Assets to AIO was fraudulent in nature.

[R. 231-1, pp. 3-4, ¶ 12]. Put simply, while Grayiel was on notice of the publicly filed Agreed Judgment, there was no information available to him to suggest that the Agreed Judgment was fraudulent until his conversation with Armstrong in 2015. Rather, the Agreed Judgment, signed by the Circuit Court Judge, the parties, and their respective counsel, appeared to be the product of a litigated compromise of a legitimate commercial debt. Indeed, it would be a steep burden if Grayiel's claims lapse due to the willful fraud by AIO and Anastas on the Kentucky Circuit Court,

when nothing on the face of the Agreed Judgment placed Grayiel, the Circuit Court, or anyone else on notice of the underlying fraud. Meanwhile, AIO and Anastas concealed material facts about their connection to Twist and the fraudulent nature of the AIO Complaint and Agreed Judgment.⁹ That is, the Agreed Judgment failed to note that AIO's Loan totaled only $250,000, that the value of the Natural Gas Assets far eclipsed the debt, and that post-Judgment, AIO would hand over possession and control of the assets to Twist via the 530/AIO Operating Agreement.

9 Further, the AIO Note, Deed of Trust, and related documents appeared, in all likelihood, to Grayiel as similar to the legitimate loan that he had made to Twist Entities in May 2001. Grayiel had taken a security interest in the Natural Gas Assets in exchange for his $500,000 loan. [R. 218, p. 11, ¶ 96]; [R. 261, 60:13-61:6]; [JX10 (Loan Agreement), JX11 (UCC Financing Statement)]. When Twist repaid the $500,000 loan to Grayiel (likely to lull him into further investments) on August 6, 2001, Grayiel filed a release of his security interest in the Natural Gas Assets. [R. 218, p. 11, ¶ 97]; [R. 261, 60:22-24]; [JX12 (UCC-3 Termination of Financing)].

While not binding precedent on this Court, the Sixth Circuit's decision in In re Fair Fin. Co. strongly supports that Grayiel did not "discover" the fraud, for statute of limitations purposes, until he discovered the fraudulent nature of the filing. See 834 F.3d at 673. Like the Sixth Circuit's reading of the Ohio UFTA in that case, the discovery rule can only effectuate the purposes of Kentucky's fraud and fraudulent conveyance statutes if read to require "both knowledge of the transfer and knowledge of the transfer's fraudulent nature." Id. To conclude otherwise would reward individuals successful at concealing a fraudulent transfer and allow claims to lapse before injured parties are even aware of the damage. See id. at 674.

The Court's conclusion that Grayiel exercised reasonable diligence in discovering the fraud is bolstered by the lengthy investigation of government agencies, who investigated Twist for many years prior to indicting him for tax evasion in federal court. While these agencies interviewed Grayiel at some point about his involvement with Twist, Grayiel's questions as to the specifics and purpose of the investigation understandably went unanswered by these agencies due to the ongoing investigations. See [R. 231-1, p. 3]. Further, the Indictment, Plea Agreement, and even sentencing hearing transcripts named several Twist entities as part of Twist's tax evasion, but never mentioned AIO as part of Twist's fraudulent schemes. See [JX55; JX70; JX71].

Finally, and contrary to AIO's argument, see [R. 280, pp. 31-21]., there is no public filing in the Martin litigation or elsewhere that would have put Grayiel on notice of a fraudulent connection between AIO and Twist prior to Grayiel's' illuminating conversation with Armstrong in the summer of 2015. See [R. 218, p. 12, ¶ 108]. AIO and Anastas argue that the fact that Thomas Martin identified AIO as the owner of the wells when filing his suit against AIO in 2009 demonstrates that Grayiel could have discovered the fraud with reasonable diligence. See [R. 280, p. 31]. There are several flaws with this argument. First, it is far from clear whether Thomas Martin actually uncovered any fraud as to the Agreed Judgment in deciding to sue AIO or uncovered any fraudulent relationship between AIO and Twist. See [R. 246-1, Ex. 1, Civil Case Information Statement, Circuit Court of Jackson County, Case No. 09-C-31, Thomas T. Martin, et al. v. AIO Holdings, et al. ("Martin Complaint")]. Rather, the Martin Complaint generally alleged that the

Agreed Judgment was improper because it was never filed in West Virginia, lacked consideration, and was a "fraud upon the Kentucky Court." Id. at 3. Martin did not allege any improper relationship between AIO and Twist. See id. Further, Thomas Martin was a landowner suing the record owner of the wells (AIO) and arguing that the leases had terminated due to failure to pay appropriate royalties to Martin. Martin was not an investor in Twist's scheme seeking to recover on fraud. [Pl. Ex. 105, p. 1]. Second, the relevant filing from the Martin Litigation that may have alerted Grayiel to the fraudulent nature of Twist and AIO's relationship occurred after Grayiel's pivotal conversations with Armstrong in July 2015. Martin v. A.I.O. Holdings, LLC, No. 09C31, 2015 WL 10026129 (W. Va. Cir. Ct. Oct. 29, 2015); see also [Pl. Exh. 105]. And the fact that it took Kaminski, AIO's attorney in the Martin Litigation, years to discover that AIO continued to employ a Twist entity to operate the wells supports the Court's holding that Grayiel could not have discovered the fraud earlier. See [R. 218, p. 10, ¶ 86]. The Martin Litigation does not demonstrate that Grayiel could have discovered the fraudulent nature of the Agreed Judgment earlier than he did.

The Court finds that Grayiel did not know of, and could not reasonably have discovered, the Defendants' involvement in Twist's schemes (and thus his claims against these individuals and entities), until his conversation with Armstrong in 2015. Pursuant to KRS § 413.120(11) and § 413.130(3), the cause of action for Grayiel's claims for fraud, aiding and abetting, and fraudulent conveyances did not accrue until his discovery of the fraud in 2015. Because Grayiel filed suit in 2015, within ten (10) years of the fraud (the Agreed Judgment was filed in 2008), his claims are timely.¹⁰

10 Grayiel's claims against Teema are timely regardless of whether the discovery rule extends the limitations period, as the fraudulent transfers involving Teema all occurred within five years of when Grayiel filed suit in this Court.

ii. Civil Conspiracy (Count VI)

The statute of limitations for civil conspiracy claims is one year, as set out in KRS § 413.140(1)(c). See Burnett v. Transit Auth. of Lexington-Fayette Urb. Cnty. Gov't., 981 F. Supp. 2d 630, 634 (E.D. Ky. 2013) ("The statute of limitations on a civil conspiracy claim in Kentucky is also one year."). "The statute of limitations for a civil conspiracy claim 'generally begins to run at the time of the last overt act in furtherance of the conspiracy.'" McNally v. Kingdom Trust Co., No. 5:21-cv-0068 (TBR), 2022 U.S. Dist. LEXIS 13115, at *36 (W.D. Ky. 2022) (quoting Anderson v. Knox Cnty., No. CV 6:17-133-KKC, 2018 U.S. Dist. LEXIS 170563, 2018 WL 7500205, at *9 (E.D. Ky. Oct. 3, 2018)); Dist. Union Amalgamated Meat Cutters, etc. v. Fleischaker, 384 S.W.2d 68, 72 (Ky. Ct. App. 1964) ("[A] conspiracy which contemplates a series of overt acts is a continuing conspiracy and the statute does not commence to run until the last overt act performed in compliance with the objective of the conspiracy has been accomplished.").

Here, the Court agrees with Grayiel that the statute of limitations period on the civil conspiracy claim has not yet run because the alleged conspiracy is still ongoing. See [R. 282-1, p. 42]. Grayiel alleges that Anastas and Teema, through AIO and Second Blue Light, conspired with Twist to divert the Natural Gas Assets away from the Twist estate to defraud Twist's creditors and ensure the profits from the Natural Gas Assets could be enjoyed by Twist's family and Anastas. [R. 86, pp. 26-27]. AIO and Second Blue Light continue,

to this day, to split revenues from the Natural Gas Assets. See [R. 257, "Notice of Reference to Check Images by Blue Light of Kentucky Limited Liability Company and Sarinprapa Teema," (Expense Detail from May 2014 to Present)]; [R. 272, "Notice of Financial Information by Blue Light of Kentucky Limited Liability Company and Sarinprapa Teema," ("Notice of Financial Information")]. Grayiel alleges that the AIO/SBL Operating Agreement is the culmination of Twist's plan to encumber his assets, which began back in 2005 with the Armstrong Complaint and evolved into the AIO Loan and Agreed Judgment. As the alleged conspiracy is still ongoing, the Court finds that the civil conspiracy claim is not time-barred.

b. Merits

i. Avoidance of Fraudulent Transfer (Counts I, II, and III)

Grayiel's Amended Complaint contains claims for avoidance of fraudulent transfer against AIO, Anastas, Teema, and Second Blue Light under both the actual fraudulent conveyance statute (KRS § 378.010) and the constructive fraudulent conveyance statute (KRS § 378.020). [R. 86, pp. 20-23]. As explained above, the Court previously dismissed the constructive fraud claims against Teema and Second Blue Light. See [R. 170, pp. 53-55]. The Court will address the remaining claims in turn.

A. Fraudulent Conveyance (Actual Fraud) (Counts I and II)

The previous version of Kentucky's fraudulent transfer law in effect prior to 2016, which this Court has already determined is applicable to this action, states:

Every gift, conveyance, assignment or transfer ... made with the intent to delay, hinder or defraud creditors, purchasers or other persons, and every ... action commenced or judgment suffered, with like intent, shall be void as against such creditors, purchasers and other persons[.]

Ky. Rev. Stat. Ann. § 378.010; see also [R. 170, pp. 38-40]. "Generally, in an action to set aside a conveyance for fraud, the fraud must be proven by a clear and convincing standard." Jadco Enters. v. Fannon, No. 6:12-225-DCR, 2013 WL 6055170 at *12, 2013 U.S. Dist. LEXIS 162717 at *35 (E.D. Ky. Nov. 15, 2013), on reconsideration in part, 991 F. Supp. 2d 947 (E.D. Ky. 2014) (citing Russell Cnty. Feed Mill, Inc. v. Kimbler, 520 S.W.2d 309, 311 (Ky. Ct. App. 1975)). "However, widely recognized exceptions to that standard have been adopted where 'badges of fraud' are shown." Id. Put differently, because it is often difficult to prove fraud by direct evidence, "[t]he issue of fraud is commonly determined by certain recognized indicia, denominated 'badges of fraud,' which are circumstances so frequently attending fraudulent transfers that an inference of fraud arises from them." United States v. Leggett, 292 F.2d 423, 427 (6th Cir. 1961). Kentucky law provides:

Badges of fraud exist when: (1) the transfer or conveyance is between persons who are related or occupy a confidential relationship; (2) where the transfer or conveyance contains false statements and recitals as to consideration; (3) where the transfer or conveyance is made by a debtor in anticipation of a suit against him; and (4) where the transfer or conveyance is made by a debtor who transfers all or any appreciable part of his property when he is insolvent or financially embarrassed.

In re Licking River Mining, LLC, 603 B.R. 336, 381 (Bankr. E.D. Ky. 2019) (quoting Jadco Enters. v. Fannon, 2013 WL 6055170, at *12, 2013 U.S. Dist. LEXIS 162717, at *35).

Additional recognized badges of fraud include: "(1) inadequacy of consideration; (2) secret or hurried transactions not in the usual mode of doing business; (3) the use of dummy or fictious parties; (4) reservation of benefits by the transferor; [and] (5) control or dominion of property by the debtor[.]"

Id. (quoting In re Appalachian Fuels, LLC, No. 11-1041, 2012 WL 4059909, at *2, 2012 Bankr. LEXIS 4289, at *2 (Bankr. E.D. Ky. Sept. 14, 2012)).

"A plaintiff's showing¹¹ of a badge of fraud allows a court to presume intent to defraud." Jadco, 2013 WL 6055170, at *12, 2013 U.S. Dist. LEXIS 162717, at *36. Although only one badge of fraud must be shown, "[a] showing of several such badges will make out a strong case." United States v. Isaac, No. 91-5830, 1992 WL 159795 at *4, 1992 U.S. App. LEXIS 16657 at *11 (6th Cir. July 10, 1992) (citing Leggett, 292 F.2d at 427); see also Ky. Petroleum Operating Ltd. v. Golden, No. 12-164-ART, 2015 WL 927358 at *4, 2015 U.S. Dist. LEXIS 27073 at *12 (E.D. Ky. Mar. 4, 2015) (citing Russell, 520 S.W.2d at 311-12) ("[A] single badge of fraud is enough [to] raise a presumption that the challenged transfer is fraudulent."). A showing of at least one badge of fraud will shift the burden to the defendants to "show the good faith of the transaction by a preponderance of the evidence." Jadco Enters. v. Fannon, 991 F. Supp. 2d 947, 953 (E.D. Ky. 2014); see also United States v. Coffman, 612 F. App'x 278, 288 (6th Cir. 2015) (quoting Jones v. Jones, 254 Ky. 475, 71 S.W.2d 999, 1004 (1934)) ("When a conveyance is attended with badges of fraud, the burden of proving good faith shifts to the one defending its integrity; and when that status has been reached, the grantee's failure to produce available explanatory evidence becomes in itself an additional badge of fraud."). The Jadco court analyzed prior Kentucky case law and concluded that, although precedent on the issue was somewhat mixed, "[t]he correct analysis first looks at the badges of fraud, followed by the validity of the pre-existing debt. The fact finder should then determine if there was any fraudulent intent behind the transfers(s). The analysis does not end once evidence of pre-existing debt is offered." 991 F. Supp. 2d at 953.¹² 1. AIO

11 The applicable standard for assessing whether a plaintiff has proven the existence of a badge of fraud is not entirely clear: clear and convincing evidence (as required to prove actual fraudulent intent) or preponderance of the evidence. The caselaw indicates the standard is preponderance of the evidence, as Kentucky case law repeatedly refers to badges of fraud as "recognized exceptions to the general rule" that "fraud must be established by clear and convincing evidence." Russell Cnty. Feed Mill, 520 S.W.2d at 311 (emphasis added); see also Jadco Enters., 2013 WL 6055170 at *12, 2013 U.S. Dist. LEXIS 162717, at *35 ("Generally, in an action to set aside a conveyance for fraud, the fraud must be proven by a clear and convincing standard. However, widely recognized exceptions to that standard have been adopted where 'badges of fraud' are shown.") (internal citations omitted). Regardless, the Court need not decide which standard applies because the Court finds that, even under a clear and convincing standard, Grayiel has sufficiently proven that at least one badge of fraud attends the relevant transfers as to Counts I and II. See supra Sections II(b)(i)(A)(1), (2).

12 Kentucky's fraudulent conveyance statute does not, directly or indirectly, require a plaintiff to demonstrate reliance as an element of the cause of action. See Osborne v. Commonwealth of Kentucky, 185 S.W. 3d 645, 648 (noting that "no unjustifiable intention can be read into [a] statute"); Reynolds Metal Co. v. Glass, 302 Ky. 622, 195 S.W.2d 280, 284 (1946) (observing that, if a right was "interpolated" into a statute, the "effect of such insertion would be tantamount to an amendment of the statute as it now reads"). The Supreme Court has found the reliance requirement of common law fraud inapplicable in the context of other statutory fraud claims. See Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 648-49, 128 S. Ct. 2131, 2138, 170 L. Ed. 2d 1012 (2008) (quoting Neder v. United States, 527 U.S. 1, 24-25, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999)) ("Nothing on the face of the relevant statutory provisions imposes [] a [reliance] requirement. Using the mail to execute or attempt to execute a scheme to defraud is indictable as mail fraud ... even if no one relied on any misrepresentation ... 'The common-law requiremen[t] of 'justifiable reliance' ... plainly ha[s] no place in the mail, wire, or bank fraud statutes.'").

