RECOVERIES AND SETTLEMENT AGREEMENTS
$10.895 Billion

CUSTOMER FUND, including required reserves
$3.415 Billion

AMOUNT DISTRIBUTED FROM CUSTOMER FUND
$7.244 Billion

SIPC COMMITTED FUNDS SUBJECT TO SUBROGATION*
$700.4 Million

AMOUNT UNAVAILABLE DUE TO APPEALS AND RESERVES
$236.7 Million

DISTRIBUTIONS

- Sixth Pro Rata Interim Distribution
- Fifth Pro Rata Interim Distribution
- Fourth Pro Rata Interim Distribution
- Third Pro Rata Interim Distribution
- Second Pro Rata Interim Distribution
- First Pro Rata Interim Distribution
- Interim Distribution Calculation
- Required Reserves
- Advances Reimbursed to SIPC on Fully Satisfied Accounts
- Claims Calculations - Example One
- Claims Calculations - Example Two

Sixth Pro Rata Interim Distribution

On April 15, 2015, the SIPA Trustee filed a motion in the United States Bankruptcy Court for the Southern District of New York seeking approval for an allocation of recoveries to the BLMIS Customer Fund and an authorization for a sixth pro rata interim distribution from the Customer Fund to BLMIS customers with allowed claims. In the motion, the SIPA Trustee sought the release of $1.249 billion of $1.449 billion that was held in reserve under a September 2012 Bankruptcy Court order, with $904 million available for immediate distribution to customers with allowed claims. The reserve was required due to ongoing litigation of the “time-based damages” issue, in which claimants asserted that they were entitled to an inflation or interest adjustment on their claims. On February 20, 2015, the Second Circuit affirmed that claimants in the SIPA liquidation of BLMIS are not entitled to any interest or inflation adjustments on money deposited at BLMIS. An approval hearing that was originally scheduled for May 28, 2015 was adjourned and then was rescheduled for Wednesday, July 29, 2015.

On July 21, 2015, the SIPA Trustee filed a notice of adjournment of the July 29 hearing.

The hearing was adjourned because certain BLMIS claimants filed a petition with the Supreme Court of the United States seeking a writ of certiorari to review the decision by the United States Court of Appeals for the Second Circuit regarding “time-based damages.”

The hearing for approval of the sixth interim distribution motion will not be rescheduled until such time as the Supreme Court resolves the petition for certiorari and the time-based damages issue reaches a final, unappealable conclusion.

Fifth Pro Rata Interim Distribution

The fifth pro rata interim distribution from the Bernard L. Madoff Investment Securities LLC (BLMIS) Customer Fund to eligible customers commenced on February 6, 2015. As of August 12, 2015, approximately $397.1 million has been distributed to BLMIS account holders with allowed claims in the fifth distribution, representing approximately 2.743 percent of the allowed claim amount of each individual account, unless the claim is fully satisfied. 

Fourth Pro Rata Interim Distribution

The fourth pro rata interim distribution from the Bernard L. Madoff Investment Securities LLC (BLMIS) Customer Fund to eligible customers commenced on May 5, 2014. As of August 12, 2015, approximately $460.9 million has been distributed to BLMIS accountholders with allowed claims in the fourth distribution, representing approximately 3.180 percent of the allowed claim amount of each individual account, unless the claim is fully satisfied. 

Third Pro Rata Interim Distribution

The third pro rata interim distribution from the Bernard L. Madoff Investment Securities LLC (BLMIS) Customer Fund to eligible customers commenced March 29, 2013. As of August 12, 2015, approximately $685.4 million has been distributed to BLMIS accounts with allowed claims in the third distribution, representing approximately 4.721 percent of the allowed claim amount of each individual account, unless the claim is fully satisfied. 

Second Pro Rata Interim Distribution

As of August 12, 2015, distributions from the BLMIS Customer Fund via the second pro rata interim distribution to BLMIS customers whose claims have been allowed by the SIPA Trustee totaled $4.900 billion, representing approximately 33.556 percent of the allowed claim amount of each individual account, unless the claim is fully satisfied. The second pro rata interim distribution commenced on September 19, 2012, based on August 22, 2012 approval by the United States Bankruptcy Court for the Southern District of New York.

