MEMORANDUM OPINION

ROBERT H. JACOBVITZ, Bankruptcy Judge.

THIS MATTER is before the Court on the Defendants' Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1) and (6) ("Motion to Dismiss"). Plaintiff filed a response and a supplemental response in opposition to the Motion to Dismiss. See Docket Nos. 10 and 19. This adversary proceeding is one of many adversary proceedings initiated by the Chapter 11 Trustee seeking to recover payments made by Vaughan Company Realtors ("VCR") to parties who invested in VCR's promissory note program. Plaintiff Judith Wagner, Chapter 11 Trustee of the bankruptcy estate of the Vaughan Company Realtors (hereinafter "Plaintiff" or "Trustee") asserts that VCR operated as a Ponzi scheme. The Plaintiff seeks to recover certain transfers made to Patricia Pruett and William E. Pruett1 under several theories, including avoidance of preferential transfers under § 547, and avoidance of transfers under the actual fraud and constructive fraud provisions of 11 U.S.C. § 548 and applicable state law. After consideration of the Motion to Dismiss and the responses thereto, and being otherwise sufficiently informed, the Court finds that the Motion to Dismiss should be granted, in part, and denied, in part.

APPLICABLE STANDARDS FOR EVALUATING A MOTION TO DISMISS

A motion to dismiss for failure to state a claim is governed by Rule 12(b)(6), Fed. R.Civ.P., made applicable to adversary proceedings by Rule 7012, Fed.R.Bankr.P. In considering a motion to dismiss under Rule 12(b)(6), the Court accepts as true all well pleaded facts and evaluates those facts in the light most favorable to the plaintiff. Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir.2006). The applicable standard for assessing a motion to dismiss for failure to state a claim under Rule 12(b), Fed.R.Civ.P. is found in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Under Twombly, in order to survive a motion to dismiss under Rule 12(b)(6), Fed.R.Civ.P., the complaint must contain enough facts to state a cause of action that is "plausible on its face." Twombly, 550 U.S. at 570, 127 S.Ct. 1955. In other words, the plaintiff must "nudge [his] claims across the line from conceivable to plausible." Id. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). A pleading that contains only "`labels and conclusions,'" a "`formulaic recitation of the elements of a cause of action'" or "`naked assertions' devoid of `further factual enhancement'" is insufficient to withstand a motion to dismiss. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555 and 557, 127 S.Ct. 1955). Under this standard, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. The Court thus takes a two-step approach in evaluating a motion to dismiss: first, the Court accepts as true all well-pled factual allegations, disregarding legal conclusions "`clothed in factual garb'"; second, the Court determines whether the well-pled factual allegations state a plausible claim for relief. See In re Tronox, Inc., 429 B.R. 73, 90 (Bankr. S.D.N.Y.2010) (quoting McHale v. Citibank (In re 1031 Tax Group, LLC), 420 B.R. 178, 190 (Bankr.S.D.N.Y.2009) and citing Iqbal, 129 S.Ct. at 1950) (stating that "Twombly illustrates the two-pronged approach."). With these principles in mind, the Court will evaluate the sufficiency of the Complaint in light of the Motion to Dismiss.

THE CLAIMS CONTAINED IN THE COMPLAINT

The Complaint contains one-hundred fifty-eight numbered paragraphs and consists of twenty separate counts. Paragraphs 1 through 68 include allegations regarding the nature of the proceeding, jurisdiction and venue, the actions of William Pruett and Patricia Pruett, the alleged transfers, and the fraudulent Ponzi scheme allegedly perpetrated by Douglas Vaughan and his company, VCR. Paragraphs 69 through 158 incorporate paragraphs 1 through 68 by reference and set forth each claim as a separate count. The counts are:

DISCUSSION

The Trustee consents to the dismissal, without prejudice, of her claim for turnover based on 11 U.S.C. § 5422, and consents to dismissal of her claims for recovery of fraudulent transfers under state law based on the transferee's insider status. Accordingly, the Court will dismiss Counts 1, 16, 17, and 18.3

