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September 2, 1976

Jerry B. KLEIN, as trustee for the liquidation of the business of JNT Investors, Inc., Debtor, Plaintiff,
Jay N. TABATCHNICK and S. Wolfe Emmer, Defendants

The opinion of the court was delivered by: WARD

WARD, District Judge.

 Plaintiff Jerry B. Klein ("Klein") brings this action pursuant to §§ 10(b) and 27 of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j and 78aa, §§ 60, 67d and 70e of the Bankruptcy Act, 11 U.S.C. §§ 96, 107 and 110, 28 U.S.C. § 1332, N.Y. Business Corporation Law § 720 (McKinney's 1963), and N.Y. Debtor and Creditor Law §§ 273, 274 and 275 (McKinney's 1945). Klein, as trustee for the liquidation of the business of JNT Investors, Inc. ("JNT"), seeks to avoid the results of two transactions involving the transfer of property by JNT to defendant S. Wolfe Emmer ("Emmer").

 The first transaction involves the transfer by JNT of certain of its portfolio securities to Emmer, supposedly as consideration for his having collateralized a personal loan for $50,000 to Jay N. Tabatchnick ("Tabatchnick"), the president of JNT. Plaintiff seeks to have these securities returned to the estate contending that the transfer was fraudulent under § 67d of the Bankruptcy Act.

 The second transaction at issue concerns the delivery of a $100,000 check to JNT by Emmer and the return of that check by JNT immediately prior to plaintiff's appointment as trustee. Plaintiff contends this transfer constituted a voidable preference under § 60 of the Bankruptcy Act, and should also be returned to the estate.

 Plaintiff and defendants Emmer and Tabatchnick cross-move for summary judgment. For the reasons hereinafter stated, defendants' motions are denied and plaintiff's motion is granted in part and denied in part.

 Background Facts

 JNT had been incorporated in June 1970, by Tabatchnick as a small brokerage firm specializing in underwriting and new issues. At all relevant times, Tabatchnick was the president, a director, and a principal shareholder of JNT. Emmer was also a principal shareholder in the company from its inception. In addition to having served as a director until November 1, 1971, Emmer was also listed as an employee of and consultant to JNT although he was never involved in the daily business activities of the firm. *fn1" Emmer and Tabatchnick had entered into a written agreement on June 23, 1970, setting forth the terms and conditions of the former's relationship with JNT. Emmer declined to obligate himself to supply subordinated capital to the firm in the future. Essentially, he was assured that his equity position would always be equal to that of Tabatchnick. To this end, various protective provisions were contained in the agreement.

 JNT's primary source of income, aside from borrowings and capital contributions from its principals, was derived from underwriting fees. These fees were utilized by JNT to trade for its own account; trading was heavily concentrated in the securities which it had underwritten. The last successful underwriting by JNT took place in August 1971, after which the firm's financial situation began to deteriorate. Between November 29, 1971 and January 11, 1972, JNT found itself in a position that necessitated the borrowing of $150,000 in three equal installments from First National City Bank ("FNCB"). JNT was required to pledge securities, valued at 200% of the loan, to the bank as collateral. There are uncontroverted allegations that the number of shares JNT pledged as collateral to FNCB exceeded the holdings of such securities in its own account. Apparently, the firm used stock owned by its customers to collateralize its loans and replaced with had been taken with subsequent stock purchases. JNT's worsening financial condition in late 1971 is further evidenced by the firm's need to terminate the services of a number of its employees and reduce the compensation of all other employees and officers.

 On February 15, 1972, plaintiff was appointed to liquidate the business of JNT pursuant to the provisions of the Securities Investor Protection Act of 1970, 15 U.S.C. §§ 78aaa-111.

 The Transfer of Securities from JNT to Emmer

 In October 1970, Tabatchnick arranged a $50,000 personal loan from FNCB. The loan was collateralized by securities furnished by Joseph Taub ("Taub"); the arrangement was that the securities would be returned in one year. Tabatchnick and JNT then entered into an agreement providing that the entire $50,000 was to be used by JNT as capital and subordinating the entire amount to the claims of all present and future creditors of JNT. The agreement also provided that the $50,000 could not be withdrawn until November 1, 1971. Tabatchnick received interest from JNT at the rate of 9% per annum and used that money to pay interest due to FNCB.

 On November 1, 1971, Tabatchnick executed an extension of the subordination agreement inasmuch as JNT was still in need of the funds. The extension provided that the $50,000 could not be withdrawn until December 15, 1972. Taub, in November 1971, indicated to Tabatchnick that he desired the return of his securities. However, he made it clear that he would allow his securities to remain as collateral if no replacement collateral could be obtained. Tabatchnick, in order to accommodate Taub, approached Emmer to secure replacement collateral. On December 11, 1971, after Tabatchnick had already extended his subordinated loan to JNT, Emmer authorized the delivery of securities owned by him to replace the Taub collateral. In exchange for this personal benefit, Tabatchnick caused certain of JNT's securities to be delivered to Emmer on December 13. The agreement between Tabatchnick and Emmer was that the latter would receive 10,000 shares of common stock of Educational Video Corporation and warrants to purchase 5,000 shares of common stock of Commonwealth Silver Industries, Ltd., Vicon Products Corporation, and Charter Funding Corporation.

 The issues to be resolved in determining whether the delivery of these securities constituted a fraudulent transfer are set out in § 67d(2)(a) of the Bankruptcy Act. For a transfer to be declared fraudulent under this section, four preconditions must be satisfied:

1. The transfer must be made within one year of the initiation of theliquidation proceedings;
2. Creditors of the debtor must exist at the time of the transfer;
3. There must be an absence of fair consideration for the transfer; and
4. The debtor must either be insolvent at the time of the transfer or thereby rendered insolvent. Summary judgment is proper,
"if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to ...

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