RECOVERIES AND SETTLEMENT AGREEMENTS
$13.412 Billion

CUSTOMER FUND, including required reserves
$1.649 Billion

AMOUNT DISTRIBUTED FROM CUSTOMER FUND
$11.758 Billion

SIPC COMMITTED FUNDS SUBJECT TO SUBROGATION*
$623.8 Million

AMOUNT UNAVAILABLE DUE TO SETTLEMENT RESERVES
$5.5 Million

MAJOR COURT DECISIONS ADVANCING SIPA LIQUIDATION OF BLMIS

Net Equity
Customer Definition
Antecedent Debt
Section 550(a)/Subsequent Transferees
Time-Based Damages
Inter-Account Transfers
Profit Withdrawal
Extraterritoriality

Net Equity – June 25, 2012
Under the Trustee’s Net Investment Method, a customer’s net equity is calculated by crediting the amount of cash deposited by the customer into his BLMIS account, less any amounts already withdrawn from that BLMIS customer account. Conversely, some claimants argued that Net Equity should be based on the value of the securities reflected in the November 2008 BLMIS account statements.

On August 16, 2011, the Second Circuit upheld the Bankruptcy Court’s approval of the Net Investment Method, affirming that the Net Investment Method is appropriate for calculating the net equity of a BLMIS customer’s account and rejecting the use of the fictitious November 2008 BLMIS account statements in determining the value of claims. In other words, the Trustee’s Net Investment Method is the formula for determining eligibility for pro rata distributions to BLMIS customers with allowed claims from the Customer Fund, based on “cash-in, cash-out” of BLMIS. See Sec. Investor Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 654 F.3d 229, 241 (2d Cir. 2011). Click here to read decision

The claimants filed petitions for writs of certiorari with the United States Supreme Court. On June 25, 2012, the Supreme Court declined to review the petitions, ending the appeals process regarding the Net Equity issue.

Customer Definition – February 22, 2013
The Trustee’s consistent position has been that only those claimants who maintained an account at BLMIS are “customers” of BLMIS, as defined in the Securities Investor Protection Act (“SIPA”). Many claimants did not open accounts directly at BLMIS; instead, they invested in feeder funds, which then opened accounts at BLMIS.

On February 22, 2013, the Second Circuit affirmed the decisions of the District Court and Bankruptcy Court, holding that certain BLMIS investors – those who invested in feeder funds with accounts at BLMIS – did not qualify as “customers” under SIPA. Further, the Second Circuit clarified that only investors who invested directly by holding BLMIS accounts in their own names qualified as “customers” under SIPA. See Kruse v. Sec. Investor Prot. Corp., Irving H. Picard, 708 F.3d 422 (2d Cir. 2013). Click here to read decision

No petitions for writs of certiorari to the Supreme Court were filed, ending the appeals process.

Antecedent Debt – October 15, 2013
The District Court considered whether the Trustee’s claims against certain defendants should be dismissed in light of the defendants’ argument that they gave value in exchange for the transfers they received.

On October 15, 2013, the District Court ruled that the Trustee’s avoidance claims against certain defendants should not be dismissed, stating that claims against the general BLMIS estate do not constitute antecedent debts and do not create “value” within the meaning of section 548(c) of the Bankruptcy Code. Further, the Court held that inter-account transfers of amounts exceeding principal in the account of the transferor continue to be fictitious profits, not principal, in the account of the recipient. See Sec. Inv’r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 499 B.R. 416 (S.D.N.Y. 2013). Click here to read decision

Section 550(a)/Subsequent Transferees – October 29, 2013
The Trustee brought recovery actions against feeder funds, as well as those who received transfers of customer property from the feeder funds (the “Subsequent Transferees”). In these actions, the Trustee alleged that the feeder funds received avoidable initial transfers of customer property from BLMIS, the feeder funds transferred the initial transfers to the Subsequent Transferees, and those amounts were recoverable under section 550(a) of the Bankruptcy Code.

