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ACFE CFE-Fraud-Investigations-and-Legal-Issues Exam - Topic 2 Question 1 Discussion

Bob owns a struggling business called Luxury Rentals that has ten luxury vehicles. A week before Luxury Rentals files for bankruptcy, Bob transfers ownership of one of the vehicles to his wife. Which type of fraud scheme has Bob most likely committed?
A) A fraudulent conveyance
B) A fraudulent bankruptcy
C) A concealed transfer
D) A planned bustout

ACFE CFE-Fraud-Investigations-and-Legal-Issues Exam - Topic 2 Question 1 Discussion

Actual exam question for ACFE's CFE-Fraud-Investigations-and-Legal-Issues exam
Question #: 1
Topic #: 2
[All CFE-Fraud-Investigations-and-Legal-Issues Questions]

Bob owns a struggling business called Luxury Rentals that has ten luxury vehicles. A week before Luxury Rentals files for bankruptcy, Bob transfers ownership of one of the vehicles to his wife. Which type of fraud scheme has Bob most likely committed?

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Suggested Answer: A

The correct answer is A. A fraudulent conveyance. The CFE Manual states that debtors often attempt to conceal assets by transferring them to another person or company, and a transfer is considered a fraudulent conveyance if its purpose is to hinder, delay, or defraud a creditor. In this question, Bob transferred one of the company's luxury vehicles to his wife just one week before the business filed for bankruptcy. That timing strongly suggests an attempt to move valuable property out of the reach of creditors before the bankruptcy estate is formed.

Option B is too broad because ''fraudulent bankruptcy'' is not the specific scheme described. Option C is not the standard label used in the Manual for this kind of transfer. Option D, a planned bustout, refers to a different scheme involving building up credit with suppliers and then collapsing the business without payment. The facts here center on the transfer of an asset to a related party to keep it away from creditors, which is the classic definition of a fraudulent conveyance under the CFE Law materials. Accordingly, A is the most accurate answer.


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Stefany
10 hours ago
I think it’s more like B) A fraudulent bankruptcy.
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Janine
6 days ago
Definitely A) A fraudulent conveyance. Classic move.
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Lynelle
11 days ago
I’m confused about the terms. Is a planned bustout different from a fraudulent bankruptcy? I feel like I need to review those definitions again.
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Cristal
16 days ago
This scenario seems similar to a practice question we had on asset transfers before bankruptcy. I lean towards A, but I could see B being a possibility too.
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Joye
21 days ago
I'm not entirely sure, but I remember something about concealed transfers being related to hiding assets. Could that apply here?
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Olga
26 days ago
I think this might be a fraudulent conveyance since Bob transferred the vehicle to his wife right before filing for bankruptcy.
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