Second Circuit Reverses Lower Courts, Preserves Madoff Trustee's Ability To Pursue $3.75 Billion of Stolen Customer Property

News / August 30, 2021

On Aug. 30, 2021, in a significant decision that paves the way for additional substantial recoveries for the victims of Bernard L. Madoff’s Ponzi scheme, the Second Circuit Court of Appeals preserved the ability of Irving H. Picard, SIPA Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS), to pursue $3.75 billion of stolen customer property currently in the hands of participants in the global financial markets. The Second Circuit reversed the rulings of the bankruptcy and district courts on issues relating to a transferee’s bad faith under the Bankruptcy Code and reaffirmed the longstanding principle that good faith is an affirmative defense that defendants have the burden to plead.

The decision marks the second major reversal by the Second Circuit in recent years secured by the Madoff appellate team, led by Seanna Brown, who worked alongside Amy Vanderwal, Matthew Feil, Chardaie Charlemagne and Frank Oliva, on the appeal. The decision, along with the prior ruling on extraterritoriality, affects not only the Madoff case but has a huge impact on the bankruptcy bar at large and future SIPA liquidations.

To date, David Sheehan, Irving Picard and the Madoff team have recovered an unprecedented $14.477 billion on behalf of the Madoff victims.