On a single day, April 2, 2012, 202 motions (including 108 second motions) to withdraw the reference were filed in the Madoff SIPA adversary “claw back” proceedings. This spike brought to 983 the number of motions were filed by defendants seeking to have their cases heard by the U.S. District Court, rather than the U.S. Bankruptcy Court, for the Southern District of New York. Out of the 1140 Madoff adversary proceedings, defendants in 760 have sought transfer to the District Court.
Fairfield Sentry Limited and Kenneth Krys, as Foreign Representative and Liquidator (“Fairfield Sentry”) has brought an additional wave of 46 bankruptcy adversary proceedings in the Chapter 15 bankruptcy case of “the largest of all so called ‘feeder funds’ to maintain accounts with [Bernard L. Madoff Investment Securities LLC]”. With the filing of these additional complaints, the total avoidance actions brought by Fairfield Sentry reaches 227. The claims in these proceedings are brought under the laws of the British Virgin Islands (“BVI”). The in the Chapter 15 bankruptcy case of “the largest of all so called ‘feeder funds’ to maintain accounts with [Bernard L. Madoff Investment Securities LLC]”.
02/28/2012 – Trustees Memorandum of Law in Opposition to Motions to Dismiss filed in the Madoff Adversary Proceedings by Trotanoy Investment Company Ltd. et al before in the Southern District of New York (Manhattan) filed by Baker & Hostetler LLP (New York, NY) attorneys David J. Sheehan, Deborah H. Renner, Sarah Jane T.C. Truong, Samir K. Ranade, Sammantha E. Clegg, Constantine P. Economides and David Choi.
Irving H. Picard, as trustee (the “Trustee”) for the substantively consolidated liquidation of the business of Bernard L. Madoff Investment Securities LLC (“BLMIS”) and the estate of Bernard L. Madoff (“Madoff”), opposes the motions to dismiss for lack of personal jurisdiction filed by three foreign entities Palmer Fund Management Services Limited (“Palmer”), Hyposwiss Private Bank Genève S.A. (“Hyposwiss”), and Access International Advisors Ltd. (“AIA Ltd.”) (collectively, the “Moving Defendants”). The brief is notable for its use of jurisdictional expanding agency relationship and “mere department” relationship theories – forward, backward and through “commonly-controlled” entities.
07/26/2011 – Memorandum of Law in Support of Citibank N.A., Citicorp North America, Inc. and Citigroup Global Markets Limiteds Motion to Dismiss the Trustees Complaint filed in the Bernard l. Madoff Investment Securities LLC Adversary Proceedings by Citibank, N.A. et al before Judge U.S. Bankrutpcy Judge Burton R. Lifland in the Southern District of New York (Manhattan) filed by Cleary Gottlieb Steen & Hamilton LLP Carmine D. Boccuzzi, Jr. (New York, New York) attorneys David Y. Livshiz, Jr. and David Y. Livshiz.
Defendants Citibank, N.A., Citicorp North America, Inc.’ (“CNAI,” and together with Citibank, N.A., “Citibank”) and Citigroup Global Markets Limited (“CGML” and collectively with Citibank, “the Citi Defendants”) challenge Trustee Irving H. Picard’s effort to “clawback” four transfers, in the aggregate amount of $430 million, received by CGMI, and Citibank as purported subsequent transferees from Fairfield Sentry Limited (“Sentry”) and the Rye Select Broad Market Prime Fund, L.P. (“Prime Fund”). Defendants make three arguments in support of their motion to dismiss the Trustee’s thirteen count complaint to recover transfers on preference, constructive fraudulent conveyance and state law theories. The Defendants argue that the “safe harbors” of sections 546(e) and (g) of the Code protect the Defendants from avoidance the transfers at issue. Additionally, the Defendants claim that the Complaint fails to adequately plead recovery of the transfers under Section 550. However, this memorandum of law is significant for argument that, in the case of Sentry, “the Trustee has expressly relinquished his ability to ever avoid the initial transfers by entering into a settlement agreement with Sentry and agreeing to the entry of a consent judgment that does not avoid the alleged initial transfers.” Registered users click here to see a copy of this brief.
The Defendants acknowledge that they are swimming upstream with this motion that both seeks dismissal based on an affirmative defense and is based on an interpretation of Section 546(e) that seemingly has been consistently rejected in prior court decisions. It is the Defendants’ arguments to distinguish the prior, adverse decisions on the applicability of Section 546(e) that especially make this decision noteworthy. In particular, the Defendants attempt to distinguish existing authority because here the Defendants are “not alleged to have any knowledge or participation in the fraudulent activities of Madoff; nor are they alleged to have received any of the transfers in bad faith.”
06/01/2011 – Defendant’s Memorandum of Law in Support of Motion to Dismiss filed in the Bernard L. Madoff Bankruptcy Adversary Proceedings brought by Irving H. Picard against Weiner et al before Judge Lifland in the Southern District of New York (Manhattan).
This is a probing, broad based motion to dismiss, challenging every count of the Trustee’s 7 count complaint. The motion to dismiss initially attacks the Trustee pleading of actual fraudulent transfers and in particular the element of actual fraudulent intent. However, the focus of the motion to dismiss is heavily weighted toward Picard’s claims based on the transfers being constructive fraudulent conveyances under the New York Debtor and Creditor Law (“NYDCL”). It is this aspect of the motion that most makes it noteworthy.
05/10/2011 – Motion to Dismiss filed in the Madoff Adversary Proceedings by L.H. Rich Companies et al before Judge Lifland in the Southern District of New York (Manhattan). The Defendants seek dismissal of the avoidance claims of Trustee Picard pursuant to Fed. R. Civ. P. 12(b)(5) for insufficient service of process and Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. The latter grounds are based on “conclusory allegations as to subsequent transferees.” Dismissal of the proceedings, however, is only one of the options available to the Court to address the challenges. The courts holding on the “substantive” issues will be less instructive to other defendants than the steps ordered by the Court to redress the deficiencies in service and pleading. Registered users, click this link to see the filing.*
The long anticipated avoidable transfer recovery proceedings against former clients of Bernard L. Madoff commenced being filed on November 26, 2010 and by December 4, 2010, the total number of complaints filed reached 887 (update April 05, 2011 – a total of 1057 avoidance actions were filed after November 26, 2010). The complaints were filed by Irving H. Picard, as trustee (the “Trustee”) in the substantively consolidated proceeding brought under the Securities Investor Protection Act (“SIPA”) for the liquidation of the business of Bernard L. Madoff Investment Securities LLC and the bankruptcy estate of Bernard L. Madoff , individually (collectively “Madoff”). The statutory grounds for the avoidance actions include Sections 547- Preferences and 548 – Fraudulent Transfers – under the Bankruptcy Code. This note provides a cursory overview of the avoidance actions.