Whether Plaintiff's Claims against Patricia Pruett, as Personal Representative of the Estate of William E. Pruett are time-barred by application of the New Mexico Uniform Probate Code (Counts 3, 6, 8, 9, 11, 12, 14, 15, 17, 18, 19 and 20)

Defendants assert that Plaintiff's claims against the Estate of William E. Pruett are time-barred under N.M.S.A.1978 § 45-3-803 (Repl. Pamp. 2008) of the New Mexico probate statutes. That section provides:

Section 45-3-803(A)(1) serves as a statute of limitations to bar claims against a decedent's estate or the personal representative of the estate that arise before the death of the decedent unless such claims are filed within one year after the decedent's death. See Macias v. Jaramillo, 129 N.M. 578, 583, 11 P.3d 153, 158 (Ct. App.2000) (stating that "[u]nder Section 45-3-803(A)(1), a tort claim against a decedent's estate that arose before the death of the decedent is barred against the estate or the personal representative `unless presented within ... one year after the decedent's death.'") (quoting the statute). Defendants assert that Plaintiff's claims against Patricia Pruett, as personal representative of the estate of William E. Pruett, are time-barred by application of N.M.S.A.1978 § 45-3-803, reasoning that: 1) William E. Pruett died on May 31, 2008; 2) all claims raised by the Plaintiff against William E. Pruett arose prior to his death; and 3) the Complaint was filed on October 25, 2011, more than a year after William E. Pruett's death. Plaintiff counters that the allegations in the Complaint fail to establish whether all of the claims against William E. Pruett arose prior to his death.

Plaintiff has asserted fraudulent transfer claims under both state law and federal bankruptcy law. A bankruptcy trustee who asserts fraudulent transfer claims under the Bankruptcy Code and applicable state law "is subject to both federal bankruptcy-law limitations periods and the state-law limitations periods applicable to fraudulent-avoidance actions." Smith v. Am. Founders Fin. Corp., 365 B.R. 647, 675 (S.D.Tex.2007). A cause of action to avoid a fraudulent transfer under 11 U.S.C. § 548 exists solely by virtue of the Bankruptcy Code.4 Thus, 11 U.S.C. § 546(a), which provides a two-year window following the petition date and a one year period following the appointment of a chapter 11 trustee,5 is the applicable statute of limitations for actions brought under 11 U.S.C. § 548. See Floyd v. Option One Mortg. Corp. (In re Supplement Spot, LLC), 409 B.R. 187, 197 (Bankr.S.D.Tex. 2009) (stating that 11 U.S.C. § 546(a) is the applicable statute of limitations period for fraudulent transfer actions brought by the trustee under 11 U.S.C. § 548). Plaintiff filed her Complaint within the statute of limitations period provided under 11 U.S.C. § 546(a) applicable to fraudulent transfer claims brought under 11 U.S.C. § 548. Consequently, Plaintiff's claims against William Pruett based on 11 U.S.C. § 548 are not time-barred regardless of the statute of limitations period contained in the New Mexico probate code.