The transfer of the Natural Gas Assets to AIO through the Agreed Judgment and related documents is rife with badges of fraud. First, the transfer in October 2008 was made by a debtor (Twist) in anticipation of litigation against him. Nearly a year before the AIO Complaint was even filed in September 2008, Twist had received a letter from Grayiel's counsel threatening litigation if Grayiel's investments were not returned. [JX38, pp. 146-47]. The letter, dated November 1, 2007, specifically provided that if Twist failed to rescind and return Grayiel's investments, he would "proceed with any and all necessary actions to collect not only Mr. Grayiel's investments but to seek remedy for all damages caused Mr. Grayiel by your improper acceptance and unauthorized solicitation with respect to his investments." Id. at 147. In essence, the letter from Grayiel's counsel warned Twist that he should anticipate litigation if he failed to return Grayiel's investment. See id.

Further, McAdam, AIO's counsel (and Twist's high school classmate), testified that Twist sought to transfer the Natural Gas Assets to a "cooperative" AIO to evade his creditors. Years prior, Twist had told McAdam that the purpose of the Armstrong Complaint was to avoid "other people that were—he said they were hounding him for money." [R. 265, 26:15-17]. Twist explained that AIO was "a similar situation" to the Armstrong Complaint, that "AIO was very cooperative with him and, you know, sort of would let him be in a position of debtor-in-possession operator," and that the Agreed Judgment would "foreclose anybody else from deciding to sue him because the equity, the assets, would all be tied up with liens." Id. at 28:10-29:4, 29:8-14. Twist's statements to McAdam demonstrate that he anticipated litigation from his creditors at the time he executed the Agreed Judgment. What is more, Anastas was aware that Twist's creditors were pursuing the assets prior to executing the Agreed Judgment. Anastas testified on direct that Twist told him at some point prior to engaging McAdam to draft the AIO Complaint "that he was worried somebody might be after him." [R. 264, 118:14-15]; see also [R. 262, 91:8-14]. Twist also stated in an email to Anastas that "time is of the essence" in executing the Agreed Judgment. [Pl. Ex. 58]. And Anastas himself quickly surmised that Twist may have been running a "Ponzi scheme," which generally involves multiple victims. See [R. 264, 116:25-117:1]. There is simply no logical reason Twist would push for AIO, his lender, to obtain title to his assets as quickly as possible aside from avoiding other, less friendly creditors. See In re Licking River Mining, 603 B.R. at 381 (listing as a badge of fraud "secret or hurried transactions not in the usual mode of doing business").

Second, there were false statements of consideration and inadequate consideration for the Agreed Judgment. The AIO Complaint and Agreed Judgment stated the transfer of the Natural Gas Assets to AIO satisfied a debt up to $2,000,000, when in fact the principal amount of the debt was $250,000. [JX35; JX36]. Anastas never informed

the Circuit Court or the public that AIO was only owed $250,000 plus interest, or that post-Judgment he would immediately cede all control of and profits from the assets to Twist. [R. 262, 18:12-22; 19:3-25; 20:2-5].

In its Proposed Findings of Fact and Conclusions of Law, [R. 280], Anastas and AIO argue that AIO provided sufficient consideration for the Natural Gas Assets. Id. at 37. Specifically, AIO and Anastas argue that the not-less-than $721,607 valuation by Grayiel's expert, Christopher B. Meadors, is too high because it includes the cost of equipment that AIO never received. Id. at 21. Therefore, Anastas and AIO argue that the value of the wells only at the time of the Agreed Judgment was $645,470, which is closer to the approximately $425,000 (including interest) that AIO was owed under the loan. Id. That argument is unavailing. The Agreed Judgment granted AIO a judgment against the AIO Foreclosure Defendants (Twist and various Twist Entities) "for immediate possession, title and control of certain drilling leases, personal property, and other assets, which were pledged as security for the line of credit extended by Plaintiff ... more specifically describe in Plaintiff's Exhibit A[.]" [JX36]. Exhibit A, attached to the Agreed Judgment and AIO's Complaint, lists over fifty pieces of equipment. Id. at 11-12. The fact that AIO never sought immediate possession and control of the equipment is irrelevant to whether the Agreed Judgment granted AIO rights to the equipment. The fact is that Anastas became owner of the equipment pursuant to the Agreed Judgment, thereby removing that equipment from the Twist estate for future creditors to recover. If anything, Anastas's failure to demand possession and control of the equipment supports the Court's finding that he was not a legitimate lender seeking to recover his collateral post-default.

Regardless, it is obvious AIO received far more from the Twist Entities than it was owed, and Anastas knew that at the time. At the time of the transaction, Anastas believed he was receiving assets worth at or above $2,000,000. [R. 264, 144:3-6]. Anastas's October 5, 2005 email to Twist and Fleu, providing comments on the lien releases for the AIO Loan, openly acknowledges that AIO took assets never intended to secure the AIO Loan. [JX28]. Anastas, as lender, agreed to pre-signed releases to allow Twist to "hock his assets (that I have not financed)[.]" [JX28 (emphasis added)].

Third, Twist and AIO's close relationship demonstrates another badge of fraud. See supra Section I(b)(iii). In Sierra Enters. Inc. v. SWO & ISM, LLC, this Court examined whether a transfer between related entities was "between persons who are related or occupy a confidential relationship." See 264 F. Supp. 3d 826, 846-47 (W.D. Ky. 2017). The Sierra Enters. court reasoned:

First, SWO & ISM and Lewis Oil were related companies with common members. Despite Lewis Oil's contentions, the record establishes that there was much more to the relationship between Lewis Oil and SWO & ISM than that of a customer and a transportation services provider. During the period of the alleged fraudulent transfers, Wallace and Ticer were the principal owners of Lewis Oil's predecessor, and both Wallace and Ticer managed Lewis Oil. Further, Wallace penned the solicitation letter to investors to raise capital to purchase Lewis Oil and was listed on the letter as the 'Operations Manager.' Wallace was also a founding member of SWO & ISM. This Court has previously indicated that while conveyances between companies with common members are 'not the

quintessential confidential relationship[,]' the relatedness of the two entities should still be considered.

Id. Here, Twist managed basically every aspect of AIO, from the yearly filings required to keep the company in good standing to handling litigation on behalf of the company. [Pl. Ex. 54]. Twist engaged several attorneys on AIO's behalf. [R. 262, 56:8-19 (Kaminski); R. 264, 135:9-136:2 (Pedley firm), 145:9-19 (Chud Dollison), 157:20-158:18 (McAdam)]. Twist instructed these attorneys as to what information to include in the relevant documents on behalf of AIO. See [R. 264, 158:13-18; R. 262, 57:4-14]. Put differently, AIO's attorneys received instructions and all relevant facts from Twist, not Anastas. And Vince Mallon, the attorney representing AIO in the proposed sale to Reserve Oil, instructed Reserve Oil to direct any questions about the sale to Twist, not Anastas. [JX59]. Moreover, a draft operating agreement for AIO listed a Twist entity, Offshore Energy LLC, as one of two members of AIO. [JX102]. The original Letter of Intent from Reserve Oil regarding purchase of the Natural Gas Assets stated that AIO was "owned, in part, directly or indirectly, by Martin Twist ('Shareholder')." [JX57, p. 1]. In sum, "the record establishes that there was much more to the relationship between [Twist] and [AIO] than that of a [lender] and a [borrower]." See Sierra Enters., 264 F. Supp. 3d at 846. Twist controlled AIO as if he owned the company. While the relationship between Twist and AIO may not be the "quintessential confidential relationship" described by this badge of fraud, the Court agrees with Sierra Enters. that "the relatedness of the two [parties] should still be considered." Id. at 847.

Fourth, the record supports that Twist was insolvent or financially embarrassed by the time of the Agreed Judgment, implicating yet another badge of fraud. Armstrong convincingly testified to consistent cash flow problems among the Twist Entities. [R. 265, 98:1-99:14]. He explained:

[A] lot of times I would call up and say "Hey, Martin, I need $40,000, you know, to pay this," and he'd be broke ... And at one time—I would get a copy from Dominion of when they paid us, and at one time they paid us like 120,000, I'm guessing, on the month. And I called Martin—or the office in Louisville, and in two days they were broke. The secretary said, "We don't have any money. We're broke." I said I need 20, 30 thousand, whatever it was. In two days—he got $120,000 direct deposit, and two days later they were broke.

Id. at 98:1-11. When asked whether the cash flow problems led to an inability to continue drilling wells, Armstrong answered in the affirmative, and explained that there were "a lot of times we just had to shut down." Id. at 99:5-7. The Court found Armstrong's testimony on this issue, and all other issues, highly credible and informative. Twist started cutting salaries and laying off employees as early as 2006. Id. at 99:20-100:10; see also [R. 264, 118:14-15]. Anastas knew Twist and his entities were "financially embarrassed." [R. 262, 27:1-25; 91:17-20; 100:9-14]. In fact, Aanstas suspected as early as 2005-2006 that Twist was running a Ponzi scheme. [R. 264, 116:20-117:8].

Finally, the Agreed Judgment also implicates the badges of fraud for "reservation of benefits by the transferor" and "control or dominion of property by the debtor[.]" In re Licking River, 603 B.R. at 381; see also Bank of Josephine v. Hopson, 516 S.W.2d 339, 341 (Ky. Ct. App. 1974) ("Another badge of fraud is the continued possession of the conveyed property by the grantor after the transfer."); In re Draper, 355 B.R. 607, 610 (Bankr. E.D. Ky. 2006)

("[T]he court finds that certain 'badges of fraud' are present in this case, including inadequate consideration, the grantor's retained possession of property, and transfer of property between close family members.") (emphasis added). After executing the Agreed Judgment, AIO immediately entered an agreement with 530 West Main, a Twist entity, to operate the wells and retain control over all revenues until such net revenues totaled $500,000. [JX39]. Anastas admitted that he had no understanding of the operating expenses of the wells when he signed the 530/AIO Operating Agreement and never received any expense reports related to the operation of the wells. [R. 262, 21:22-22:6]. He also affirmed that Twist received all revenues from the operation of the wells from the time of executing the 530/AIO Operating Agreement in October 2008 until Twist's death in 2014. [R. 264, 8:19-24]. In fact, Twist retained such absolute control over the Natural Gas Assets that his fiancé, Teema, believed Twist, through 530 West Main, still owned the gas wells until after Twist's death. [R. 266, 75:1-13]. Teema's testimony demonstrates that nothing changed in the control, possession, or operation of the wells, even though AIO purportedly gained ownership of the Natural Gas Assets through the Agreed Judgment.

In sum, the Agreed Judgment and related documents are so riddled with badges of fraud it would have been more expedient to list which badges of fraud do not apply. Under Jadco, the Court must next analyze the validity of the pre-existing debt. See 991 F. Supp. 2d at 953. The parties stipulated that "[a]t the time of the filing of the AIO Complaint, the principal indebtedness under the AIO Note was $250,000 plus interest at 2% per month, the default rate in the note." [R. 218, p. 6, ¶ 42]. However, the analysis does not end once the defendants prove a preexisting debt. See Jadco, 991 F. Supp. 2d at 953. Rather, the burden shifts to AIO to demonstrate good faith. See id. Even applying the lesser "preponderance of the evidence" standard from Jadco, AIO has failed to meet its burden. See id.

Kentucky courts have found transfers avoidable when the surrounding circumstances fly in the face of common sense/reasonable business practices and are accompanied by unbelievable narratives. The Court finds the logic in In re Akin, 64 B.R. 510 (Bankr. W.D. Ky. 1986), instructive on the issue of good faith. In that case, the court analyzed whether a debtor transferred his assets to place them beyond the reach of his creditors. Id. at 511. Specifically, the court scrutinized a transfer of "all outstanding stock of National," which was surrendered by Akin, the debtor, to Roberts, who had a close relationship with Akin, "in full satisfaction of the indebtedness owed by Akin on the 1973 note plus accrued interest, a total of $40,000.00." Id. at 513. Within two weeks of Roberts' demand for repayment, Akin transferred all the National stock to Roberts, claiming it was "an involuntary transfer." Id. at 515. The court disagreed, finding that the transfer was "neither logical, reasonable, credible, prudent, or satisfactorily explained." Id.

The Akin court first noted that the "value of the corporate stock was far in excess of the Roberts debt ... was totally lacking in adequate consideration and even failed to satisfy Roberts' purported sole desire to 'just be paid.'" Id. The court then detailed the circumstances of the transfer that demonstrated it was not made in good faith:

Their conduct fails in every respect as that of ordinary and reasonably prudent businessmen. Reasonable efforts were not resorted to by Akin to satisfy the Roberts' debt through the sale of

assets, loans, application of National's other assets, or other alternatives. Roberts stated objective of actual payment was likewise not achieved. Their conduct following the transfer further taints their stated intentions. Roberts thereafter exerted no control, direction, or review of the corporation's financial assets or affairs until April, 1982 when Akin's services to National were terminated. Akin conversely remained the President of National, exercising total control over its affairs including absolute discretion in withdrawal of corporate funds for personal usage. Such conduct is entirely uncharacteristic of a creditor who demands payment of a personal note obligation—said demand for payment being the supposed force prompting the stock transfer of July 2, 1979, nor would Akin's retained position with National and withdrawal privileges be consistent with Roberts past history of protecting his interests.

Id. at 516 (emphasis added and internal citations omitted). Therefore, the court held that the transfer was "a sham, totally lacking in adequate consideration, and designed to transfer the legal ownership of Akin's stock beyond the reach of his creditors for the purpose of hindering, delaying or defrauding their claims," and void under both KRS § 378.010 and § 378.020. Id.

Similarly, in Gillardi v. Henry, 272 Ky. 188, 113 S.W.2d 1158 (Ky. Ct. App. 1938), the Kentucky Court of Appeals rejected the defendants' untrustworthy and illogical narrative of the transfers at issue. Id. at 193, 113 S.W.2d 1158. The court analyzed a transfer in which some of the defendants, the LaFastas, "agreed to pay $11,000 for a home and then sold it the next day for one-half that amount without any explanation as to why such almost unheard of character of transaction was entered into[.]" Id. The court stated:

Bona fide transactions are not so made, nor is the story told by appellant as to his acquisition of the funds composing the loans to his codefendants—and his depository thereof—in accord with usual and natural methods. None of the related transactions chime with human experience but are always the earmarks of fraud and deception. The chief argument of counsel for appellant is that we should put aside such infallible evidence of fraud and accept in lieu thereof, the contradictory, irreconcilable, and incredible narrative expressly testified to by the defendants.

Id. Accordingly, the court concluded that "the character of testimony we have hereinbefore recited is of a type and nature that leads to the irresistible conclusion, not only that the LaFastas acted fraudulently in making that conveyance, but that their vendee, the appellant, had knowledge thereof and participated therein, even if it should be conceded that his alleged debt against his codefendants was a bona fide one." Id. at 194, 113 S.W.2d 1158.

The Court finds that AIO has not met its burden of demonstrating good faith. First, Twist unquestionably transferred the Natural Gas Assets to AIO to place those assets beyond his other creditors, and AIO/Anastas knew this. [R. 264, 116:25-117:1; 118:14-15]; see also [R. 262, 91:8-14]; [Pl. Exh. 58]. McAdam and Armstrong likewise testified Twist designed the transfer, with AIO's complicity, as a sham foreclosure to evade creditors. [R. 265, 29:8-10; 95:1-10]. This scheme was a replay of the original scheme to file the Armstrong Complaint to evade creditors. [R. 218, pp. 2-3, ¶¶ 9-17]; [R. 265, 26:1-21; 35:3-23]. Twist and Anastas concocted the AIO Complaint and Agreed Judgment to ensure Twist's continued ownership and control over the Natural Gas Assets. As in Akin and Gillardi, the circumstances surrounding the Agreed Judgment run counter to the dealings of reasonable businesspersons. Anastas argues that AIO was a good faith lender seeking repayment on its loan, but this argument is incompatible with the evidence. Twist (the debtor) hired the lawyers for both parties and provided all the information contained within the AIO Complaint, and in some cases, Anastas never spoke with AIO's lawyers. [R. 265, 30:13-15, 31:4-11;32:6-12; 35:18-36:25]. Anastas testified that neither he nor AIO ever performed a valuation of the Natural Gas Assets. [R. 262, 18:5-7]. A good faith lender would not agree to make a loan up to $2,000,000 or to release his claims against a debtor in exchange for assets without assessing their value. [JX28]. Nor would a good faith lender presign releases of the collateral so his borrower could "hock his assets" and "raise additional financing." [JX28].

