Here at the Bankruptcy Update, we frequently write on the intersection of insolvency and fraud, including collapsed Ponzi schemes. Another Ponzi-scheme related opinion recently issued from the United States Bankruptcy Court for the Southern District of New York.
In In re: Marita Padiernos Rosado, No. 24-11851 (JLG), 2025 WL 3708753 (Bankr. S.D.N.Y. Dec. 19, 2025) (“Rosado”), the court held that debts owed by the debtor related to investments obtained through fraud are non-dischargeable.
The case stemmed from purported real estate investment opportunities offered by the debtor, Marita Padiernos Rosado (“Debtor”), through her wholly owned company, MK Global. Debtor’s marketing materials stated that her company would invest in distressed real property, obtain rental income, and sell certain already owned assets for a profit.
Lorelei Sanchez Araneta (“Plaintiff”) was one of Debtor’s marks. Plaintiff told Debtor that she wanted to invest, but “needed the money back relatively quickly because that was all she had at the time to support herself and her two children.” “Debtor assured the Plaintiff that the money would be safe and secure,” agreed to return the money within six months, and also agreed to make regular monthly payments. Based on those representations, Plaintiff paid Debtor $30,000 and received a promissory note (the “Note”) in return.
Other than the first monthly payment and scattered other incomplete payments, Debtor failed to pay amounts due under the Note, including after the six-month term expired.
In 2024, Debtor filed a petition for relief under chapter 7 of the Bankruptcy Code. Debtor’s schedules listed an “unknown” amount owed to Plaintiff. Upon learning of the bankruptcy, Plaintiff questioned Debtor about the amount owed to her. Debtor repeatedly promised she would pay Plaintiff back “next week.”
After speaking to other investors who had also not been paid, Plaintiff filed an adversary proceeding against Debtor. Her complaint alleged that Debtor operated a Ponzi scheme using MK Global as her alter ego. Debtor would bring in new investments to pay prior obligations. Plaintiff’s complaint included three causes of action:
- First, Plaintiff asserted that her debt was nondischargeable under Bankruptcy Code section 523(a)(2)(A) because Debtor had falsely represented that Plaintiff’s investment would be secure and used for an investment in real estate.
- Second, Plaintiff asserted the debt was nondischargeable under section 523(a)(6) because, “having willfully and maliciously caused significant damage to her … Debtor should not be entitled to a discharge of any debt or obligation owed by Debtor to Plaintiff.”
- Third, Plaintiff sought a declaratory judgment stating that MK Global was Debtor’s alter ego.
Debtor did not answer Plaintiff’s complaint. Plaintiff moved for default judgment. The court agreed with Plaintiff that she was entitled to judgment on the first two counts but denied the “alter ego” relief requested in count three.
Nondischargeability Under Section 523(a)(2)(A)
The court first addressed nondischargeability under section 523(a)(2)(A). That provision makes debt “obtained by false pretenses, a false representation, or actual fraud” non-dischargeable. To succeed on a section 523(a)(2)(A) claim, plaintiffs must prove five elements:
- The debtor made a false representation;
- The debtor knew it was false;
- The debtor made the representation with the intent of deceiving the creditor;
- The creditor justifiably relied on the representation; and
- The creditor sustained losses or damages that were proximately caused by the false representation.
The court found each of these elements satisfied. Debtor represented to Plaintiff that she would apply funds towards real estate investment opportunities that were “safe and secure,” and agreed to return the money within six months and make monthly payments. Those representations were false and Debtor knew it, satisfying the first two elements. They also raise an inference of an intent to deceive, satisfying the third element.
The court also found that Plaintiff’s reliance on Debtor’s representations was “justifiable,” satisfying the fourth element. As to the fifth element, the court found it undisputed that Debtor failed to return Plaintiff’s money. Thus, the court found for Plaintiff on Count One.
Nondischargeability Under Section 523(a)(6)
Next, the court turned to nondischargability under section 523(a)(6). That provision states that discharge will be denied for debts occasioned by a “willful and malicious injury by the debtor to another entity or to the property of another entity.” 11 U.S.C. § 523(a)(6). A claim under Section 523(a)(6) requires three elements:
- The debtor acted willfully;
- The debtor acted maliciously; and
- The debtor’s willful and malicious actions caused injury.
Again, the court found each element satisfied. Facts alleged in the complaint (deemed admitted due to Debtor’s default) supported the plausible inference that Debtor intended to injure Plaintiff. “Debtor solicited an investment she had no intention of honoring. The investment was not secure, and the Debtor knew this would be the case when she solicited the investment.” Debtor thus acted “willfully.”
As to maliciousness, again the court found the admitted allegations sufficient. “Debtor solicited investments from multiple victims with no intention of honoring the promised returns, used new investor funds to pay prior obligations, and diverted funds for personal use.” Thus, Debtor’s actions were malicious.
Finding of injury and causation were straightforward. Debtor never paid Plaintiff back for the funds she solicited.
Alter Ego
Finally, the court addressed Plaintiff’s “alter ego” claim. In her complaint, Plaintiff sought a declaratory judgment stating that MK Global was Debtor’s alter ego and that MK Global’ s liabilities should be deemed Debtor’s liabilities. However, Plaintiff did not name MK Global as a party to the adversary proceeding.
Under New York law, “claims for the imposition of liability against a defendant that rest upon allegations that such defendant is liable to the plaintiff because it is an alter ego of another entity who has not been joined as a defendant, renders the non-joined entity a necessary party.” An attempt “to pierce the corporate veil does not constitute a cause of action independent of that against the corporation; rather it is an assertion of facts and circumstances which will persuade the court to impose the corporate obligation on its owners.”
Applying these principles, the court found MK Global to be a necessary party to the adversary proceeding and denied the declaratory relief requested in Count Three. However, the court granted Plaintiff leave to file a motion to amend the complaint so that she could add MK Global to a subsequent pleading.