First Pro Rata Interim Distribution

As of August 12, 2015, distributions from the BLMIS Customer Fund via the first pro rata interim distribution to BLMIS customers whose claims have been allowed by the SIPA Trustee totaled $674.6 million, representing approximately 4.602 percent of the allowed claim amount of each individual account, unless the claim is fully satisfied. The first pro rata interim distribution commenced on October 5, 2011, based on July 12, 2011 approval by the United States Bankruptcy Court for the Southern District of New York.

Interim Distribution Calculation

To make interim distributions from the BLMIS Customer Fund, the SIPA Trustee must determine or estimate both the total value of customer property available for distribution (including reserves for disputed recoveries) and the total net equity of all allowed claims (including reserves for disputed claims).

There are unresolved issues that require maintenance of substantial reserves with respect to both the customer property “numerator” and the net equity claims “denominator.” This includes the expected increase of several billion dollars in the value of allowed claims due to the 113 additional claims that have been deemed determined by the SIPA Trustee pending the outcome of litigation, the time value of money and appeals of other settlements.

Nevertheless, even when taking reserves into account, it is possible for the SIPA Trustee, on an interim basis, to determine the (a) allocation of property to the BLMIS Customer Fund or the “numerator”; (b) amount of allowable net equity claims or the “denominator”; and (c) calculation of each allowed claimant’s minimum pro rata share of the Customer Fund.

The equation is as follows:

 

For the purposes of interim distributions, the SIPA Trustee’s calculations must take into consideration all unresolved issues and establish sufficient reserves to ensure that he would be able to make a pro rata distribution to all potentially eligible claimants, whether or not their claims are allowed at the time of distribution.

There are two primary reasons why significant funds are not available for distribution at this time: required reserves and ongoing appeals.

Required BLMIS Customer Fund Reserves for Deemed Determined Claims

As of August 12, 2015, while there are 2,560 allowed claims and the dollar amount of allowed claims is approximately $14.846 billion, both the number of allowed claims and the dollar amount will increase over time. There remain 113 claims, which have been "deemed determined" by the SIPA Trustee, but their status as "allowed" claims is not yet final, pending the outcome of ongoing litigation. If allowed, these claims would become eligible for all pro rata distributions to date. For this potential scenario, the SIPA Trustee must set aside a reserve for the five interim distributions of 48.802 percent of potential payments, and has therefore to date reserved approximately $1.879 billion. The ultimate amount of additional allowed claims depends on the outcome of litigation or negotiation and could add billions of dollars to the total amount of allowed claims.

Court-Ordered Time-Based Damages Reserve

The Supreme Court of the United States announced, on June 25, 2012, that it had denied two writs for certiorari which had asked the Court to review the SIPA Trustee’s net equity methodology. The Court’s action finalized the SIPA Trustee’s “cash-in, cash-out” formula as the measure for determining eligibility for pro rata distributions from the BLMIS Customer Fund.

On July 26, 2012, the SIPA Trustee filed a motion in the United States Bankruptcy Court for the Southern District of New York seeking approval for an allocation of recovered monies to the BLMIS Customer Fund and for a second pro rata interim distribution from the Customer Fund to BLMIS customers with allowed claims.

However, over time, more than 1,200 objections had been filed relating to the time-based damages issue. The objections relate to additional payments, based on the New York state statutory pre-judgment interest rate of 9 percent, inflation or other damages calculations, sought by certain claimants.

On August 22, 2012, the Honorable Burton R. Lifland approved the SIPA Trustee’s motion for the allocation and a second pro rata interim distribution and, at the same time, ordered the SIPA Trustee to establish a reserve representing 3 percent of all BLMIS Customer Fund recoveries, should the time-based damages matter be resolved in favor of the appellants. To date, that reserve amount totals $1.449 billion.