Plaintiff's state law causes of action are subject to the statute of limitations period found under New Mexico's probate statutes. Provided that the state law statute of limitations period expired before the commencement of the bankruptcy case, the trustee's fraudulent transfer claims brought under applicable state law are time-barred. See Rosania v. Haligas (In re Dry Wall Supply, Inc.), 111 B.R. 933, 936 (D.Colo.1990) ("`Since the trustee, under section 544(b), will often be compelled to stand on the rights of a single qualified creditor, it is to be expected that questions of estoppel and the effect of the running of statutes of limitations will arise. The general rule is that section 544(b) confers upon the trustee no greater rights of avoidance than the creditor himself would have.... Consequently, if the creditor... is barred from recovery because of the running of a statute of limitations prior to the commencement of the case, the trustee is likewise rendered impotent.'") (quoting 4 Collier on Bankruptcy § 544.03[2] at 544-21 to -22 (L.King. 15th ed. 1989) (emphasis in original)). However, if the state law statute of limitations period expires after the commencement of the bankruptcy case, the Plaintiff's state law claims are limited by 11 U.S.C. § 546(a), which includes state law claims the trustee may assert pursuant to 11 U.S.C. § 544(b).6 "[A]s long as the state law statute of limitations has not run before the debtor's filing for bankruptcy, the trustee can bring a fraudulent conveyance action as long as he [or she] complies with the provisions of § 546(a)." Dry Wall Supply, 111 B.R. at 936.7

Neither party directed the Court to N.M.S.A.1978 § 45-3-803(C) of the New Mexico Uniform Probate Code. That section applies to "claims against a decedent's estate that arise at or after the death of the decedent." N.M.S.A.1978 § 45-3-803(C) (emphasis added). Section 45-3-803(C) provides:

If this section is applicable, the trustee must assert her state law cause of action within four months after the claim arises. The applicable look back period for fraudulent transfer claims brought under the New Mexico Uniform Fraudulent Transfer Act is four years. See N.M.S.A.1978 § 56-10-23 (providing that a cause of action must be brought within four years after the date of the transfer). Thus, the look back period as of the date of commencement of the bankruptcy case reaches back to February 22, 2006. This date pre-dates the date William Pruett died. Some of the transfers the Plaintiff seeks to recover may have occurred prior to the death of William E. Pruett and some may have occurred after the death of William E. Pruett but prior to the date VCR filed its bankruptcy case.

Mr. Pruett died on May 31, 2008, and VCR commenced its voluntary bankruptcy case on February 22, 2010. To the extent the applicable state law statute of limitations expired before the petition date, Plaintiff's state law fraudulent transfer claims are time-barred. The timely filing of claims against a decedent's estate is mandatory; if such claims are not timely filed, they are barred as a matter of law. Bowman v. Butler, 98 N.M. 357, 360, 648 P.2d 815, 818 (Ct.App.1982) (citing In re Will of Skarda, 88 N.M. 130, 537 P.2d 1392 (1975) and Matter of Estate of Oney, 95 N.M. 640, 624 P.2d 1037 (Ct.App.1981)).

However, Plaintiff is correct that the Court cannot determine based solely on the Complaint whether the transfers Plaintiff seeks to avoid occurred after the date of decedent's death and within four months of the petition date in the VCR chapter 11 bankruptcy case. Consequently the Court cannot grant Defendant's motion to dismiss Plaintiff's state law causes of action. But to the extent the transfers at issue preceded William Pruett's death, Plaintiff's state law fraudulent transfer claims against Patricia Pruett, as personal representative of the estate of William Pruett, would be time-barred under N.M.S.A.1978 § 45-3-803(A)(1).9 Similarly, to the extent the transfers at issue occurred after Mr. Pruett died, but more than four months prior to the date of the petition, Plaintiff's state law fraudulent transfer claims would be time-barred by application of N.M.S.A.1978 § 45-3-803(C).10 Other than the claims under 11 U.S.C. § 548, only those post-death, pre-petition transfers that occurred within the four month period preceding the filing of VCR's bankruptcy case that Plaintiff seeks to avoid under applicable state law would be further subject to the extension afforded under 11 U.S.C. § 546(a).