What is more, as in Akin, "[Anastas's] stated objective of actual payment was likewise not achieved." In re Akin, 64 B.R. at 516; see also [R. 264, 123:15-16 ("I just wanted what was owed to me. I never wanted the assets.")]. After obtaining title to all the Natural Gas Assets through the Agreed Judgment, AIO immediately entered into an operating agreement with a Twist entity and ceded control of the assets to Twist. Such behavior is "entirely uncharacteristic of a creditor who demands payment of a personal note obligation." Akin, 64 B.R. at 516. Incredibly, that agreement entitled Twist to half the revenues for assets Anastas fully owned, allowed Twist to control all revenues until the net revenues reached $500,000, and reverted the assets back to Twist once Anastas had been repaid his loan value. In effect, AIO/Anastas, having succeeded to ownership of the Natural Gas Assets, then immediately conveyed full control of the assets and revenues to his borrower. These are not the actions of a legitimate creditor. When asked on cross-examination why he would agree to such terms, Anastas stated, "This is a terrible document. I mean, it's—it was a big mistake doing this." [R. 262, 23:20-21]. However, the Court finds that an experienced businessman like Anastas, who is plainly driven to "protect[] his interests," would not, in good faith, agree to such terms. Akin, 64 B.R. at 516.

Similarly, the proposed sale of the Natural Gas Assets to Reserve Oil years later in 2012 undermines his argument on his ultimate intentions concerning the Natural Gas Assets. Anastas agreed to sell the assts for $500,000, splitting the proceeds 50-50 with Twist. [JX56; JX57]. When asked whether he performed a valuation of the assets prior to negotiating with Reserve Oil, Anastas explained: "All I cared about was receiving my 250,000." [R. 262, 54:18-20]. His agreement at the time to hand over the other $250,000 to Twist (and all the assets to Reserve Oil) undercuts his testimony that he ultimately intended to "hand [the assets] back and let [another creditor] get the second bite." [R. 264, 123:11-124:5; 155:1]; see also [R. 264, 123:15-18 ("I just wanted what was owed to me. I never wanted the assets. I just wanted what was owed. And then like I said, anybody after me could take their share out of it.")].

Further, the Court simply does not credit Anastas's highly suspect narrative. Anastas was not a credible witness. He attempted to simultaneously portray himself as a sophisticated businessman with a finance degree from USC yet also as an individual naïve enough to innocently squander his full ownership over the Natural Gas Assets by executing the 530/AIO Operating Agreement. Anastas also admitted to perjuring himself during the Martin Litigation, falsely testifying that he had

loaned Twist $1,100,000 rather than $250,000 and that Twist had no ties to AIO. When asked why he lied, Anastas provided no explanation. He merely stated, "I don't know. I mean, I can't tell you why" and "[m]aybe I had a lapse in memory." [R. 262, 74:4-6, 80:2]. He did not deny that he lied to give the impression that the Agreed Judgment was legitimate:

Q. I mean, but there must have been a reason why you [lied under oath], though, right?

A. Yeah. I don't know. I mean, I can't tell you why.

Q. Was it to give an impression that the agreed judgment was appropriate?

A. I can't tell you why I did it. I don't remember what was in my mind. I don't remember what was going on in my mind.

[...]

Q. So you don't deny that it gave—it could give that impression; that the agreed judgment was appropriate?

A. I absolutely don't deny that.

Q. Do you deny that it was the impression that you sought to convey?

A. I don't remember what was in my mind and why I lied.

Q. Just to be clear—but you don't deny that it was the impression that you wanted to convey?

A. I don't remember why I lied.

Id. at 74:4-10, 14-22. Like in Gillardi, Anastas's chief argument "is that we should put aside such infallible evidence of fraud and accept in lieu thereof, the contradictory, irreconcilable, and incredible narrative expressly testified to by [Anastas]." 272 Ky. at 193, 113 S.W.2d 1158. Such a narrative, especially given his track record of perjury, simply does not "chime with human experience" or meet the burden of establishing good faith.

In sum, the evidence paints a clear picture of fraud with no feasible, good faith explanation beyond the $250,000 loan stipulated to by the parties. Accordingly, as Grayiel proved several badges of fraud, and AIO failed to demonstrate good faith, the Court finds the Agreed Judgment avoidable under KRS § 378.010.

2. Teema and Second Blue Light

In their Proposed Findings of Fact and Conclusions of Law, [R. 281], Teema and Second Blue Light argue Count II must fail because Grayiel has not proven the existence of any transfer from Twist to Teema or Second Blue Light. Id. at 5-9. They first argue that the formation of Second Blue Light cannot qualify as "a gift, conveyance, assignment or transfer of" Twist's estate under KRS § 378.010. Id. at 19. Second, they argue that the AIO/SBL Operating Agreement also cannot qualify under the statute because AIO did not transfer the wells to Second Blue Light, but rather entered a valid contract through which Second Blue Light provided valuable consideration—operating the wells. Id. at 20. Finally, although Teema/Second Blue Light admit that the Right of Way Agreement transferred certain right of ways to gas pipelines, they argue that "[n]o competent evidence was introduced as to the legal meaning or effect of the right-of-way assignment, or what value it had, if any." Id. at 5-6. In sum, Teema and Second Blue Light contend that "[t]here was no evidence introduced of anything of value transferred to Teema or Second Blue Light prior to Twist's death." Id. at 8.

As an initial matter, the Court agrees with Teema and Second Blue Light that the formation of Second Blue Light, alone, does not qualify as a "gift, conveyance, assignment or transfer of" Twist's estate under KRS § 378.010. However, the creation of Second Blue Light was accompanied

by the Right of Way Agreement, and subsequently resulted in the AIO/SBL Operating Agreement which, to this day, collectively continue to transfer ill-gotten revenues from the Natural Gas Assets to Teema, Second Blue Light, and AIO. In essence, the formation of Second Blue Light, the Right of Way Agreement, and the AIO/SBL Operating Agreement comprise the second phase of Twist's fraud. Given Twist's Indictment and impending incarceration, these events ensured that the revenues from the Natural Gas Assets continued to be shielded from his creditors and illegally diverted to his former fiancé and child. As explained below, these collective transfers of valuable assets to Teema and Second Blue Light are attended by numerous badges of fraud. Even analyzed independently, both the Right of Way Agreement and the AIO/SBL Operating Agreement contain sufficient badges of fraud to shift the burden to Teema to demonstrate good faith.

First, the Court disagrees with Teema and Second Blue Light that the Right of Way Agreement transferred nothing of value. The Right of Way Agreement, executed the same day as Second Blue Light's Operating Agreement (December 7, 2012), see [JX62], transferred "all of [First Blue Light's] right, title and interest in and to the gas pipeline, taps and related facilities[.]" The Gathering Contract previously entered into between 530 West Main and First Blue Light explains that First Blue Light had "certain pipelines, right of ways, and pipeline taps, which 530 requires to be able to transport their gas production from said wells to market." [JX40]. The ownership of the right of ways entitled First Blue Light to a percentage of the revenues from the wells through the Gathering Contract. Id. The common-sense interpretation of the Right of Way Agreement, read alongside the Gathering Contract, demonstrates that Twist transferred a valuable asset to Teema through the Right of Way Agreement, regardless of whether the Gathering Contract was ever officially assigned to Second Blue Light.

Teema confirmed this. At trial, when asked whether Second Blue Light has any assets aside from the AIO/SBL Operating Agreement, she explained that Second Blue Light also owned a right-of-way that would allow the gas to be transported to the buyer. [R. 266, 88:12-21]. In their post-trial briefing, Teema and Second Blue Light argue that Teema "obviously misunderst[ood]" the legal effect of the Right of Way. [R. 281, p. 5]. While Teema claimed confusion at some points during her testimony, the Court finds it plain that Twist and Teema understood the Right of Way Agreement to transfer something appreciable to Teema, which was to serve as an "inheritance" for Teema and their son. The creation of Second Blue Light alone, without any additional transfer, may not have provided any sort of inheritance. But by executing the Right of Way Agreement the very same day that Second Blue Light was formed, Teema's new company gained a valuable asset that could allow her to recoup revenues from the Natural Gas Assets (under the Gathering Contract between 530 West Main and First Blue Light) or enable her to exert leverage over the owner of the Natural Gas Assets. Her testimony clearly supports the commonsense reading of the document. The fraudulent impetus for the creation of Second Blue Light and assignment of the Right of Way Agreement could not be more clear or more improper: to provide Teema and her son an "inheritance" outside of Twist's estate and outside the reach of Twist's creditors. While the exact value obtained by Second Blue Light through the Right of Way Agreement is unclear, the fact that the agreement transferred a valuable asset is enough for purposes of KRS § 378.010. Teema's close, confidential relationship with Twist is another clear badge of fraud. In Bolling v. Adams, the Kentucky Court of Appeals summarized the reasoning behind this badge of fraud:

We have often written that courts look with suspicion upon transactions such as this between persons occupying confidential relations. When such a transaction is exposed to scrutiny, the burden is always upon the recipient of the property acquired to show that the conveyance was fairly made and not tainted with an intent to accomplish a fraudulent purpose.

296 S.W.2d 696, 699 (Ky. Ct. App. 1956); see also United States v. Isaac, 1992 WL 159795, at *4, 1992 U.S. App. LEXIS 16657, at *11-12 (same); Coffman, 612 F. App'x at 288 (quoting Hayes v. Rodgers, 447 S.W.2d 597, 600 (Ky. Ct. App. 1969)) ("Between persons closely related, such as husband and wife, the transaction must be closely examined to see that no subterfuge is employed."). Following this logic, in Russell County Feed Mill, the Kentucky Court of Appeals found that "[t]he plaintiff's proof clearly established that all parties to the conveyance occupied both a confidential and close family relationship" and that badge of fraud "was alone sufficient to effect a shift to the Corbins of the burden to offer evidence showing that no fraud was involved in the conveyance." 520 S.W.2d 309, 312 (Ky. Ct. App. 1975) (emphasis added).

Here, Teema was Twist's fiancé and the mother of one of his children. See [R. 218, p. 10, ¶ 89]. The badge of fraud for transactions between individuals in a close, confidential relationship is plainly implicated. See In re Montalvo, 333 B.R. 145, 149 (Bankr. W.D. Ky. 2005) ("The Court finds that the only 'badge of fraud' proven by the Trustee was the confidential relationship between the parties as husband and wife/fiancé."); see also Coffman, 612 F. App'x at 288. And, as the Kentucky Court of Appeals stated in Russell County Feed Mill, establishing that the parties to the transfer occupied a "confidential and close family relationship" is "alone sufficient to effect a shift to the [defendants] of the burden to offer evidence showing that no fraud was involved in the conveyance." 520 S.W.2d at 312.

However, the Court need not rely on this badge of fraud alone, as additional badges of fraud attended the Right of Way Agreement. First, "[a] transfer for no consideration or for inadequate consideration is also suspect as a badge of fraud." Isaac, 1992 WL 159795, at *4, 1992 U.S. App. LEXIS 16657, at *12 (citing Hopson, 516 S.W.2d at 341). Teema testified that she paid nothing for the right of ways. [R. 266, 137:22-138:9]. She viewed this transfer as an inheritance and expressed surprise at the suggestion, on cross-examination, that she would have paid Twist money in return. Id. Moreover, not only did Teema provide no consideration for the transfer, but the Right of Way Agreement contains false recitals of consideration—an additional badge of fraud. See United States v. Gilbert, No. 3-12-CV-235-H, 2014 WL 894483 at *3, 2014 U.S. Dist. LEXIS 25799 at *8 (W.D. Ky. Jan. 10, 2014) (listing additional badges of fraud, which include transfers "which contain[] false statements and recitals as consideration"); Lennon v. Kemp, Nos. 2015-CA-001273-MR and 2016-CA-000026-MR, 2018 WL 1033315 at *11, 2018 Ky. App. Unpub. LEXIS 115, at *30 (Ky. Ct. App. Feb. 23, 2018) (same). The Right of Way Agreement stated that Second Blue Light provided "good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged." [JX100]. But, as noted, Teema and Second Blue Light provided no consideration for the transfer. Finally, the Right of Way Agreement was executed at a time in which Twist was being sued by several creditors, including Grayiel. In Princesse D'Isenbourg Et Cie Ltd. v. Kinder Caviar, Inc., No. 3:12-004-DCR, 2013 WL 147841, 2013 U.S. Dist. LEXIS 5006 (E.D. Ky. Jan. 14, 2013), the plaintiff argued that "all transfers made after the previous suit was filed in 2009 are presumed to be fraudulent because they were made after the lawsuit was filed." Id. at *14. The court agreed, finding that the pending lawsuit rendered the transfer presumptively fraudulent. Id. The same is true here. The Right of Way Agreement was executed in 2012, and Grayiel filed suit against Twist and his entities in West Virginia in November 2008. [JX100; JX38]. Again, this fact alone is sufficient to shift the burden to Teema and Second Blue Light. What is more, an additional badge of fraud is implicated because Twist was also "financially embarrassed" at this point; he had already been indicted for tax evasion. [JX67 (dated Feb. 7, 2012)]; see also In re Licking River Mining, LLC, 603 B.R. at 381.

As Grayiel has sufficiently established several badges of fraud as to the Right of Way Agreement, the burden shifts to Teema and Second Blue Light to demonstrate that the conveyances were made in good faith. Even adopting the more defendant-friendly "preponderance of the evidence" standard from Jadco, Teema and Second Blue Light have failed to rebut the presumption of fraud. See 991 F. Supp. 2d at 953. In their post-trial filing, Teema and Second Blue Light merely argue that Grayiel cannot prove fraudulent intent because "she established Second Blue Light to take care of her son and herself." [R. 281, p. 20]. First, the evidence is overwhelming that Twist formed Second Blue Light and operated and controlled it till his death. [R. 266, 113:25-114:6; 160:4-13]. Moreover, Teema consistently testified that she viewed Twist's conveyance as an "inheritance" for her and her son outside of Twist's estate. See [R. 266, 120:1-12; 136:2-5; 127:3-6; 146:23-25; 150:14-25]. An "inheritance" does not jibe with Teema's narrative that she built a new business from the ground up. Teema's insistence that Second Blue Light was intended to provide for her son and herself does not demonstrate that the transfer was made in good faith. Rather, it supports the vast weight of the evidence that Twist and Teema transferred valuable assets to Second Blue Light to ensure Teema and her son could profit off Twist's estate while creditors were left out to dry. Therefore, the Court finds that Teema and Second Blue Light are liable for the fraudulent conveyance from First Blue Light to Second Blue Light of the right of ways related to the Natural Gas Assets.

The AIO/SBL Operating Agreement was also attended by numerous badges of fraud. First, AIO and Second Blue Light "negotiated" and executed the AIO/SBL Operating Agreement through "hurried transactions not in the usual mode of doing business." In re Licking River Mining, LLC, 603 B.R. at 381. After speaking with Teema at Twist's funeral, Anastas immediately decided to do business with her. Indeed, the AIO/SBL Operating Agreement was executed about one month after Twist's death; Twist died on February 23, 2014, and the AIO/SBL Operating Agreement is dated March 31, 2014. [R. 266, 100:1-2, 123:25-124:2]; [JX83]. Anastas conducted no inquiry into what "operating" the wells entailed—cutting checks from a computer—prior to executing this agreement with Teema, nor did he utilize his business savvy to learn how to operate the wells himself. Anastas never sought a company independent of Twist to operate or purchase the wells. See [R. 262, 96:1-4]. Instead, Anastas (allegedly a scorned creditor

who found Twist difficult to work with) inexplicably and immediately jumped into business with Twist's fiancé after Twist's death, under terms that vastly overcompensated Teema. What is more, the agreement was not negotiated at arm's length. When "negotiating" the AIO/SBL Operating Agreement, only one attorney was present: Bryan Dillon, counsel for Teema.¹³ [R. 267, 23:5-6].

13 The Court acknowledges that Mr. Dillon denies representing AIO in this discussion. [R. 284, p. 6]. Regardless, Dillon was the only attorney involved, and AIO's failure to hire a lawyer for the discussion further supports a finding that this was not a typical arms-length negotiation.