The issue was whether section 550(a)’s limitation on the Trustee’s recovery of transfers “to the extent that a transfer is avoided” requires the Trustee to obtain an actual, adjudicated judgment of avoidance, or whether it merely required him to prove in a recovery action that the transfer he seeks to claw back is avoidable. The District Court held that section 550(a) requires the Trustee to show that a given transfer is avoidable and does not require an actual judgment of avoidance. See Sec. Inv’r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 501 B.R. 26 (S.D.N.Y. 2013). Click here to read decision

Time-Based Damages – October 5, 2015
Under the Net Investment Method, customer claims for net equity are limited to the “cash in/cash out” amount. But some claimants asserted that they were entitled to an inflation or interest adjustment on their claims. The Trustee’s position was that customers were not entitled to an inflation-based adjustment to their allowed customer claims. On February 20, 2015, the Second Circuit affirmed the Bankruptcy Court’s decision, holding that claimants in the SIPA liquidation of BLMIS are not entitled to any interest or inflation adjustments on money deposited at BLMIS. See In re Bernard L. Madoff Inv. Sec. LLC, 779 F.3d 74, 80, 82 (2d Cir. 2015). Click here to read decision

The defendants filed a petition for a writ of certiorari with the United States Supreme Court, and on October 5, 2015, the Supreme Court declined to review the petition, ending the appeals process.

Inter-Account Transfers – June 1, 2017
The question arose as to how to value the net equity of transfers between BLMIS accounts (“Inter-Account Transfers”).

To calculate net equity following an Inter-Account Transfer, in which no new funds entered BLMIS, the Trustee gave credit only for the amount of principal available in the transferor account to be transferred; credit was not given for fictitious profits. If the transferor BLMIS account did not have any principal available at the time of the transfer, then $0 was credited to the transferee BLMIS account.

On June 1, 2017, the Second Circuit issued a Summary Order affirming the District Court’s order upholding the Trustee’s application of the Net Investment Method to Inter-Account Transfers. See In re Bernard L. Madoff Inv. Sec., LLC, 16-413-bk(L), 2017 WL 2376567, *3 (2d Cir. Jun. 1, 2017). Click here to read decision

No petitions for writs of certiorari to the Supreme Court were filed, ending the appeals process.

Profit Withdrawal – July 27, 2018 Active Case
Several hundred BLMIS account statements contained the notation “PW”, or “Profit Withdrawals.” The Trustee treated “PW” transactions as cash withdrawals for the purposes of determining a customer’s net equity. After a trial before the Bankruptcy Court, the Trustee’s treatment of PW transactions as debits was upheld on July 27, 2018. See Sec. Inv’r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 592 B.R. 513 (Bankr. SDNY 2018). Click here to read decision Claimants appealed the decision to the District Court.

The matter currently is pending.

Extraterritoriality – February 25, 2019 Active Case
On February 25, 2019, the Second Circuit reversed two rulings by the lower courts holding that the Trustee could not recover funds stolen from Madoff and subsequently transferred overseas.

The Second Circuit held that the presumption against extraterritoriality and principles of international comity do not limit the reach of section 550(a)(2) of the Bankruptcy Code, enabling the Trustee to use it to recover property from a foreign subsequent transferee that received the property from a foreign initial transferee. See In re Picard, Tr. for Liquidation of Bernard L. Madoff Inv. Sec. LLC, No. 17-2992 (L), 2019 WL 903978 (2d Cir. Feb. 25, 2019). Click here to read decision

The decision allows the Trustee’s legal team to target approximately $4 billion that was withdrawn from BLMIS by its feeder funds, who then redistributed that money to their foreign managers and investors.

The defendants filed a Petition for Rehearing and Rehearing En Banc on March 11, 2019. The Second Circuit denied the Petition on April 3, 2019.

The defendants then sought a stay of the mandate pending the Supreme Court’s disposition of their impending petition for a writ of certiorari. The Trustee opposed that motion on April 18, 2019. The Second Circuit entered an order granting the defendants’ motion to stay the mandate on April 23, 2019.