Whether Plaintiff's Actual Fraud Claims are plead with sufficient particularity (Counts 3, 4, 7, 8, and 9)

Pursuant to Rule 9(b), Fed.R.Civ. P., made applicable to adversary proceedings by Rule 7009, Fed.R.Bankr.P., a party alleging fraud "must state with particularity the circumstances constituting fraud[,]" though "[m]alice, intent, knowledge and other conditions of a person's mind may be alleged generally." Rule 9(b), Fed. R.Civ.P. A party asserting a claim for actual fraud under either 11 U.S.C. § 548(a)(1) or applicable state law is subject to the heightened pleading requirements of Rule 9(b), Fed.R.Civ.P.11

Plaintiff asserts claims based on actual fraud under the Bankruptcy Code and under state law.12 The actual fraud provision found in 11 U.S.C. § 548(a)(1) provides, in relevant part:

Similarly, N.M.S.A.1978 § 56-10-18(A)(1) includes the requirement that the debtor made the transfer "with actual intent to hinder, delay or defraud any creditor of the debtor." Defendants assert that Plaintiff's Complaint falls short of Rule 9(b)'s specificity requirement because Plaintiff has failed to plead the requisite fraudulent intent with respect to each transfer sought to be avoided and has failed to connect the allegations against the Defendants to VCR's scheme to defraud creditors, relying upon Silverman v. Actrade Capital, Inc. (In re Actrade Fin. Technologies Ltd.), 337 B.R. 791 (Bankr.S.D.N.Y.2005).13

To satisfy the heightened pleading requirement under Rule 9, Fed.R.Civ. P., a plaintiff must plead the factual grounds upon which the fraud is based sufficiently to afford the defendant fair notice of the fraud claim, including, generally, the time, place, and contents of the alleged fraudulent representation, the identity of the party who made the misrepresentation, and the consequences of the false representation. Koch v. Koch Indus., Inc., 203 F.3d 1202, 1236 (10th Cir.2000) (citation omitted).14 Plaintiff correctly points out that fraudulent intent for purposes of establishing a claim for actual fraud is determined based on the intent of the transferor, in this instance, VCR, rather than the transferee. Actrade is consistent with this view. See Actrade, 337 B.R. at 808 (stating that "[c]ases under § 548(a)(1)(A) indicate that it is the intent of the transferor and not the transferee that is relevant for purposes of pleading a claim for intentional fraudulent conveyance under the Bankruptcy Code.") (citations omitted).15 In addition, when a fraudulent transfer claim is asserted by the bankruptcy trustee, courts often apply a less stringent standard when weighing the sufficiency of the complaint, reasoning that "`a trustee is an outsider to the transaction who must plead fraud from second-hand knowledge.'" Madoff, 454 B.R. at 329 (quoting Nisselson v. Softbank AM Corp., (In re MarketXT Holdings Corp.), 361 B.R. 369, 395 (Bankr.S.D.N.Y.2007) (quoting Picard v. Taylor (In re Park South Sec., LLC), 326 B.R. 505, 517-518 (Bankr. S.D.N.Y.2005) (internal quotations omitted))). Nevertheless, many courts require that, even under the less stringent standard applicable to a trustee, to satisfy the particularity requirement of Rule 9 when pleading an actual fraudulent transfer the plaintiff must set forth facts sufficient to apprise the defendant "of the nature of his alleged participation in the fraud,"16 and at least connect the defendant's actions to the debtor's alleged scheme to defraud.17