On September 10, 2013, the United States Bankruptcy Court for the Southern District of New York approved the SIPA Trustee’s motion to deny time-based damages adjustments to customer claims. That decision was appealed by certain objecting parties on September 24, 2013. An order was filed by the Bankruptcy Court certifying the order of September 10, 2013 for immediate appeal to the United States Court of Appeals. The appeal was accepted by the Second Circuit on January 22, 2014, and oral arguments were heard on Tuesday, October 14, 2014.

On February 20, 2015, the Second Circuit reaffirmed the decision of the Bankruptcy Court that claimants in the SIPA liquidation of BLMIS are not entitled to time-based damages.

On April 15, 2015, the SIPA Trustee filed a motion in the Bankruptcy Court seeking to allocate $1.249 billion, which had been held in reserve related to the time-based damages issue, to the BLMIS Customer Fund and requesting authorization for a sixth pro rata interim distribution from the Customer Fund to BLMIS customers with allowed claims. A hearing was originally scheduled for May 28, 2015. For more information on this filing, click here

On May 26, 2015, the SIPA Trustee filed a notice of adjournment of the May 28 hearing for approval of the sixth interim distribution motion. The notice, filed with the United States Bankruptcy Court for the Southern District of New York, adjourned the hearing until July 29, 2015.

The May 28 hearing was originally scheduled for seven days after the expiration of the time period within which claimants could ask the Supreme Court of the United States to review the Second Circuit decision by filing a petition for a writ of certiorari. If no petitions had been filed, the SIPA Trustee’s sixth distribution motion hearing would have been able to go forward on that date.

Certain parties requested an extension of the deadline to file a petition for certiorari. The request was granted by the Supreme Court of the United States and the deadline was extended to July 20, 2015.

On July 21, 2015, the SIPA Trustee filed a notice of adjournment of the July 29 hearing for approval of the sixth interim distribution motion. The notice was filed with the United States Bankruptcy Court for the Southern District of New York.

The hearing has been adjourned because certain BLMIS claimants have filed a petition with the Supreme Court of the United States seeking a writ of certiorari to review the decision by the United States Court of Appeals for the Second Circuit regarding “time-based damages.” 

The hearing for approval of the sixth interim distribution motion will not be rescheduled until such time as the Supreme Court resolves the petition for certiorari and the time-based damages issue reaches a final, unappealable conclusion.

Other Customer Fund Required Reserves

As of August 12, 2015, other reserves, including reserve for deferred payments and unallocated funds: approximately $86.6 million.

Amount Unavailable to the BLMIS Customer Fund Due to Required Reserves and Appeals

Portions of recoveries and settlement agreements have not yet been collected, due to appeals, the timing of payments of certain settlement monies and other issues. Therefore, these funds cannot be either allocated to the Customer Fund or distributed to BLMIS customers with allowed claims until these issues are resolved. As of August 12, 2015, approximately $236.7 million relating to settlement reserves and other matters must be held in reserve.

Advances Reimbursed to SIPC on Fully Satisfied Accounts

In the Bernard L. Madoff Investment Securities LLC (BLMIS) liquidation, the Securities Investor Protection Corporation (SIPC) has made cash advances – up to a maximum of $500,000 per allowed claim – available to the court-appointed Securities Investor Protection Act (SIPA) Trustee to distribute to eligible customers, as a way to expedite financial relief to these customers. As of August 12, 2015, SIPC has committed approximately $825.7 million to the BLMIS liquidation for this purpose. SIPC-committed advances will continue to increase as claims that are currently in litigation are allowed as a result of settlements or the conclusion of litigation.

According to the provisions of SIPA, SIPC is reimbursed for its advances to customers once each respective customer claim is fully satisfied. As of the fifth pro rata interim distribution in the BLMIS liquidation proceeding, SIPC received $125.3 million in reimbursement from the Customer Fund for advances paid on fully satisfied accounts.

Reimbursement payments to SIPC are calculated as follows:

On a claim that has been allowed in the amount of $976,592:

In another example, if a claim were allowed in the amount of $2 million, distributions to date would be as follows: