April 24, 2005
Kelley Drye obtained a significant victory for State Street Bank in an action arising out of the
financial collapse of one of its former borrowers, Sharp International.
The U.S. Court of Appeals for the Second Circuit affirmed the dismissal of Sharp’s Complaint against
State Street by the U.S. District Court for the Eastern District of New York. The Second Circuit held
that State Street’s alleged discovery of the fraud, like any other information obtained through its own
due diligence, was an asset that belonged to State Street, which had a fiduciary duty to use that
information to protect its shareholders, if it legally could.
In addition, the Second Circuit affirmed the dismissal of Sharp’s fraudulent conveyance claims, holding
that, even if State Street knew that the funds raised to repay the debt were fraudulently raised, the
repayment to State Street was not a fraudulent conveyance.