When there is sufficient evidence of a Ponzi scheme, the "actual intent to defraud" element necessary to recover a transfer as actually fraudulent under either § 548(a)(1)(A) or applicable state law can be established based on a "Ponzi scheme presumption." See, e.g., Perkins v. Haines, 661 F.3d 623, 626 (11th Cir. 2011) ("With respect to Ponzi schemes, transfers made in furtherance of the scheme are presumed to have been made with the intent to defraud for purposes of recovering the payments under §§ 548(a) and 544(b).") (citations omitted); In re AFI Holding, Inc., 525 F.3d 700, 704 (9th Cir.2008) ("`the mere existence of a Ponzi scheme' is sufficient to establish actual intent under 548(a)(1) or a state's equivalent to that section.") (quoting Hayes v. Palm Seedlings Partners-A (In re Agricultural Research and Tech. Group, Inc.), 916 F.2d 528, 535 (9th Cir.1990)); S.E.C. v. Resource Dev. Int'l, LLC, 487 F.3d 295, 301 (5th Cir.2007) ("In this circuit, proving that IERC operated as a Ponzi scheme establishes the fraudulent intent behind the transfers it made."). See also Ivey v. Swofford (In re Whitley), 2012 WL 170135, *4 (Bankr.M.D.N.C. Jan. 19, 2012) (finding that the Ponzi scheme presumption applicable to 11 U.S.C. § 548 should likewise be applied to the North Carolina fraudulent transfer statute).18 Under this rule, it is presumed that "`any transfers made in the course of a Ponzi scheme could have been made for no purpose other than to hinder, delay, or defraud creditors.'" McHale v. Boulder Capital LLC (In re The 1031 Tax Group, LLC), 439 B.R. 47, 72 (Bankr. S.D.N.Y.2010) (quoting Bear Stearns Sec. Corp. v. Gredd (In re Manhattan Inv. Fund Ltd.), 397 B.R. 1, 8 (S.D.N.Y.2007) (quoting Gredd v. Bear, Stearns Sec. Corp. (In re Manhattan Fund Ltd.), 359 B.R. 510, 517-518 (Bankr.S.D.N.Y.2007))) (additional internal quotation marks omitted).19

The allegations in the Complaint describing the promissory note program and VCR's method of conducting business and securing new investors plausibly describe a Ponzi scheme.

"The fraud consists of funneling proceeds received from new investors to previous investors in the guise of profits from the alleged business venture, thereby cultivating an illusion that a legitimate profit-making business opportunity exists and inducing further investment." Wyle v. C.H. Rider & Family (In re United Energy Corp.), 944 F.2d 589, 590 n. 1 (9th Cir. 1991) (citations omitted). Thus, in a typical Ponzi scheme, (1) the debtor receives funds from investors (which can include parties loaning money to generate a return); (2) investors are promised large returns for their investments; (3) initial investors are actually paid the promised returns, which attracts additional investors; (4) returns to investors are not financed through the success of the underlying business venture, if any, but are taken from principal sums received from newly attracted investments; and (5) the debtor induces investments through an illusion of paying returns to investors from legitimate business activities. For a compilation of factors courts consider to determine whether a Ponzi scheme exists, see Kathy Bazoian Phelps and Hon. Steven Rhodes, The Ponzi Scheme Book: A Legal Resource for Unraveling Ponzi Schemes, § 2.03[1][b] (2012).

The Complaint generally describes the alleged Ponzi scheme perpetrated by Douglas F. Vaughan through VCR and other entities in which Mr. Vaughan held an interest. For example, Plaintiff alleges that VCR issued promissory notes to investors with high, fixed rates of return that were allegedly secured by a deed of trust on real property, other investments, and Mr. Vaughan's personal wealth, but that, in fact the money received from investors "was not utilized to buy real estate or to further real estate projects as purported, but instead was primarily used to make principal and/or interest payments to other investors and to fund VCR's operating expenses ... and to enrich [Mr.] Vaughan." Complaint, ¶ 21. The Plaintiff also alleges that VCR's expenses "greatly exceeded the cash generated by its business," that VCR "relied entirely on new money raised from third parties through the note program," that "VCR used funds deposited from investors to continue operations and pay not redemption proceeds to other investors and to make other transfers," that "because of the "diversion of new investments to pay requests for payment and redemptions from other investors, VCR did not have funds to pay investors on account of their new investments," and that "VCR was able to stay afloat by using the principal invested by some investors to pay other investors the interest and/or principal." See Complaint, ¶¶ 17 and 24. Finally, the Complaint recites that in Mr. Vaughan's individual bankruptcy case, the bankruptcy court found that the only way Mr. Vaughan was able to continue his business operations was to obtain additional "`funds from investors who were promised high rates of return on their investments. The funds invested were not utilized as represented; rather they went to pay the high rates of returns to the prior investors. This is a textbook example of a Ponzi scheme.'" Complaint, ¶ 27 (quoting Memorandum Opinion on U.S. Trustee's Motion to Appoint a Chapter 11 Trustee and Motion to Convert Case to Chapter 7, filed in Case No. 7-10-10763 JA as Docket No. 343). These allegations are sufficient to set forth a plausible claim that VCR operated its business as a Ponzi scheme. Thus, the Complaint contains factual allegations sufficient to allege "actual intent to defraud" under the Ponzi scheme presumption.