Relatedly, the AIO/SBL Operating Agreement significantly overcompensates Second Blue Light/Teema for the limited work required to "operate" the wells. Teema's work "operating" the wells involves no understanding of physical well operation, but rather requires Teema to work from home for two to three hours each month, sending checks from her computer. [R. 266, 117:19-24]. Through the AIO/SBL Operating Agreement, Teema's 50% cut of the net revenues translates into an astonishing $900 per hour for her work. [R. 267, 58:19-24, 59:2-4]. On cross-examination, Teema admitted that it would be ridiculous for AIO to pay anyone else that hourly rate to operate the wells. Id. at 62:8-13. Her bloated rate severely undermines the validity of the AIO/SBL Operating Agreement.

Moreover, the terms of the AIO/SBL Operating Agreement provide that the Natural Gas Assets, purportedly owned by AIO/Anastas, will be transferred to Second Blue Light/Teema once Anastas is repaid his $250,000 (plus interest). Why would Anastas, as sole owner of the Natural Gas Assets, ever agree to return them to Twist's former fiancé? Teema and Second Blue Light argue that "[t]he consideration for Second Blue Light receiving the net profits is undertaking the responsibility of managing the wells." [R. 281, p. 20]. But, as previously explained, Teema is dramatically overpaid for her limited work "managing" the wells. Over the course of their business relationship, AIO and Second Blue Light have each netted over $257,634.19. [JX97]. The Court simply cannot find that Teema's two-to-three hours of work per month, cutting checks from her computer, is sufficient consideration.

Put simply, Teema and Second Blue Light slid into Twist's (and First Blue Light's) shoes after Twist died and worked alongside AIO to ensure that the Natural Gas Assets remained shielded from creditors to the benefit of Twist, Teema, and Anastas. Grayiel has clearly demonstrated that at least one badge of fraud accompanied the AIO/SBL Operating Agreement, and, as such, the burden shifts to Teema and Second Blue Light to demonstrate that the transaction was in good faith. See Jadco, 991 F. Supp. 2d at 953. They have not done so. In fact, Teema and Second Blue Light provide no real argument that the transaction was executed in good faith, merely arguing a lack of proof as to actual fraudulent intent. See [R. 281, pp. 19-20]. As explained, Grayiel need not directly prove actual fraudulent intent, but rather may satisfy his burden through showing at least one badge of fraud. See United States v. Leggett, 292 F.2d 423, 427 (6th Cir. 1961). He has proven numerous badges of fraud. The same evidence demonstrating the badges of fraud cuts against any argument that the AIO/SBL Operating Agreement was executed in good faith. As Teema and Second Blue Light have failed to demonstrate good faith, the Court finds that the AIO/SBL Operating Agreement is avoidable. B. Constructive Fraud as to AIO (Count III)

Because the Court finds the Agreed Judgment avoidable under KRS § 378.010, it need not analyze the transfer under KRS § 378.020. See In re Addington, No. 12-10029, 2015 WL 3404505 at *7, 2015 Bankr. LEXIS 1755 at *21 (Bankr. E.D. Ky. May 27, 2015) ("Having avoided the transfer under § 378.020, it is unnecessary to consider whether to avoid the transfer under § 378.010."). However, the Court finds that even if the transfer of the Natural Gas Assets through the Agreed Judgment were not avoidable under the actual fraudulent conveyance statute, it is avoidable as a constructive fraudulent conveyance. The version of the constructive fraudulent conveyance statute that the Court previously determined is applicable in this case, Ky. Rev. Stat. Ann. § 378.020, provides:

Every gift, conveyance, assignment, transfer or charge made by a debtor, of or upon any of his estate without valuable consideration therefor, shall be void as to all his then existing creditors, but shall not, on that account alone, be void as to creditors whose claims are thereafter contracted[.]

Id. (emphasis added); see also [R. 170, pp. 38-40]. This statute differs from the actual fraudulent conveyance statute, KRS § 378.010, in three key respects. First, fraudulent intent is not required to prove constructive fraud. Sierra Enters., 264 F. Supp. 3d at 845 (quoting Combs v. Poulos, 241 Ky. 617, 44 S.W.2d 571, 573 (1913)) ("Neither actual dishonesty of purpose nor intent to deceive is an essential element of constructive fraud."); see also Madison Cap. Co., LLC v. Smith, No. 3:08CV-382-H, 2009 WL 482093, at *4 (W.D. Ky. Feb. 25, 2009), as amended (Mar. 4, 2009) (citing Combs, 44 S.W.2d at 573) ("To obtain relief under this statute, a creditor need not show fraudulent intent."). Second, constructive fraud, unlike actual fraud, requires the claimant to qualify as a "then existing creditor" of the debtor. See Smith, 2009 WL 482093, at *4-5. Third, to qualify under the constructive fraudulent conveyance statute, the transfer must have been without valuable consideration. Accordingly, the Court must decide (1) whether Grayiel was a "then existing creditor" at the time of the Agreed Judgment, and (2) whether AIO provided valuable consideration for the Natural Gas Assets.

In its prior Memorandum Opinion and Order on the parties' cross-motions for Summary Judgment, this Court determined that genuine issues of material fact existed as to whether Grayiel was a "then-existing creditor" of Twist at the time of the Agreed Judgment. [R. 170, p. 42-51]. In so holding, the Court extensively recounted relevant Kentucky case law on the issue. See id. The Court will not restate the entire analysis of precedent from its prior opinion but will provide an abbreviated summary of the relevant law on the issue of whether Grayiel was a "then existing creditor" of Twist on the relevant date of the transfer of the Natural Gas Assets to AIO.

The Court agrees with Grayiel that there is persuasive authority holding that a plaintiff may be a creditor under KRS § 378.020 at the time of filing suit, or even well beforehand. In Smith, the Western District of Kentucky reasoned that, because the statute did not define the term "debtor" and "no recent Kentucky cases have provided any reasonable guidance," a court should look to the plain meaning of the word. 2009 WL 482093, at *4, 2009 U.S. Dist. LEXIS 14690, at *12. The court determined that a debtor, as commonly understood, is "one who owes an obligation of payment to another[.]" Id. Accordingly, the court reasoned that "[t]he fact that a

guarantor's obligation to pay is contingent (or dependent upon other events) does not make him any less a debtor in the broad sense of the term." Id. at *4, 2009 U.S. Dist. LEXIS 14690 at 12-13. The Smith court bolstered its holding by finding it consistent with precedent, specifically the Kentucky Supreme Court's holding in Daniels v. Goff, 192 Ky. 15, 20, 232 S.W. 66 (Ky. 1921). Smith, 2009 WL 482093 at *4, 2009 U.S. Dist. LEXIS 14690, at *13. In Daniels, the court reasoned that the phrase "then existing liabilities," as used in a statutory precursor to KRS § 378.020, was "a sufficiently broad and comprehensive term to embrace conditional or contingent obligations which may or may not in the future result in indebtedness." 192 Ky. at 20, 232 S.W. 66. The Smith court also noted that its decision was consistent with a more recent Bankruptcy Court opinion in the Eastern District of Kentucky, In re Salyers, No. 06-10060, 2008 WL 2139605, 2008 Bankr. LEXIS 1537 (Bankr. E.D. Ky. May 20, 2008), in which a conveyance was deemed avoidable under KRS § 378.020 because, at the time of the transfer, the debtor was "a defendant in a lawsuit in which a significant monetary judgment could be rendered against him by one of his creditors[.]" Id. at 3, 2008 Bankr. LEXIS 1537 at 7.

The Kentucky Court of Appeals' opinion in Hager v. Coleman, 307 Ky. 74, 208 S.W.2d 518 (1948) held that an individual may be considered a "creditor" under Kentucky's fraudulent conveyance statutes if the defendant had a reason to believe and anticipate suit against him (even if such suit had not yet been filed). In Hager, Coleman transferred a bank account to his wife two days after stabbing Hager. Id. at 518-19. Hager died five days later, and his wife and children secured a judgment against Coleman. Id. at 519. The court found the transfer avoidable because "[c]ertainly Butler Coleman had reason to believe and anticipate that some sort of action might be taken against him. If Hager survived he could have brought suit, and having died, either his personal representative, or as in this action, his widow and children could bring it." Id.

The Eastern District of Kentucky more recently found a genuine issue of material fact as to whether a claimant was a "then existing creditor." Kinder Caviar, 2013 WL 147841, at *4, 2013 U.S. Dist. LEXIS 5006, at *18. In Kinder Caviar, the plaintiff argued that it became a creditor of the defendant when it filed its original complaint. Id. The court first stated that "Kentucky courts have not explicitly decided whether a creditor can be considered a 'then-existing' creditor prior to the entry of a Judgment against the debtor." Id. However, the court noted that "[t]here is some authority that KRS § 378.020 includes obligations to pay that are contingent on the happening of other events." Id. (citing Smith, 2009 WL 482093). The Kinder Caviar court then examined the purposes of Kentucky's fraudulent conveyance statutes: to place creditors in the same position they would have been in prior to any avoidable conveyances. Id. at 5, 2013 U.S. Dist. LEXIS 5006 at 19. The court concluded that "using the date of the filing of the prior complaint is the most likely mechanism for accomplishing the goal of putting [the plaintiff] in the position it would have been prior to any transfers of property made without good faith." Id.

Further, courts analyzing Kentucky's actual fraudulent conveyance statute have reasoned that a claim for damages confers creditor status. See Evans v. Armenta, No. 14-329-GFVT, 2016 WL 7971244, 2016 U.S. Dist. LEXIS 190731 (E.D. Ky. May 20, 2016) ("And '[a] person who has a claim for damages against a grantor is a creditor within the meaning of' Kentucky's fraudulent conveyance statutes, even before that

claim has been reduced to judgment.") (emphasis added); Lewis v. Barber, 243 Ky. 519, 522, 49 S.W.2d 328 (1932) ("A person who has a claim for damages is a creditor within the meaning of the statute."). While these cases relate to the actual fraudulent conveyance statute, it does not appear that the meaning of the word "creditor" differs between the two statutes. These cases support a finding that a claimant can be a creditor before securing a judgment.

Additionally, as explained in the Court's previous Order at [R. 170, pp. 48-49], cases from other jurisdictions provide persuasive authority that the term "creditor" as used in fraudulent conveyance statutes may include an investor with a claim, even before judgment is rendered in their favor. See Carroll v. Stettler, 941 F. Supp. 2d 572, 578 (E.D. Pa. 2013) (reasoning that investors in a Ponzi scheme qualified as creditors under Pennsylvania's fraudulent conveyance statute as their investments were "100% fully refundable through the entire process" and, therefore, met the statutory definition of a creditor as someone with a "right to payment"); In re McDowell, 87 B.R. 554 (Bankr. S.D. Ill. 1988) (finding that investors became "creditors" under Illinois fraudulent conveyance law by taking the affirmative step of filing suit against the debtor); Donell v. Kowell, 533 F.3d 762, 771 (9th Cir. 2008) ("Where causes of action are brought under UFTA against Ponzi scheme investors, the general rule is that to the extent innocent investors have received payments in excess of the amounts of principal that they originally invested, those payments are avoidable as fraudulent transfers[.]").

The Court now holds that, given the persuasive authority cited above, Grayiel was a "creditor" of Twist at the time of the Agreed Judgment. Further, even considering multiple dates for when the transfer of the Natural Gas Assets through the Agreed Judgment occurred for purposes of KRS § 378.020, the Court finds Grayiel was a "creditor" under any of them. Grayiel filed suit against Twist on November 17, 2008. Two important dates associated with the Agreed Judgment—the date the Jefferson Circuit Court entered the Agreed Judgment (December 2, 2008) and the date Joerhea assigned the Natural Gas Assets to AIO (January 1, 2009)—occurred after Grayiel filed his complaint against Twist and associated entities. The case law recited above demonstrates Grayiel was a creditor at least by the time he filed suit. However, even if the Court used an earlier date for the transfer, such as the date the parties executed the Agreed Judgment (October 30, 2008) or the date the AIO Complaint was filed (September 23, 2008), the Court still finds that Grayiel was a then-existing creditor of Twist because Twist was on notice that Grayiel would seek recovery on his investment. As in Hager, Twist had wronged Grayiel and "[c]ertainly ... had reason to believe and anticipate that some sort of action might be taken against him." 208 S.W.2d at 519. But the Court need not merely speculate as to whether Twist should have expected suit, because Grayiel (through counsel) expressly threatened further action in a letter sent over a year prior to any of the relevant dates to the Agreed Judgment. [JX38, pp. 146-47 (dated November 1, 2007)]. This letter, which warned that Grayiel would "proceed with any and all necessary actions to collect not only [his] investments but to seek remedy for all damages[,]" clearly put Twist on notice in November 2007 that Grayiel had a claim for damages and that a lawsuit was forthcoming. Therefore, the Court finds that, regardless of the transfer date for the Natural Gas Assets, Grayiel was a then-existing creditor of Twist. Importantly, in its post-trial briefing, AIO did not even argue that Grayiel was not a creditor at the time of the transfer. See [R. 280, pp. 3-4]. Rather, it solely argues that liability cannot attach under KRS § 378.020 because AIO paid valuable consideration for the Natural Gas Assets. See id. The Court disagrees. "As interpreted by Kentucky courts, a transfer made without valuable consideration is one in which the thing conveyed 'exceed[s] in value by a substantial sum' the consideration given.'" In re Licking River Mining, 603 B.R. at 365 (quoting In re Addington, 2015 WL 3404505, at *4, 2015 Bankr. LEXIS 1755, at *4). "To be valuable, consideration 'must not be inadequate.'" Id. (quoting Carter v. Richardson, 60 S.W. 397, 399 (Ky. 1901)). "[A] transfer for less than 'a fair and reasonable price' is void." Id. (quoting In re Wilkinson, 319 B.R. 134, 140 (Bankr. E.D. Ky. 2004), aff'd 196 F. App'x 337 (6th Cir. 2006)); Liberty Bank & Trust Co. v. Davis, 281 Ky. 51, 55, 134 S.W.2d 988 (Ky. Ct. App. 1939) ("A preexisting debt is a sufficient consideration to uphold a conveyance from a debtor to his creditor, and a deed executed in payment of such debt will not be set aside if the amount of the debt is not materially less than the fair and reasonable value of the property conveyed.").

As discussed above in analyzing the badge of fraud for "inadequate consideration" pursuant to the actual fraudulent conveyance statute, AIO did not pay a fair and reasonable price for the Natural Gas Assets. See supra Section II(b)(i)(A)(1). According to Anastas and AIO, they were owed about $425,000 (the principal loan balance of $250,000 plus interest) and received at least $750,000 in assets through the Agreed Judgment, using the not-less-than figure from the expert report of Christopher B. Meadors. See [JX95]; see also [R. 280, p. 21]. Using the conservative valuation, the Natural Gas Assets were worth almost double what Anastas was owed. This already unreasonable transfer is made even more unreasonable when considering that, at the time of the transfer, Anastas believed he was receiving $2,000,000 in assets. See [R. 264, 143:19-144:6]. Put differently, Anastas believed that the Agreed Judgment transferred assets valued eight times more than the principal indebtedness owed to him. Accordingly, the amount owed to AIO was "materially less than the fair and reasonable value of the property conveyed." Liberty Bank & Trust Co., 281 Ky. at 55, 134 S.W.2d 988. As Grayiel was a then existing creditor of Twist's at the time of the transfer, and AIO did not provide valuable consideration for the Natural Gas Assets, the Court finds that the Agreed Judgment is also void as a constructive fraudulent conveyance under KRS § 378.020.

ii. Common Law Fraud as to AIO and Anastas (Count VII)

Under Kentucky law, a plaintiff claiming fraud must prove: "(1) that the declarant made a material representation to the plaintiff, (2) that the representation was false, (3) that the declarant knew the representation was false or made it recklessly, (4) that the declarant induced the plaintiff to act upon the misrepresentation, (5) that the plaintiff relied upon the misrepresentation, and (6) that the misrepresentation caused injury to the plaintiff." Flegles, Inc. v. TruServ Corp., 289 S.W.3d 544, 549 (Ky. 2009). "A plaintiff is required to prove fraud by clear and convincing evidence, a heightened standard of proof." Norwich v. Norwich, 459 S.W.3d 889, 899 (Ky. 2015). "Where the proven facts or circumstances merely show inferences, conjecture, or suspicion, or such as to leave reasonably prudent minds in doubt, it must be regarded as a failure of proof to establish fraud." In re Pearl, 577 B.R. 513, 526 (Bankr. E.D. Ky. 2017) (quoting Bates

v. Alliance Banking Corp., No. 2016-CA-000410-MR, 2017 WL 3328116, at *5, 2017 Ky. App. Unpub. LEXIS 572, at *15 (Ky. Ct. App. Aug. 4, 2017)).