The allegations in the complaint also sufficiently connect the Defendants to the alleged Ponzi scheme. The Complaint identifies each of the alleged investments the Defendants made, and the alleged rate of return for each investment. See Complaint ¶¶ 30 and 46. The Complaint alleges that two investments of $50,000.00 each had an interest rate of 20%, and that Patricia Pruett's investment of $200,000 in January of 2007 had an interest rate of 25%. See Complaint ¶¶ 30 and 46. As for the transfers Plaintiff seeks to recover, the Complaint identifies the total amounts that Plaintiff alleges were transferred to Defendants during each look-back period. Each count in the Complaint incorporates by reference all of the previous numbered allegations in the Complaint. Absent such incorporation by reference, the Court agrees that the allegations in each count, including the counts based on actual fraud, are insufficient to withstand a motion to dismiss under the Iqbal standard.20 However, the allegations, including those incorporated by reference into each Count of the Complaint, sufficiently connect the Defendants to the Ponzi scheme by specifically identifying the investments they made which were a part of the "promissory note program" and the payments made to Defendants. The Court, therefore, concludes that the Complaint satisfies Rule 9, Fed. R.Civ.P. because the allegations sufficiently provided defendants with "`fair notice of plaintiff's claims and the factual background upon which [they] are based...'" Koch v. Koch Indus., 203 F.3d at 1236 (quoting Lawrence Nat'l Bank v. Edmonds (In re Edmonds), 924 F.2d 176, 180 (10th Cir.1991)). The Court will deny the Motion to Dismiss Plaintiff's actual fraud claims.

Whether Plaintiff's Constructive Fraud Claims Should Be Dismissed based on receipt of "reasonably equivalent value" (Counts 5, 6, 10, 11, 12, 13, 14, 16, 17)

Defendants also seek to dismiss Plaintiff's constructive fraud claims, arguing that, because the amounts the Plaintiff seeks to recover are less than the amounts Defendants initially invested, Defendants provided reasonably equivalent value in exchange for what they received as a matter of law. Constructive fraud under 11 U.S.C. § 548(a)(1)(B) requires the plaintiff to establish that the debtor "received less than a reasonably equivalent value in exchange for the transfer." 11 U.S.C. § 548(a)(1)(B)(i).21 Similarly, the constructive fraud provisions under the New Mexico Fraudulent Transfer Act contain a requirement that the debtor made the transfer "without receiving a reasonably equivalent value in exchange for the transfer." N.M.S.A.1978 § 56-10-18(A)(2). The Plaintiff bears the burden of demonstrating that the transferor received less than a reasonably equivalent value in exchange for the transfer.22

Defendants' sole argument is that the Debtor received reasonably equivalent value in exchange for the transfers because they received less than their initial investments. Defendants' argument is premised on their assertion that they were victims of the alleged Ponzi scheme; therefore, they have a potential restitution claim against VCR to recover the amount of their investment. In Independent Clearing House, the court concluded that investors in a Ponzi scheme provided reasonably equivalent value to the debtor in exchange for the transfers to the extent the transfers did not exceed the initial investment. Independent Clearing House, 77 B.R. at 857. In reaching this determination, the court reasoned that

The court reasoned further that "to the extent a transfer merely repaid a defendant's undertaking, the debtor received not only a `reasonably equivalent value' but the exact same value — dollar for dollar." Id. The Tenth Circuit has taken a similar approach to reasonably equivalent value in the context of a Ponzi scheme in Jobin v. McKay (In re M & L Business Machine Co.), 84 F.3d 1330 (10th Cir.1996).