The Court finds that Grayiel has established the elements of fraud by clear and convincing evidence. First, the Court agrees that AIO and Anastas made materially false misrepresentations in the AIO Complaint, Agreed Judgment and related AIO Loan documents. These documents falsely represented that AIO held a $2,000,000 secured debt. Through the Agreed Judgment, AIO then enforced its secured debt that subsumed the entirety of the Natural Gas Assets, which Anastas believed to be worth $2 million, even though Anastas and Twist knew the debt in question was not worth more than $250,000 plus interest. These knowing, false representations about the amount of the AIO Loan and transfer of all the Natural Gas Assets in satisfaction of the AIO Loan induced reliance by Grayiel who believed AIO to be a legitimate creditor enforcing its secured loan. In other words, when AIO, through Anastas, entered the Agreed Judgment and obtained the Natural Gas Assets, it made a representation to the Jefferson Circuit Court and the public, including Grayiel and all Twist's creditors, that AIO rightfully owned the Natural Gas Assets as repayment for the debt outlined in the $2,000,000 AIO Note. See Chamberlain v. Am. Tobacco Co., No. 1-96 CV 2005, 1999 WL 33994451 at *10, 1999 U.S. Dist. LEXIS 22636 at *38 (N.D. Ohio Nov. 19, 1999) (finding that the plaintiffs adequately pled the elements of fraud by alleging that defendants made misrepresentations about cigarettes to the public, specifically "in the media and before Congress," on which plaintiffs relied). AIO and Anastas do not challenge the fact that statements in public filings, such as the AIO Complaint and the Agreed Judgment, functioned as representations to the public and Twist's creditors. See [R. 280, pp. 24-25].

The Agreed Judgment was plainly a material misrepresentation of the debt and relationship between AIO and the Twist Entities. In UPS v. Rickert, 996 S.W.2d 464 (Ky. 1999), the Kentucky Supreme Court cited the Restatement (Second) of Torts § 529 (1977) for the proposition that "a mere partial truth can be fraudulent if it is materially misleading." Rickert, 996 S.W.2d at 469; see also Harralson v. Monger, 206 S.W.3d 336, 339 (Ky. 2006) ("A half truth may be as vicious as an express misrepresentation."); Harman v. Sullivan Univ. Sys., No. 03-738-C, 2005 WL 1353752 at *3, 2005 U.S. Dist. LEXIS 10904 at *12 (W.D. Ky. June 6, 2005) (same). Section 529 also provides that "a statement that contains only favorable matters and omits all reference to unfavorable matters is as much a false representation as if all the facts stated were untrue." Rest. (2d) of Torts, § 529 cmt. a.

Anastas and AIO contend that there was no fraudulent misrepresentation in the Agreed Judgment. [R. 280, p. 17]. Specifically, they argue that because the Agreed Judgment did not mention or grant a judgment for $2,000,000 (or specify any sum), it could not be fraudulent. Id. The Court disagrees. The Agreed Judgment expressly referenced the AIO Complaint, the AIO Note (and "further attached [the AIO Note] to [the] Judgment"), and the Credit Line Deed of Trust,¹⁴ all of which provided more details

14 In their Response, AIO and Anastas argue that the AIO Complaint could not have contained misrepresentations because the AIO Complaint was not recorded in West Virginia, only the Agreed Judgment was. [R. 285, p. 2]. The Court notes that the AIO Complaint is a publicly available court filing, so any member of the public could have accessed and referred to it. Additionally, the Credit Line Deed of Trust, which was recorded in three counties in West Virginia, referenced the AIO Note of $2,000,000 as being secured by the Deed of Trust. [JX21; JX22; JX23]. The point still stands that AIO and Twist failed to disclose the actual amount owed under the AIO Note and failed to inform the Circuit Court, or note anywhere in the Agreed Judgment, that the parties intended for Twist to continue controlling the wells.

as to the line of credit offered to the Twist Entities by AIO. [JX35; JX36]. The Complaint stated that MTEC "obtained a line of credit, in the amount of Two Million Dollars ($2,000,000)." [JX35, p. 3]. The Complaint also explained: "[MTEC] is therefore in default of said agreement, and is presently indebted to Plaintiff in an amount to be determined, after an accounting, said amount not to exceed Two Million Dollars ($2,000,000); plus accumulated interest, per the said agreement." Id. at 4. These statements within the AIO Complaint contain only a fraction of the necessary information. That is, while AIO initially agreed to extend a line of credit to Twist Entities in the amount not to exceed $2,000,000, it was only owed $250,000 plus interest. The intentional omission of the actual amount owed served as a half-truth, meant to misrepresent AIO's right to recover the entirety of the Natural Gas Assets. Further, the parties failed to disclose, in either the AIO Complaint or the Agreed Judgment, that Twist controlled AIO or that the parties intended to execute an operating agreement, immediately after the filing of the Agreed Judgment, wherein a Twist entity would continue to control and benefit from the Natural Gas Assets. The AIO Complaint contained "only favorable matters [the $2,000,000 figure] and omit[ted] all reference to unfavorable matters [the true amount owed and AIO's intent to immediately hand over possession and control of the Natural Gas Assets through the 530/AIO Operating Agreement]" in order to misrepresent the true nature of the Agreed Judgment and the relationship between Twist, AIO, and Anastas. Rest. (2d) of Torts, § 529 cmt. a. In truth, it was a sham lawsuit with a pre-determined out-come. As such, the Court finds that the half-truths provided in the Deed of Trust, AIO Complaint, and Agreed Judgment are "as much a false representation as if all the facts stated were untrue." See id.

Third, Anastas knew the representation was false. Undercutting AIO's argument that the revolving feature of the Note gave him complete discretion on advancing future funds [R. 280, p. 6], Anastas testified that shortly after loaning the $360,000 to Twist and his entities (and being paid back $110,000), he decided he would not loan Twist any more money under the AIO Note, despite the AIO Note providing a line of credit of up to $2,000,000. See [R. 264, 116:20-117:8]. Suspecting a "Ponzi scheme," Anastas approached Twist and informed him that he would not be loaning any more money and demanded repayment. See id. Yet, Anastas retained the entirety of the Natural Gas Assets as collateral under the Deed of Trust, knowing he would not extend additional credit under the AIO Loan. At trial, Anastas testified that he knew at the time he executed the Agreed Judgment that AIO was only owed $250,000 plus interest but believed the Natural Gas Assets were worth in excess of $2,000,000. [R. 262, 16:21-25]. Additionally, cross-examination produced the following testimony:

Q. Did you ever let the court know that the amount owed to AIO was actually only $250,000?

A. I don't know what I provided to the attorneys. I don't recall.

Q. So, I mean, I suspect you didn't provide anything because you never actually talked to Mr. McAdam [AIO's counsel], correct?

A. I mean, maybe. Yeah. I mean, I don't know. I mean, you guys have my emails. I don't know if there's something in there. I'd have to look.

Q. It was your testimony that you never spoke to him.

A. I did not speak to him.

Q. And it was your testimony that you never communicated with him.

A. That's correct.

Q. Right. So did you counsel—so you don't know if Mr. McAdam let the court know that the amount AIO was owed was only $250,000, correct?

A. That is correct.

Q. So essentially anyone—anyone in the public if they saw this agreed judgment that was entered on the court's dockets, they would see AIO had a judgment for nearly all of the natural gas assets, correct?

A. Correct.

Q. All right. And they wouldn't know that AIO was only owed $250,000, right?

A. Not from this document.

Id. at 18:16-19:16. Anastas also testified:

Q. And after the agreed judgment and AIO entered into an operating agreement with 530 West Main in which Mr. Twist retained possession or control of the natural gas assets, correct?

A. Yes.

Q. And to your knowledge, when you did the agreed judgment, the transfer of the natural gas assets to 530 West Main was not disclosed to the court?

A. It was not.

Id. at 99:25-100:8. Moreover, Anastas repeatedly testified that the litigation and Agreed Judgment were, in essence, a "set play." Anastas and Twist had agreed upon the outcome of the litigation prior to even filing suit. Id. at 15:7-10. Accordingly, Anastas knew that the Agreed Judgment falsely portrayed the amount the Twist Entities owed AIO and the relationship between Twist and AIO. Indeed, that was the whole point of the Agreed Judgment, entered by the Circuit Court and signed by the Circuit Judge: to convey the appearance that it was the product of a litigated compromise of a legitimate commercial debt between two unrelated parties.

Fourth, the Agreed Judgment induced Grayiel not to seek recovery from AIO, and Grayiel relied upon the misrepresentations in making his litigation decisions. "Kentucky courts have long suggested that '[t]he very essence of actionable fraud or deceit is the belief in and reliance upon the statements of the party who seeks to perpetrate the fraud.'" W. Diamond LLC v. Barnes, No. 4:12-CV-00028-JHM-HBB, 2013 WL 253281, at *4, 2013 U.S. Dist. LEXIS 8774, at *11 (W.D. Ky. Jan. 22, 2013) (quoting Wilson v. Henry, 340 S.W.2d 449, 451 (Ky. 1960)); see also Compressed Gas Corp. v. United States Steel Corp., 857 F.2d 346, 352 (6th Cir. 1988) ("Kentucky law requires that the party claiming fraud show that he or she relied on the alleged misrepresentation, not a third party."). "With regard to the reliance element, the plaintiff 'must prove that his reliance on the misrepresentation was reasonable, and in making this determination, the Court should consider the plaintiff's knowledge and experience.'" Lore, LLC v. Moonbow Invs., LLC, No. 2012-CA-001305-MR, 2014 WL 507382, 2014 Ky. App. Unpub. LEXIS 99 (Ky. Ct. App. Feb. 7, 2014) (quoting Bassett v. Nat'l Collegiate Athletic Ass'n., 428 F. Supp. 2d 675, 682 (E.D. Ky. 2006)). However, "reliance is not reasonable when either minimal investigation would have revealed

the truth, or when [the relying party] closes its eyes and passively accepts the contradictions that exist in the information available to it." First Tech. Cap., Inc. v. JPMorgan Chase Bank, N.A., 53 F. Supp. 3d 972, 994 (E.D. Ky. 2014) (quoting Claypool v. Brock, No. 2010-CA-1268-MR, 2011 WL 3793419 at *3, 2011 Ky. App. Unpub. LEXIS 617, at *9 (Ky. Ct. App. Aug. 26, 2011)) (internal quotation marks omitted).

The Court finds that Grayiel relied upon the misrepresentations in the AIO Complaint and Agreed Judgment in deciding not to seek collection against AIO initially. See [R. 282-1, p. 68]. As discussed in Sections I(h) and II(a)(i) above, Grayiel did not discover the "friendly" relationship between Twist and AIO until his conversations with Armstrong in July 2015. See [R. 231-1, p. 6]. When looking at the Agreed Judgment and AIO Complaint, Grayiel had no reason to believe that AIO was owed only a fraction of the value of the assets, or that AIO had an agreement for Twist to continue full control and operation of the Natural Gas Assets post foreclosure. Only when confronted with insider knowledge by one of Twist's most trusted former employees did Grayiel learn that AIO was the most recent Twist confederate to shield his assets from creditors while Twist retained complete control.

Such reliance by Twist's creditors was the entire goal of transferring the assets through the Kentucky court system rather than private settlement. Anastas and McAdam both testified that, before the AIO Complaint was even filed, the outcome was predetermined. See [R. 262, 15:7-10; R. 265, 35:18-23]. So why file suit? The parties could have handled the matter outside of court, avoiding the time and costs of litigation entirely. But that would have made the transaction more suspicious to third parties. A court judgment, on the other hand, signed by the Circuit Court Judge, gave the transfer legitimacy to the outside world, including Twist's creditors. And Grayiel relied upon the Agreed Judgment in seeking recovery against Twist and other Twist Entities, rather than pursuing AIO. At trial, he testified: "The assignment and the judgment looked legitimate, so at that time I didn't—I thought it was okay, and I didn't file any lawsuit [against AIO]." [R. 265, 55:16-20]. He also testified in his Declaration that he "presumed that the courts' judgment and subsequent assignment were legitimate" and therefore did not initially attempt to collect on his investment from AIO. [R. 231-1, pp. 4-5]. In sum, not only is it clear that Grayiel actually relied upon the Agreed Judgment, it is also apparent that AIO and Twist intended the Agreed Judgment to induce such reliance.

Finally, the misrepresentation caused injury to Grayiel. AIO and Anastas argue that Grayiel could not have sustained any damages by AIO receiving the entirety of the Natural Gas Assets despite being owed only $250,000 plus interest because "AIO agreed to return the gas wells [to Twist] once its debt was repaid with interest." [R. 280, p. 15]. In other words, according to AIO and Anastas, because the assets would eventually revert to Twist, the Agreed Judgment could not possibly have injured Grayiel. This argument has no bearing. Although the Natural Gas Assets, under the 530/AIO Operating Agreement, were to eventually revert to 530 West Main, the assets were not in Twist's estate at the time he passed away, so they were out of reach of Grayiel and other creditors. Further, the practical effect of the AIO/SBL Operating Agreement substituted Teema and Second Blue Light for 530 West Main and First Blue Light, and continued to shield the Natural Gas Assets from Twist's creditors. Grayiel's injury is readily apparent; he was unable to recover

on his West Virginia judgment against the Twist estate because the Natural Gas Assets were transferred out of the estate and shielded from creditors. Therefore, the Court finds AIO and Anastas liable for common law fraud.

iii. Aiding and Abetting Fraud as to AIO, Anastas, and Teema (Count V)

Aiding and abetting (Count V) and civil conspiracy (Count VI) provide two distinct "means of recovering from multiple defendants for an underlying tort." Fackler v. Greenland Acquisition Co., No. 21-5989, 2022 WL 2311508, 2022 U.S. App. LEXIS 18119 (6th Cir. June 28, 2022); see also Great Am. Inc. Co. v. Poynter, No 1:10-CV-00161, 2013 WL 1181445, at *6, 2013 U.S. Dist. LEXIS 38241, at *11-12 (W.D. Ky. Mar. 20, 2013) (citing Lappas v. Barker, 375 S.W.2d 248, 252 (Ky. 1963)) ("Aiding and abetting tortious conduct, including fraud, is a recognized claim in Kentucky."). However, the two theories of recovery have some elements in common. Id. "Both depend on some underlying tortious conduct" and require knowledge and intent to further the tortious conduct. Id. at *6, 2022 U.S. App. LEXIS 18119 at *16.

Kentucky law follows the definition of aiding and abetting tortious conduct as laid out in the Restatement (Second) of Torts § 876. Bariteau v. PNC Fin. Servs. Grp. Inc., 285 F. App'x 218, 224 (6th Cir. 2008). Section 876 provides that a party is subject to liability if he:

(a) does a tortious act in concert with [another] or pursuant to a common design with him, or

(b) knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so as to conduct himself, or

(c) gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person.

Id. (quoting Restatement (Second) of Torts § 876 (1979)). The Restatement includes the following comment on clause (a):

Parties are acting in concert when they act in accordance with an agreement to cooperate in a particular line of conduct or to accomplish a particular result. The agreement need not be expressed in words and may be implied and understood to exist from the conduct itself.

Restatement (Second) of Torts § 876 cmt. on Clause (a). "A claim under § 876(b) has 'two elements: (1) knowledge that the primary party's conduct is a breach of duty and (2) substantial assistance or encouragement to the primary party in carrying out the tortious act.'" Id. (quoting Aetna Cas. & Sur. Co. v. Leahey Constr. Co., 219 F.3d 519, 533 (6th Cir. 2000)). "Under Kentucky law, constructive knowledge is not sufficient to support a claim of aiding and abetting; instead, a plaintiff must show that a defendant had actual knowledge that a tortfeasor was engaged in wrongful conduct." Neblett v. Brothers, 325 F. Supp. 3d 797, 807 (E.D. Ky. 2018) (quoting Great Am. Inc. Co., 2013 WL 1181445, at *4, 2013 U.S. Dist. LEXIS 38241, at *11-12). "Although actual knowledge is required, the requisite intent and knowledge may be shown by circumstantial evidence." Id. (quoting Sierra Enters., 264 F. Supp. 3d at 840) (internal quotations omitted).

In his post-trial brief, Grayiel argues that AIO, Anastas, and Teema provided substantial assistance to the fraud perpetrated by Twist.¹⁵ [R. 282-1, pp. 69-75].

15 The Court does not agree with AIO and Anastas that the intracorporate conspiracy doctrine bars Grayiel from simultaneously arguing that Anastas aided and abetted and/or conspired with Twist to carry out the fraud and that AIO was an alter ego of Twist, for veil piercing purposes. See [R. 280, pp. 35-36 ("Thus, if Mr. Twist was a part of AIO, there is no cause of action for aiding and abetting or civil conspiracy under Kentucky law. Conversely, if Mr. Twist is not a part of AIO, then there is no basis for piercing the corporate veil or any alter ego theory.")]. The intracorporate conspiracy doctrine provides that "a corporation cannot conspire with its employees, and its employees, when acting within the scope of their employment, cannot conspire among themselves." Cowing v. Commare, 499 S.W.3d 291, 294 (Ky. Ct. App. 2016). Notably, this doctrine "originated in the antitrust context" and it often only applies in related contexts, or to employment discrimination claims. See id. at 294-95. AIO and Anastas point to no authority supporting the idea that the intracorporate conspiracy doctrine would bar such claims when the existence of the company itself serves to further the conspiracy to defraud. Further, although Twist controlled AIO, he was not "an employee" of the company, and his actions were not "within the scope of [his] employment," but rather sought to further his own fraudulent agenda. See Johnson v. Hills & Dales Gen. Hosp., 40 F.3d 837, 840 (6th Cir. 1994) ("The intracorporate conspiracy doctrine, if applied too broadly, could immunize all private conspiracies from redress where the actors coincidentally were employees of the same company. Aware of this possibility, courts have created a 'scope of employment' exception that recognizes a distinction between collaborative acts done in pursuit of an employer's business and private acts done by persons who happen to work at the same place.").

Accordingly, Grayiel's theory falls under § 876(b).¹⁶. Grayiel first argues that AIO and Anastas substantially assisted Twist in perpetrating a fraud on the public and his creditors by transferring the Natural Gas Assets to AIO through the Agreed Judgment, shielding them from Twist's creditors, and yet allowing Twist to retain control of the wells and associated revenues. Id. at 70. He also argues that Teema substantially assisted Twist's scheme by working with Twist to fraudulently transfer assets into Second Blue Light, essentially sliding into Twist's shoes after his death, to continue to shield the Natural Gas Assets from Twist's creditors. Id. at 74-75. The Court agrees.

16 Although Grayiel does not directly argue this point, the Court notes that AIO, Anastas, and Teema are likely also liable for doing "a tortious act in concert with [another] or pursuant to a common design with him," under § 876(a). The facts presented demonstrate that AIO, Anastas, Teema, and Twist acted in accordance with an agreement to "accomplish a particular result;" defrauding Twist's creditors. Restatement (Second) of Torts, § 876 cmt. on Clause (a); see infra Section II(b)(iv).

Anastas, acting through AIO, knew that Twist had other creditors seeking to recover on the Natural Gas Assets and substantially assisted Twist in defrauding those other creditors by shielding the assets. First, Anastas set up AIO, but, as exhaustively explained herein, Twist exerted substantial control and oversight over AIO. Further, Anastas allowed Twist to direct the lawyers in drafting the AIO Complaint, Agreed Judgment, and generally calling the shots. At the time, Anastas knew Twist was being hounded by creditors. Anastas testified on direct that Twist told him he "was worried somebody might be after him." [R. 264, 118:14-15]; see also [R. 262, 91:8-20]. And, importantly, in the course of explaining his fantastic narrative of his relationship with Twist, Anastas testified that almost immediately after making a loan to Twist's entities in 2005, he became suspicious of Twist himself, stating "I felt like I was—it was like a little bit of a Ponzi scheme. And I talked to a few people around me, and they somewhat agreed with that feeling." [R. 264, 116:20-117:8] (emphasis added). Twist communicated the urgency of his financial situation to Anastas in an email, telling Anastas that "time [was] of the essence" in filing the

AIO Complaint, clearly implying Twist's creditors were closing in. See [Pl. Ex. 58]. Anastas all but admits his knowledge in an October 5, 2005 email sent by Anastas to Twist and Fleu, allowing for pre-signed releases "[t]o accommodate [Twist] so that if he wanted to hock his assets (that I have not financed) he could do so" and so that Twist could "file this release if [he chose] to raise additional financing." [JX28]. This email plainly demonstrates that Anastas took assets never intended to secure AIO's loan, but rather to shield those assets from Twist's mounting creditors.

Finally, on June 29, 2012, Anastas sent Twist an email requesting Twist's comments on the proposed settlement agreement between AIO and Thomas Martin. [R. 218, p. 10, ¶ 80]; [JX60]. In the email, Anastas stated: "Martin, Can you please review the attached settlement agreement with Mr. Martin and make sure that everything looks in order. Please type any changes on the document and email it back to me." [JX60]. This clearly demonstrates Anastas's knowledge of Twist's breach of duty to his creditors.

Additionally, Anastas's perjury in the Martin Litigation illustrates how he assisted Twist's fraud. To make the Agreed Judgment appear legitimate, Anastas perjured himself in the Martin litigation, falsely claiming he loaned over $1,000,000, and lying about AIO's relationship with 530 West Main and Twist's involvement with AIO. When asked why he lied, Anastas provided no explanation. He merely stated, "I don't know. I mean, I can't tell you why" and "[m]aybe I had a lapse in memory." [R. 262, 74:4-6, 80:2]. He did not deny that he lied to give the impression that the Agreed Judgment was appropriate:

Q. I mean, but there must have been a reason why you [lied under oath], though, right?

A. Yeah. I don't know. I mean, I can't tell you why.

Q. Was it to give an impression that the agreed judgment was appropriate?

A. I can't tell you why I did it. I don't remember what was in my mind. I don't remember what was going on in my mind.

[...]

Q. So you don't deny that it gave—it could give that impression; that the agreed judgment was appropriate?

A. I absolutely don't deny that.

Q. Do you deny that it was the impression that you sought to convey?

A. I don't remember what was in my mind and why I lied.

Q. Just to be clear—but you don't deny that it was the impression that you wanted to convey?

A. I don't remember why I lied.

Id. at 74:4-10, 14-22. Anastas's intention is apparent, and the effect of his perjury was to assist Twist in the fraud. Finally, Anastas provided the ultimate assistance by, post-Agreed Judgment, handing off control and revenues from the Natural Gas Assets to Twist through the 530/AIO Operating Agreement. The evidence demonstrates that Anastas both knew of and substantially assisted Twist in his tortious conduct. See Neblett, 325 F. Supp. 3d at 807 ("Although actual knowledge is required, the requisite intent and knowledge may be shown by circumstantial evidence.").

The Court also finds that Teema knew she was assisting with the second phase of Twist's fraud to effectively continue the business of Twist and First Blue Light through Second Blue Light. At the time Teema and Twist formed Second Blue Light, Twist had already been criminally indicted. [JX55 (Indictment dated Feb. 7, 2012); JX61 (Articles of Organization for Second Blue Light dated Oct. 1,

2012)]. Grayiel sued Twist about four years before Second Blue Light was formed. [JX38 (Grayiel Complaint dated Nov. 17, 2008)]. Though Second Blue Light was in Teema's name, Twist controlled the entity till his death. While she denied knowledge of Twist's creditors and his federal indictment, her testimony was not credible on this point. It is simply too far-fetched to believe that an individual living with Twist, giving birth to his child, and interacting with him daily, would not know of his criminal charges or serious civil cases pending against him. Moreover, Teema was intimately involved with the Twist Entities, paying both household and business bills, and she admitted being copied on many of Twist's email correspondences, including an email from Twist's criminal defense attorney Scott Cox in November 2012. See [Pl. Ex. 123]; see also Elite Labor Servs. v. Pcijvky, Inc., No. 1:17-CV-00056-GNS-HBB, 2021 WL 707656, at *7, 2021 U.S. Dist. LEXIS 33420, at *18 (W.D. Ky. Feb. 23, 2021) (quoting SAAP Energy, Inc. v. Bell, No. 1:12-CV-00098-JRW-HBB, 2020 WL 5044145 at *10, 2020 U.S. Dist. LEXIS 155012 at *10 (W.D. Ky. 2020)) (denying summary judgment on a plaintiff's civil conspiracy claims, and stating that "[b]ecause [Kaz] was intimately involved in [Chau's] transactions, he likely knew about the fraudulent nature of these transactions."). Teema also repeatedly asserted an entitlement to Twist's assets, even above any of his creditors, as an "inheritance," but did not provide any reasoning why that inheritance could not be accomplished through traditional estate planning measures. In short, Teema's role and use of Second Blue Light helped Twist evade creditors while also ensuring that, given his serious legal and health issues, the Natural Gas Assets would provide her and her child a healthy income while leaving Twist's creditors with an empty bag. Teema substantially assisted Twist in defrauding his creditors by forming Second Blue Light, allowing him complete control of the entity till his death, succeeding to the Right of Way assets for no consideration, and continuing the fraud with Anastas and AIO through the AIO/SBL Operating Agreement, siphoning off half the revenues.

iv. Civil Conspiracy as to AIO, Anastas, and Teema (Count VI)

The elements of civil conspiracy under Kentucky law are "1) an agreement or combination, 2) that is unlawful or corrupt, 3) entered into by two or more persons, 4) for the purpose of accomplishing an unlawful goal." Ellington v. Fed. Home Loan Mortg. Corp., 13 F. Supp. 3d 723, 730 (W.D. Ky. 2014) (citation omitted) (citing Brown v. Student Loan Xpress, Inc., No. 5:11-CV-00090-TBR, 2012 WL 1029467, *10 (W.D. Ky. Mar. 26, 2012)). "Importantly, however, civil conspiracy is not a free-standing claim; rather, it merely provides a theory under which a plaintiff may recover from multiple defendants for an underlying tort." Stonestreet Farm v. Buckram Oak Holdings, Nos. 2008-CA-002389-MR, 2009-CA-000026-MR., 2010 WL 2696278, at *13 (Ky. Ct. App. July 9, 2010) (citing Davenport's Adm'x v. Crummies Creek Coal Co., 299 Ky. 79, 184 S.W.2d 887, 888 (1945)).

"[I]n order to prevail on a claim of civil conspiracy, the proponent must show an unlawful/corrupt combination or agreement between the alleged conspirators to do by some concerted action an unlawful act." James v. Wilson, 95 S.W.3d 875, 997 (Ky. Ct. App. 2002) (emphasis added) (citing Montgomery v. Milam, 910 S.W.2d 237, 239 (Ky. 1995)). An agreement to pursue an unlawful aim alone is not adequate to prove civil conspiracy, rather the charged party must undertake some "concerted action" to consummate

the conspiracy. See Powell v. Tosh, 929 F. Supp. 2d 691, 715 (W.D. Ky. 2013); Wallace v. Midwest Fin. & Mortg. Servs., 728 F. Supp. 2d 906, 925 (E.D. Ky. 2010); Fastenal Co. v. Crawford, 609 F. Supp. 2d 650, 662-63 (E.D. Ky. 2009). To show concerted action, a "plaintiff must show Defendants were either 'directly involved with the tortious act, [knew] of the tortious act and provide[d] substantial assistance or encouragement with respect thereto, or provide[d] substantial assistance to another who achieves a tortious result, while his own acts separately constitute a breach of duty to the third person who was harmed." Elite Labor Servs., 2021 WL 707656, at *6, 2021 U.S. Dist. LEXIS 33420, at *18. However, "mere negligence [on the part of the defendants] is not sufficient to support a claim for civil conspiracy." Ford v. Batts, No. 5:17-CV-94-TBR, 2019 WL 4126076 at *5, 2019 Dist. LEXIS 147385 at *14 (W.D. Ky. Aug. 29, 2019) (quoting Peoples Bank of Northern Kentucky, Inc. v. Crowe Chizek and Co. LLC, 277 S.W.3d 255, 261 (Ky.App.2008).

Wallace v. Midwest Fin. & Mortg. Servs., 714 F.3d 414 (6th Cir. 2013) provides guidance interpreting Kentucky civil conspiracy. The Wallace plaintiff alleged a civil conspiracy that seemed "to consist of two distinct subparts that bind the defendants together[.]" Id. at 423. The first subpart involved "the alleged agreement between Midwest Financial, Schlueter, Bates, Soard, and Brock to manufacture the fraudulent appraisals" and the second subpart involved "the alleged agreement between Midwest Financial, Schlueter, Bates, and MortgageIT providing for 'unlawful kickbacks' in the form of yield spread premiums." Id. The Sixth Circuit found that, as to the second subpart, plaintiff failed to demonstrate that MortgageIT conspired with Midwest Financial to commit an unlawful act. Id. Specifically, the Sixth Circuit found that the theory that MortgageIT knew of the appraisal-based scheme based on its review of the application materials and agreed to the conspiracy's overarching objective simply by paying yield spread premiums was "too attenuated to raise a sufficient question of fact." Id.

Here, the Court has already determined that AIO, Anastas, and Teema aided and abetted Twist's "unlawful" and "corrupt" act of fraud, satisfying the "tortious act" element. See supra Section II(b)(iii). Like in Wallace, Grayiel essentially alleges two subparts¹⁷ to the conspiracy to defraud Twist's creditors that coalesced upon the execution of the AIO/SBL Operating Agreement. First, Grayiel alleges a conspiracy between Twist, AIO, and Anastas¹⁸ "to ensure that Twist would

17 The Court emphasizes that although Grayiel alleges two subparts to the conspiracy, these subparts were not themselves separate and distinct conspiracies. Rather, they were two means of achieving the overarching goal of defrauding Twist's creditors.