In McKay, the Tenth Circuit began its analysis by examining the definitions set forth in the Bankruptcy Code. 84 F.3d at 1340. "Value" is defined under 11 U.S.C. § 548(d)(2)(A) as "property, or satisfaction or securing of a present or antecedent debt of the debtor." 11 U.S.C. § 548(d)(2)(A). "Debt" is defined as "liability on a claim," and "claim" is broadly defined as the "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, legal, equitable, secured, or unsecured," and includes the "right to an equitable remedy for breach of performance." 11 U.S.C. § 101(5) and (12). Reasonably equivalent value can take the form of a reduction in the amount of a claim by the transferee against the transferor resulting from the transferee's receipt of the payment. McKay, 84 F.3d at 1341. A defrauded investor's contractual right to the return of its principal or restitution claim could, thus, qualify as an antecedent debt under these definitional Code sections. See McKay, 84 F.3d at 1341. Whether the transferee had such a claim and whether the payment reduced the amount of the claim is governed by applicable state law. Id.

The Defendants allege the Debtor received reasonably equivalent value in exchange for its transfers to Defendants because the transfers reduced the amount of the Defendants' claim of restitution against the Debtor. New Mexico courts recognize that restitution is an equitable remedy, and often look to the Restatements for guidance in considering restitution claims.23 Consistent with the Restatement (Third) of Restitution, an investor in a Ponzi scheme who had no actual knowledge and did not participate in the fraud is entitled to retain distributions up to the amount of their initial investment. See Restatement (Third) Restitution § 32(2) and (3).24 Under the Restatement, a party is entitled to restitution to recover benefits conferred when a contractual obligation to the party is unenforceable as against public policy provided restitution would not defeat or frustrate the policy rendering the contract unenforceable, and the party asserting a claim for restitution has not acted inequitably. Id.25 Retention of withdrawals or distributions up to the amount of the investment would not defeat or frustrate the public policy rendering a promissory note issued in furtherance of a Ponzi scheme void as against public policy.26 However, because a claim for restitution is equitable in nature, "investors who have knowledge of, and help perpetuate, a fraud should not be permitted to benefit in the form of restitution." Picard v. Merkin (In re Bernard L. Madoff Inv. Securities, LLC), 440 B.R. 243, 262 (Bankr.S.D.N.Y.2010) (applying New York law).27 Similarly, in evaluating "reasonably equivalent value" under 11 U.S.C. § 548(a)(2) in light of a defendant's potential claim for restitution, the Tenth Circuit, applying Colorado law, determined that a transferee without actual knowledge of the Ponzi had a restitution claim at the time of transfer even if the transferee was negligent and unreasonable in relying upon the misrepresentation. McKay, 84 F.3d at 1341-42. Thus, the defendant without actual knowledge of the Ponzi scheme provided reasonably equivalent value through a reduction in the amount of his claim for restitution sufficient to defeat the claim to recover the transfer as constructively fraudulent under 11 U.S.C. § 548(a)(2). Id. at 1341-1342.

Here, Plaintiff has alleged that Defendants knew or should have known that the VCR promissory note program was a fraudulent scheme and that the Defendants willingly turned a blind eye to several red flags that would indicate that VCR was perpetrating fraud. See Complaint, ¶¶ 54-56, 62. Plaintiffs further allege that such red flags became commonly known by the public at large following the arrest of Bernard Madoff in 2008, and that Defendants nevertheless continued to invest in VCR's note program despite the fact that the interest rates the Defendants received were "unrealistically high." See Complaint ¶ 53. These allegations are sufficient to state a plausible claim that Defendants had actual knowledge of the fraud and subjectively knew that they were participating in a fraudulent scheme. Defendants may, in fact, have a claim for restitution that was partially satisfied when they received distributions. But if the Defendants had subjective knowledge that they were participating in the fraudulent scheme, they would be precluded from asserting a claim for restitution. Because the Court cannot determine Defendants' subjective knowledge at this stage in the proceeding, it is premature for the Court to dismiss the Plaintiff's claims for constructive fraud. The Court will, therefore, deny the Defendants' request to dismiss Plaintiff's constructive fraud claims.28

Whether Plaintiff's State Law Claims Should be Dismissed based on Jurisdictional Defects in light of the Supreme Court's decision in Stern v. Marshall (Counts 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 and 19)29

Defendants' Motion to Dismiss includes an argument that jurisdictional impediments to Plaintiff's causes of action warrant dismissal under the Supreme Court's decisions in Stern v. Marshall, ___ U.S. ___, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011) and Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989). Defendants "incorporate by reference" the jurisdictional arguments set forth in Wagner v. Pickett, Adversary No. 11-1126, but fail to articulate the jurisdictional arguments in their Motion to Dismiss. The Court declines to address Defendants' jurisdictional arguments because the Defendants have failed to properly raise or otherwise explain their jurisdictional arguments. Consequently, the Court will deny the Motion to Dismiss Counts 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, and 17 and 19 to the extent the motion is premised on an unarticulated lack of jurisdiction argument premised on Stern v. Marshall.30 Furthermore, any jurisdictional defect implicated by Stern v. Marshall cannot serve as grounds for dismissal; the application of Stern v. Marshall merely affects whether certain claims require a final decision rendered by the District Court rather than this Court. Even if Stern v. Marshall were grounds to require withdrawal of the reference of this Adversary Proceeding so that a final judgment can be entered by the District Court, the Court notes that Plaintiff consents to the withdrawal of the reference of this adversary proceeding. See Response, at p. 19.

Finally, Plaintiff points out that the Defendants have not sought dismissal of Count 2, alleging that transfers to Patricia Pruett made within ninety days of the date of the filing of the VCR bankruptcy case should be recovered as a preference under 11 U.S.C. § 547, or Count 20 as it relates to Patricia Pruett. Plaintiff asserts that such failure should be deemed an admission on the part of Defendants as to those claims such that Plaintiff should be entitled to the relief requested in Counts 2 and 20 by default.

Rule 12(a)(4)(A) of the Federal Rules of Civil procedure, made applicable to this adversary proceeding by Rule 7012, Fed.R.Bankr.P., provides:

The Plaintiff apparently is arguing that Rule 12(a)(4)(A) does not apply where, as here, the Defendant's Motion to Dismiss, if granted, would only partially dispose of the claims asserted in the complaint. The large majority of courts addressing this issue have held that when a defendant timely files a motion to dismiss under Rule 12(b)(6), Fed.R.Civ.P., Rule 12(a)(4)(A) extends the time to file an answer as to all claims, including those not addressed by the motion to dismiss. See Talbot v. Sentinel Ins. Co., Ltd., 2012 WL 1068763, *4 (D.Nev. Mar. 29, 2012) (surveying the case law) and holding that "a pending motion to dismiss, although it may only address some of the claims alleged, tolls the time to respond to all claims under Rule 12(a)(4)."31 This Court agrees with that holding.

Defendants filed a timely motion under Rule 12(b)(6). Pursuant to Rule 12(a)(4)(A), Defendants are not required to file a responsive pleading that addresses the claims not addressed by their Motion to Dismiss until 14 days after the Court rules on the Motion. Plaintiff is not entitled to the relief requested in Counts 2 and 20 by default.

Based on the foregoing, the Court will deny the Defendants' Motion to Dismiss. The Court will enter a separate order consistent with this Memorandum Opinion.