18 Contrary to AIO and Anastas's assertions in their post-trial filing, Armstrong's testimony was properly admitted. First, AIO/Anastas fail to direct the Court to any specific testimony being challenged, so any objection is overruled as insufficiently developed. Arguing that AIO/Anastas and Armstrong were not co-conspirators, they appear to claim that Armstrong's testimony was inadmissible because there is no direct link between the fraud involving the Armstrong Complaint and the conspiracy between Twist and AIO/Anastas. See [R. 280, pp. 39-40] ("It makes it doubtful that Mr. Armstrong was a co-conspirator with AIO/Anastas since they were not acting in concert pursuant to a common design.... Lonny Armstrong was not part of the Agreed Judgment nor did [Anastas]/AIO have a role in the proposed Armstrong suit. Thus, his statements were not those of a co-conspirator and should not have been admitted"). This argument fails for numerous reasons. First, Lonny Armstrong testified at trial to numerous facts and circumstances for which he had actual, direct knowledge. Second, there is no requirement that Armstrong be a co-conspirator with Anastas to offer admissible testimony. To the extent AIO/Anastas target Armstrong's testimony concerning co-conspirator statements made by Twist to Armstrong related to the Armstrong Complaint, such statements are admissible under Fed. R. Evid. 801(d)(2)(E). That rule requires that the statement: (1) be "offered against an opposing party"; (2) be "made by the party's co-conspirator; and (3) during and in furtherance of the conspiracy. Here, Armstrong's testimony is being offered by Grayiel against Anastas, an opposing party. Armstrong testified to statements made by Twist, a deceased declarant, who the Court has found was Anastas's co-conspirator. Lastly, Twist's statements were made in furtherance of the overarching conspiracy, which was to defraud creditors through a "friendly creditor" who ties up any available assets. Moreover, this scheme originated with the Armstrong Complaint, and Armstrong remained involved with the conspiracy at the time of AIO's formation. Armstrong formed Exploration Escrow to keep AIO's loans separate from the other Twist Entities, leaving no doubt that Twist, Armstrong, and Anastas were involved in one overarching conspiracy. [R. 265, 85:17-86:21]. Even if Anastas had not yet joined the conspiracy at the time of the Armstrong Complaint, Armstrong's testimony is admissible against Anastas because Anastas's joinder served to adopt previous statements by his coconspirators. See United States v. Arrellano, 757 F.3d 623 (7th Cir. 2014) ("When a person joins a conspiracy[,] statements previously made by conspirators may be admitted against him as his joinder adopted the previous acts and statements of the conspiracy."); United States v. Adamo, 882 F.2d 1218, 1230-31 (7th Cir. 1989) ("[I]t is well established that a defendant who joins a conspiracy [takes] the conspiracy as he found it. When he joined and actively participated in it he adopted the previous acts and declarations of his fellow co-conspirators.") (alteration in original) (internal citation and quotation marks omitted); United States v. Handlin, 366 F.3d 584, 590-91 (7th Cir. 2004) (affirming district court's admission of coconspirator statements under Rule 801(d)(2)(E) concerning certain arsons defendant was not part of because the court found a "single, overarching conspiracy" to commit arsons). Despite Anastas's assertion otherwise, he, Twist, and Armstrong did act in concert pursuant to a common design—to defraud creditors by whatever means necessary—and the Court stands by its Enright findings regarding Armstrong's testimony. Finally, even if the Court accepted Anastas's underdeveloped argument that these were two wholly separate conspiracies, Armstrong's testimony would nevertheless be admissible under Rule 803(3), which excludes from the hearsay prohibition statements of a declarant's "then-existing state of mind (such as motive, intent, or plan) or emotional, sensory, or physical condition (such as mental feeling, pain, or bodily health)[.]" Fed. R. Evid. 803(3). Twist's motive, intent, and plan—and Armstrong's and Anastas's understanding thereof—is directly at issue in this case. Armstrong's testimony was therefore admissible under Rule 803(3), in addition to Rule 801(d)(2)(E).

retain control over the Natural Gas Assets, and profit handsomely at the expense of [Grayiel] and Twist's other creditors." [R. 282-1, p. 76]. That conspiracy involved, among other actions, the formation of AIO, the filing of the Agreed Judgment, and the execution of the 530/AIO Operating Agreement. Id. at 76-77. The second subpart to the conspiracy involved Teema and Second Blue Light working with Twist to further shield the Natural Gas Assets from Twist's creditors and to provide an "inheritance" for Teema and their child that could not be attacked by Twist's creditors. See id. at 78. This involved the formation of Second Blue Light, which Twist controlled until his death, connecting the Second Blue Light bank account with other Twist Entities, and the Right of Way Agreement which transferred the right of way assets from First Blue Light to Second Blue Light for no consideration. Later, after Anastas and Teema met at Twist's funeral, they agreed to continue the overarching conspiracy and later executed the AIO/SBL Operating Agreement to ensure that no rights to or revenues from the Natural Gas Assets would be accessible by creditors through Twist's estate. Through the AIO/SBL Operating

Agreement, Teema "essentially stepped in Twist's shoes as the recipient of the ill-gotten profits of the Natural Gas Assets." Id. at 78.

Presently, Anastas/AIO and Teema/Second Blue Light continue to profit off assets that would have been in the Twist's estate—and therefore recoverable by Twist's creditors—if not for the fraudulent conveyances to AIO and Second Blue Light. What is more, the AIO/Second Blue Light Operating Agreement, as explained previously, served no logical purpose for AIO other than furthering the conspiracy. See supra Section II(b)(i)(A)(2). AIO entered into the AIO/SBL Operating Agreement where, once again, Anastas agreed to split revenues 50-50% (from assets he owned 100%) and hand off the Natural Gas Assets to Teema once he is repaid his original $250,000 plus interest. Additionally, Anastas failed to explain why he would choose to enter into business with Teema, who admitted to having little to no experience in gas well operations, rather than finding someone completely unrelated to Twist who could operate the wells. See [R. 266, 117:17-24]. He testified that he had a "bad taste" in his mouth from his dealings with Twist, yet he replaced Twist with Twist's former fiancé.

As explained, the work involved in "operating" the wells was minimal and could have been done by almost anyone with minimal computer/ministerial skills for less pay, allowing AIO/Anastas to recoup his investment far faster. Her work "operating" the wells only takes about two to three hours each month cutting checks from her home computer, but the AIO/SBL Operating Agreement paid Teema the equivalent of $900/hour. [R. 266, 117:19-24]; [R. 267, 58:19-24, 59:2-4]. Anastas and Teema acted together to continue the unlawful, fraudulent goal originally hatched by Twist and Anastas to shield Twist's assets from Twist's creditors while allowing Twist and those close to him to profit.

Further, the only attorney present at the "negotiation" between AIO and Second Blue Light was Bryan Dillon. [R. 267, 23:5-6]. Teema explained that she and Anastas reached the deal "with the help of Mr. Dillon," that Anastas just wanted his "$250,000 back plus interest," and that if she paid that off, he would transfer the assets to her. Id. at 23:12-15. Notably, the AIO/SBL Operating Agreement itself provides that Second Blue Light would "continue" to operate the Natural Gas Assets, suggesting that Second Blue Light was entrenched in the Twist schemes prior to the execution of the AIO/SBL Operating Agreement, and that the agreement was just a continuation of the existing schemes. Unlike the theory presented in Wallace, the argument that AIO and Teema knew of the conspiracy and acted to further its aims is not attenuated, but rather the obvious conclusion from the evidence presented. See 714 F.3d at 423. In sum, the AIO/SBL Operating Agreement does not comport with normal business practices, but rather served to further the aims of the overarching conspiracy—to keep the Natural Gas Assets accessible to Twist's family and those close to him but inaccessible to his creditors. The Court finds that Grayiel has proven the existence of a decades-long conspiracy to defraud Twist's creditors.

v. Alter Ego/Veil Piercing (Count IX)

Through this claim, unlike the claims discussed above that allege individual liability, Grayiel seeks to recover directly from Anastas and AIO on his judgment against the Twist estate. To accomplish this, Grayiel asks the Court to find AIO liable for Twist's debts as an alter ego of Twist, then pierce the corporate veil to hold Anastas individually liable for the judgment against Twist. The Court must first undertake a choice of law analysis to determine which state's laws apply. "A federal court acting pursuant to its diversity jurisdiction must apply the choice of law rules of the state in which it sits." DuraCore Pty Ltd. v. Applied Concrete Tech., Inc., No. 5:13-CV-184-TBR, 2016 WL 3620793 at *8, 2016 U.S. Dist. LEXIS 84503 at *27 (W.D. Ky. June 28, 2016) (citing Standard Fire Ins. Co. v. Ford Motor Co., 723 F.3d 690, 692 (6th Cir. 2013)). Accordingly, this Court looks to Kentucky choice of law rules. In Howell Contractors, Inc. v. Berling, 383 S.W.3d 465 (Ky. Ct. App. 2012), the Kentucky Court of Appeals applied the choice of law rule within the Restatement (Second) Conflicts of Laws § 307, which states that "[t]he local law of the state of incorporation will be applied to determine the existence and extent of a shareholder's liability ... to its creditors for corporate debts[.]" Id. at 467; see also EiA Props., LLC v. Fenwick Equestrian, LLC, No. 5:14-CV-328-REW, 2015 WL 5698540 at *4, 2015 U.S. Dist. LEXIS 129767 at *15 (E.D. Ky. Sept. 28, 2015) (applying South Carolina law to a reverse veil piercing claim because it "honor[ed] the letter and intent of Kentucky law—to apply the law of the state of organization to determine 'the rights, duties and obligations of the Fenwick entities.'"); Olbers v. Thompson, No. 3:16-cv-521-DJH, 2017 WL 3671328 at *8, 2017 U.S. Dist. LEXIS 136854 at *21 (W.D. Ky. Aug. 25, 2017) (explaining that "[w]ith respect to piercing the corporate veil, Kentucky courts follow the Restatement (Second) of Conflict of Laws § 307 (1971)"); DuraCore, 2016 WL 3620793, at *8, 2016 U.S. Dist. LEXIS 84503, at *27 (same). The Howell court found that "[b]y analogy to corporate law, the rights, duties and obligations of an Ohio LLC and its members are governed by Ohio law." Id. Here, AIO is a limited liability company formed under the laws of Delaware. [R. 218, p. 2, ¶ 5]. Therefore, Delaware law governs this issue.¹⁹

19 AIO and Anastas argue, in their Response, that Kentucky law should govern because Kentucky has the most significant relationship as set forth in Restatement (Second) of Conflict of Laws § 302. [R. 285, p. 12]. While Kentucky courts often analyze choice of law questions by determining which state has the most significant relationship, veil piercing questions are governed by the state of incorporation. See EiA Props., 2015 WL 5698540, at *4, 2015 U.S. Dist. LEXIS 129767, at *15. AIO and Anastas cite Pro Tanks Leasing v. Midwest Propane & Refined Fuels, LLC, 988 F. Supp. 2d 772 (W.D. Ky. 2013) to support the proposition that Kentucky law should apply to this veil piercing claim. However, in that case, the Court did not carry out a choice of law analysis, but rather cursorily reasoned that, under Erie, a federal court should apply the substantive law of the state in which it sits. Id. at 782. The Pro Tanks court did not discuss Kentucky's choice of law rules in arriving at its conclusion and, therefore, does not persuade the Court to ignore more recent case law citing Kentucky's choice of law principles. See id. Further, while the citizenship of the members of an LLC is relevant for diversity purposes, it does not change the Court's analysis as to which state's laws apply to the veil piercing theory of liability. See [R. 285, p. 11].

To hold AIO liable for Twist's debts, this Court would have to reverse pierce the corporate veil. Grayiel argues that his "alter ego theory of liability" does not require reverse piercing the corporate veil, but the Court is unconvinced. See [R. 286, p. 2]. Upon an examination of relevant case law, it appears "alter ego" is a theory to justify piercing the corporate veil, and the two terms are often used interchangeably. See Mobil Oil Corp. v. Linear Films, Inc., 718 F. Supp. 260, 266 (D. Del. 1989) ("Plaintiff's so-called 'alter-ego theory' is often used interchangeably with such expressions as 'disregarding the corporate entity' and 'piercing the corporate veil.'");

Winner Acceptance Corp. v. Return on Cap. Corp., No. 3088-VCP, 2008 WL 5352063, at *5 n. 32, 2008 Del. Ch. LEXIS 186, at *16 n.32 (Del. Ch. Dec. 23, 2008) ("The terms 'alter ego theory' and 'piercing the corporate veil' are used interchangeably in Delaware law.'"); Trevino v. Merscorp, Inc., 583 F. Supp. 2d 521, 528 (D. Del. 2008) ("[I]n order to state a claim for piercing the corporate veil under an alter ego theory, they must show (1) that the corporation and its shareholders operated as a single economic entity, and (2) that an overall element of injustice or unfairness is present."). Grayiel asserts that he is not seeking to pierce the corporate veil because Twist was not a direct shareholder of AIO. However, it does not appear, and the parties have provided no case law to support, that the doctrine of veil piercing is so limited as to preclude the remedy when an individual intentionally forms an entity in someone else's name yet retains full control and possession. W. Coast Opportunity Fund, LLC v. Credit Suisse Sec. (USA), LLC, 12 A.3d 1128, 1132 (Del. 2010) ("The alter ego theory applies when there is such unity between a corporation and an individual that the separateness of the corporation has ceased. Under the alter ego doctrine, when a corporation is the mere instrumentality or business conduit of another corporation or person, the corporate form may be disregarded."); Novartis Pharms. Corp. v. Handa Neuroscience, LLC, No. 21-645-LPS, 2022 WL 610771, 2022 U.S. Dist. LEXIS 35655 (D. Del. Mar. 1, 2022) ("The test used in the Third Circuit to determine if veil piercing is warranted is often referred to as the alter ego test. Pursuant to the applicable analysis, courts will pierce the corporate veil (i.e., disregard the corporate form) to 'prevent fraud, illegality, or injustice, when recognition of the corporate entity would defeat public policy[.]"); In re Sunstates Corp. S'holder Litig., 788 A.2d 530, 534 (Del. Ch. 2001) (quoting Wallace v. Wood, 752 A.2d 1175, 1184 (Del. Ch. 1999)) ("[T]o pierce the corporate veil based on an agency or 'alter ego' theory, 'the corporation must be a sham and exist for no other purpose than as a vehicle for fraud.'"). As such, the Court finds that the "alter ego" theory espoused by Grayiel is essentially a veil piercing claim.

"Traditional veil piercing permits a court to render an individual liable in a judgment against a business entity in which the individual has an interest, when the entity 'is in fact a mere instrumentality or alter ego of [the individual].'" Sky Cable, LLC v. DIRECTV, Inc., 886 F.3d 375, 385 (4th Cir. 2018) (citing NetJets Aviation, Inc. v. LHC Communs., LLC, 537 F.3d 168, 176 (2d Cir. 2008)). "Conversely, reverse veil piercing attaches liability to the entity for a judgment against the individuals who hold an ownership interest in that entity." Id. (emphasis in original). As the Delaware Court of Chancery recently explained, "[a]t its most basic level, reverse veil-piercing involves the imposition of liability on a business organization for the liabilities of its owners." Manichaean Cap., LLC v. Exela Techs., Inc., 251 A.3d 694, 710 (Del. Ch. 2021) (citing Sky Cable, 886 F.3d at 385). There are two variants of the reverse veil-piercing doctrine: insider reverse veil-piercing, in which "the controlling [member] urges the court to disregard the corporate entity that otherwise separates the [member] from the corporation" and outsider reverse veil-piercing, in which "an outside third party, frequently a creditor, urges a court to render a company liable on a judgment against its member." Id. (quoting Sky Cable, 886 F.3d at 385).

"When resolving an issue of state law, 'we look to the final decisions of that state's highest court, and if there is no decision directly on point, then we must

make an Erie guess to determine how that court, if presented with the issue, would resolve it.'" In re Fair Fin. Co., 834 F.3d at 671 (quoting Conlin v. Mortg. Elec. Registration Sys., Inc., 714 F.3d 355, 358-59 (6th Cir. 2013)). Importantly, the Delaware Supreme Court has not expressly adopted or rejected the theory of reverse veil piercing.²⁰ Manichaean Cap., 251 A.3d at 710 ("The question of whether and to what extent courts of Delaware should allow so-called reverse veil-piercing is one of first impression ... our courts have yet to accept or deny the claim."). However, in Manichaean Capital, the Delaware Court of Chancery provided recent guidance on how the doctrine fares under Delaware law. See id. The court began by explaining that courts that have refused to allow reverse veil piercing relied primarily on concern for innocent shareholders and third-party creditors. Id. at 711. The Manichaean Capital court reasoned that "[t]he risks that reverse veil-piercing may be used as a blunt instrument to harm innocent parties, and to disrupt the expectations of arms-length bargaining, while real, do not, in my view, justify the rejection of reverse veil-piercing outright. Rather, the recognition of the risks creates an opportunity to manage them, and to do so in a manner that serves the interest of equity." Id. at 712. The court further explained that:

20 The Court notes that this issue would be similarly unclear under Kentucky law, as the Kentucky Supreme Court also has not approved of or rejected the reverse corporate veil piercing theory. In re Howland, 516 B.R. 163, 167 (Bankr. E.D. Ky. 2014); see also Slone v. Quest Energy Corp., No. 7:21-CV-00101-REW-EBA, 2022 WL 2402656, at *4 n.2 (E.D. Ky. May 4, 2022).

Only in cases alleging egregious facts, coupled with the lack of real and substantial prejudice to third parties, should the court even consider utilizing the reverse veil-piercing doctrine. With prejudice to third-parties in mind and a framework designed to deal with such concerns, however, reverse veil-piercing can act as a deterrent to owners of companies, particularly those that are closely held, from shuffling their assets among their controlled entities with the express purpose of avoiding a judgment.

Id. at 714. The court clarified that such a test should only be utilized in cases involving outsider reverse veil piercing, not insider reverse veil piercing. Id. Finally, the Court laid out the proper inquiry for courts analyzing reverse veil piercing claims under Delaware law:

The natural starting place when reviewing a claim for reverse veil-piercing are the traditional factors Delaware courts consider when reviewing a traditional veil-piercing claim—the so-called "alter ego" factors that include insolvency, undercapitalization, commingling of corporate and personal funds, the absence of corporate formalities, and whether the subsidiary is simply a façade for the owner. The court should then ask whether the owner is utilizing the corporate form to perpetuate fraud or an injustice ... Fundamentally, reverse veil-piercing, like traditional veil-piercing, is rooted in equity, and the court must consider all relevant factors ... to reach an equitable result.

Id. at 715.

This Court holds that the egregious facts of this case, coupled with the lack of any impact on innocent third parties, justifies reverse piercing the corporate veil to hold AIO liable for Grayiel's West Virginia state court judgment against Twist's estate. See Manichaean Cap., 251 A.3d at 714. First, this claim involves outsider reverse veil piercing, because an outside third party (Grayiel) is

seeking to render a company (AIO) liable for a judgment against the individual controlling the company—Twist. See id. at 710. In Manichaean Capital, the Delaware Court of Chancery suggested that outsider reverse veil piercing is less problematic than insider reverse veil piercing, specifically noting that its "carefully circumscribed reverse veil-piercing rule" should only apply to outsider reverse veil piercing claims, not insider claims. Id. at 714. See Sky Cable, 886 F.3d at 389 ("The district court therefore correctly held that under Delaware law, outsider reverse piercing of an LLC is warranted to render an LLC a co-judgment debtor when the LLC is the alter ego of its sole member.").

Second, the factors that Delaware courts consider in reviewing traditional veil-piercing claims support piercing the corporate veil in this case. See id. at 714. These factors include: "(1) whether the company was adequately capitalized for the undertaking; (2) whether the company was solvent; (3) whether corporate formalities were observed; (4) whether the dominant shareholder siphoned company funds; and (5) whether, in general, the company simply functioned as a façade for the dominant shareholder." EBG Holdings LLC v. Vredezicht's Gravenhage 108 B.V., No. 3184-VCP, 2008 WL 4057745, at *12, 2008 Del. Ch. LEXIS 127 at *49 (Del Ch. Sept. 2, 2008) (quoting Pauley Petroleum, Inc. v. Cont'l Oil Co., 239 A.2d 629, 633 (Del. 1968)). "The decision to disregard the corporate entity generally results not from a single factor, but rather some combination of them, and an overall element of injustice or unfairness must always be present, as well." Doberstein v. G-P Indus., No. 9995-VCP, 2015 WL 6606484 at *4, 2015 Del. Ch. LEXIS 275 at *12 (Del. Ch. Oct. 30, 2015) (quoting MicroStrategy Inc. v. Acacia Research Corp., No. 5735-VCP, 2010 WL 5550455 at *, 2010 Del. Ch. LEXIS 254 at *46 (Del. Ch. Dec. 30, 2010)).

The first, third, fourth, and fifth factors above are also implicated here. As to the first factor, testimony elicited at trial demonstrates that shortly after AIO's formation and the initial AIO Loan to the Twist Entities, Anastas had spent much of his available cash opening several liquor stores in quick succession. [R. 265, 8:6-9:8]. While he claimed he had the capacity to loan $2,000,000 at the time he signed the AIO Note in June 2005, Anastas explained that his cash depleted "quickly after that point" as he opened five liquor stores from 2005-2009, spending approximately $750,000 to open each store. Id. at 8:9-12, 8:22-9:8. This testimony suggests that AIO was essentially undercapitalized from the outset, as Anastas was depleting his available cash by opening three liquor stores within a year of AIO's formation. See id. As to the third factor, it is apparent that AIO failed to observe basic corporate formalities. In fact, AIO did not perform one of the most basic tasks of a new company—it never finalized an operating agreement. [R. 264, 131:7-8]; see also [JX102].²¹ AIO never had any employees, and Anastas testified that the sole purpose of AIO was to loan money to Twist. [R. 264, 130:18-23]. Additionally, as noted by Grayiel, it does not appear that AIO maintained any corporate records, and "does not seem to have ever issued written resolutions authorizing

21 In addition, as discussed supra Section I(b)(iii), when the Pedley law firm drafted an operating agreement for AIO in July of 2005, Offshore Energy, LLC, a Twist entity, was listed as a member of AIO. [R. 218, p. 4, ¶¶ 26-29]; [JX102, p. 36]; [JX102]. Similarly, the April 27, 2012 Reserve Oil Letter of Intent [JX57] regarding "Purchase of Certain Assets of AIO LLC and Affiliates" was addressed to Twist and named Twist as an owner and shareholder of AIO. See supra Section I(c)(i).

substantial events in its history, including the filings of the AIO Complaint, the execution of the Agreed Judgment, and the execution of the 530/AIO Operating Agreement." [R. 282-1, pp. 84, 86]. As to the fourth factor, it is likely that Twist siphoned funds owed to AIO, considering Anastas purportedly received no well revenues from the period between the execution of the Agreed Judgment and Twist's death. Finally, as to the fifth factor, AIO plainly functioned as a façade of Twist. The evidence presented at trial demonstrated that Twist controlled all aspects of AIO during his lifetime. He emailed Anastas reminding him to provide some corporate filings to the state of Delaware to keep AIO in good standing. Twist controlled the Martin Litigation on behalf of AIO, to the point where Anastas, the supposed sole owner of AIO, did not know AIO was even involved in litigation until years later. And, while all this occurred, Twist profited off the well revenues in the same fashion as before the Agreed Judgment. AIO was simply Twist's most successful attempt to shield his assets in a shell company.

Third, and perhaps most importantly, refusing to reverse pierce the corporate veil under these facts would be unjust because it would grant Twist's wish to shield his assets from creditors through the use of shell entities. "Fundamentally, reverse veil-piercing, like traditional veil-piercing, is rooted in equity;" individuals cannot abuse the corporate form to avoid creditors. Manichaean Cap., 251 A.3d at 715. Here, Twist's repeated abuses of the corporate form cannot be overstated. AIO is but one of several entities that Twist conspired to create, shift his assets into, and retain control over. Twist abused the corporate form at every turn, including his use of AIO to shield his assets from creditors, and reverse piercing the corporate veil is necessary to avoid injustice.

Grayiel further asks the Court to pierce the corporate veils of AIO and Advantage Investments to hold Anastas individually liable for the judgment against Twist. The same factors governing traditional veil piercing, discussed above, apply to this issue. See EBG Holdings, 2008 WL 4057745, at *12, 2008 Del. Ch. LEXIS 127, at *49 (listing factors that include "(1) whether the company was adequately capitalized for the undertaking; (2) whether the company was solvent; (3) whether corporate formalities were observed; (4) whether the dominant shareholder siphoned company funds; and (5) whether, in general, the company simply functioned as a façade for the dominant shareholder").

As to Anastas, the same issues with inadequate capitalization and failure to observe corporate formalities, analyzed above as to the reverse piercing claim, counsel in favor of piercing the corporate veils of AIO and Advantage Investments. Further, it appears that Anastas treated the accounts of AIO and Advantage Investments as part and parcel of his own personal funds. When asked whether there was any formal documentation detailing the loan from Advantage Investments to AIO, Anastas testified: "No. I mean, I don't do that because I don't think it's necessary. It's like what's in your left pocket, what's in your right pocket." [R. 264, 128:14-18].

The Court further finds that concerns of equity, which form the foundation for the doctrine of veil piercing, counsel in favor of piercing the corporate veil to reach Anastas. See Mason v. Network of Wilmington, Inc., No. 19434-NC, 2005 WL 1653954, at *3, 2005 Del. Ch. LEXIS 99, at *11 (Del. Ch. July 1, 2005) (quoting Wallace, 752 A.2d at 1184) ("Piercing the corporate veil under the alter ego theory requires that the corporate structure cause fraud or similar

injustice. Effectively, the corporation must be a sham and exist for no other purpose than as a vehicle for fraud."); Paul Elton, LLC v. Rommel Del., LLC, No. 2019-0750-KSJM, 2020 WL 2203708, 2020 Del. Ch. LEXIS 172 (Del Ch. Feb. 4, 2020) ("Although a court considers several factors when determining whether to pierce the corporate veil, courts have often articulated the elements of a veil piercing as requiring 'an overall element of injustice or unfairness.'"); Gadsden v. Home Pres. Co., No. 18888, 2004 WL 485468, 2004 Del. Ch. LEXIS 14 (Del. Ch. Feb. 20, 2004) ("A court of equity will disregard the separate legal existence of a corporation where it is shown that the corporate form has been used to perpetrate a fraud or similar injustice.").

As discussed throughout this entire opinion, Anastas and Twist collectively utilized AIO to evade Twist's creditors. For the same reasons discussed above, the corporate existence of AIO must be disregarded because it functioned to perpetrate a fraud on Twist's creditors. And the corporate existence of Advantage Investments should likewise be disregarded because Advantage Investments was merely the vehicle through which Anastas funded AIO.²² Advantage Investments is a Kentucky limited liability company, see [JX1], so, unlike with AIO, Kentucky law likely governs whether to pierce the corporate veil of Advantage Investments. See Howell Contractors, Inc., 383 S.W.3d at 467. Kentucky law looks to similar factors as Delaware law in analyzing whether to pierce the corporate veil. The Kentucky Supreme Court boiled these considerations down to two dispositive elements: (1) "domination of the corporation resulting in a loss of corporate separateness" and (2) "circumstances under which continued recognition of the corporation would sanction fraud or promote injustice." Inter-Tel Techs., Inc. v. Linn Station Props., LLC, 360 S.W.3d 152, 165 (Ky. 2012). Importantly, in Inter-Tel, the Kentucky Supreme Court reasoned that parent and grandparent entities may be viewed collectively for veil piercing purposes, stating that "[t]here is ... authority for piercing the veil of any related entity where the facts justify it." Id. at 166. The court further explained that "[c]ourts should not pierce corporate veils lightly but neither should they hesitate in those cases where the circumstances are extreme enough to justify disregard of an allegedly separate corporate entity." Id. at 168. Finally, the Kentucky Supreme Court made plain that:

22 Kentucky law generally looks to the same factors as Delaware law in analyzing this issue: "(1) domination of the corporation resulting in a loss of corporate separateness and (2) circumstances under which continued recognition of the corporation would sanction fraud or promote injustice." Inter-Tel Techs., Inc. v. Linn Station Properties, LLC, 360 S.W.3d 152, 165 (Ky. 2012).

There is no valid basis for precluding a piercing action simply because the claim was not part of the original debt collection suit. In some cases, the creditor may know enough to proceed against all potentially liable parties but, in other instances, it may be appropriate to obtain the judgment first and only when it proves uncollectible then seek relief through veil-piercing litigation.

Id. at 169.

The Court has herein described the plethora of reasons why the circumstances presented in this case are "extreme" enough to justify piercing the corporate veils of the two entities that Anastas and Twist utilized to perpetuate fraud—AIO and Advantage Investments. Advantage Investments was, at all relevant times, solely owned by Anastas, had no employees,

and solely functioned to hold notes issued to other entities affiliated with Anastas, such as AIO. [R. 218, p. 3, ¶¶ 20-21]. As Anastas himself explained, he essentially viewed AIO and Advantage Investments as interchangeable. [R. 264, 128:14-18]. Therefore, "piercing the veil of any related entity" to AIO, such as its sole owner, Advantage Investments, is appropriate. See Inter-Tel, 360 S.W.3d at 166. And, like in Inter-Tel, Grayiel did not forfeit any right to seek veil piercing remedies merely because he failed to seek recovery from AIO, Advantage Investments, or Anastas in his West Virginia state court suit. See id. at 169; see also Estate of Williams v. Estate of Oates, No. 2016-CA-001494-MR, 2018 WL 3954304, at *4, 2018 Ky. App. Unpub. LEXIS 583, at *10 (Ky. Ct. App. Aug. 17, 2018) (finding that piercing the corporate veil "post-judgment is appropriate in certain circumstances.").

AIO and Anastas argue that it is improper for the Court to enforce the West Virginia state court judgments against AIO, Advantage Investments, or Anastas because Grayiel did not prove that he perfected those judgments in Kentucky. However, they fail to cite any law supporting the proposition that a party cannot recover on a judgment through a theory of veil piercing unless he has perfected his judgment in the state of the lawsuit. Rather, the cited statutes appear to provide a vehicle for direct enforcement of a foreign judgment against a judgment debtor. In fact, KRS § 426.975 provides "The right of a judgment creditor to bring an action to enforce his judgment instead of proceeding under KRS 426.950 to 426.975 remains unimpaired." Ky. Rev. Stat. Ann. § 426.975; see also Redondo Constr. Corp. v. United States, 157 F.3d 1060, 1065 n.8 (6th Cir. 1998) ("Although a creditor may still choose to proceed with a civil enforcement action, the UEFJA [Uniform Enforcement of Foreign Judgments Act] provides a much simpler and more expeditious process to achieve the same result."); Nutrition Rich Prods. v. Nutritional Res., Inc., No. 2000-CA-002838-MR, 2003 WL 1339309, at *3, 2003 Ky. App. Unpub. LEXIS 1138, at *7-8 (Ky. Ct. App. Feb 21, 2003) ("The trial court permissibly found that the corporation was a sham, used to subvert public policy and to enable the Ligons to avoid payment of debts due under a valid out-of-state judgment. Under such circumstances, a court may properly pierce the corporate veil in the interest of justice."). Whether Grayiel can recover on the West Virginia state court judgment against AIO, Advantage Investments, and Anastas does not appear to depend on whether the judgment was perfected in Kentucky. The parties may raise properly supported arguments as to any such procedural impediments in subsequent briefing on damages.

Recognizing the corporate structures of AIO and Advantage Investments would sanction fraud and injustice and accomplish the aims of the conspiracy itself—to shield Twist's assets behind shell corporations. The misuse of the corporate form by both Twist and Anastas could not be more apparent. The two men used shell corporations to essentially transfer the Natural Gas Assets from Twist to Anastas to evade Twist's creditors. Therefore, in light of relevant Delaware and Kentucky law and in the interests of equity, the Court finds Anastas personally liable for Grayiel's West Virginia state court judgment against Twist.

III. DAMAGES

Grayiel has provided some evidence on the issue of damages, such as the amount of his investment, but the Court presently lacks specifics concerning issues such as the amount of interest that has accrued and the value of the lots in the Virgin Islands transferred by Teema to Grayiel.

As such, the Court will order further briefing on the issue of damages consistent with the present rulings on the merits. The Court will also entertain briefing on the issue of direct damages against Anastas and AIO as an alternative finding to the damages awarded through alter ego liability.

The parties are advised that the additional briefing shall pertain to damages only. The Court will set a telephonic conference to discuss the damages briefing with the parties and will set an expedited briefing schedule and an evidentiary hearing at that time.

IV. CONCLUSION

For the reasons above, the Court will grant judgment for Grayiel on all claims remaining in the case. The Court will order additional briefing on the issue of damages and issue its findings related thereto by separate order. Accordingly, and the Court being otherwise sufficiently advised, IT IS HEREBY ORDERED:

1. Plaintiff's Motion for Judgment pursuant to Fed. R. Civ. P. 52(c) (contained within his Proposed Findings of Fact and Conclusions of Law) is GRANTED as to Counts I, II, III, V, VI, VII, and IX.

2. A Telephonic Conference is SET for Monday, January 9, 2023, at 1:30 p.m ET, before the Honorable Claria Horn Boom. All parties and counsel shall participate. Counsel for the parties shall connect to the Telephonic Conference by dialing the toll-free number 888-363-4735 and entering access code 9522526#. Parties shall dial into the Conference five (5) minutes prior to the Conference.