BakerHostetler attorneys working on Madoff liquidation recognized in Law360 article on key Second Circuit decision

News / August 16, 2011

On August 16, 2011, Law360 reporter Evan Weinberger filed an article – entitled "Madoff Investors Can’t Collect Fake profits:  2nd Circ." – that named BakerHostetler Partners David J. Sheehan, Thomas Warren, Counsel Wendy Gibson, and Associate Seanna Brown, as well as SIPA Trustee and BakerHostetler Partner Irving H. Picard. The article describes a Second Circuit Court of Appeals decision which upheld a critical Bankruptcy Court ruling affirming the SIPA Trustee's "net equity" or "net investment" method for determining the claim amounts for eligible customers of Bernard L. Madoff Investment Securities LLC (BLMIS). The decision helped ensure that certain customers of BLMIS – who withdrew more money than they deposited with BLMIS – would not benefit at the expense of other customers who had withdrawn less than their total BLMIS deposits.

Mr. Weinberger summed up the court decision by stating, "The appeals court ruled that the so-called net investment method adopted by Picard, which allows for victims to collect only the money they gave to Madoff minus the amount they withdrew from their accounts, was the fairest way to compensate them. The decision affirmed a March 2010 decision in New York bankruptcy court. Investors in the scheme challenged that decision, saying that they should be compensated based on their last statement from Bernard L. Madoff Investment Securities LLC. But the Second Circuit ruled that because Madoff never actually invested the money his victims handed over, there were no real profits to collect." The article referenced that Judges Dennis Jacobs, Pierre N. Laval, and Reena Raggi sat on the panel for the Second Circuit for the case entitled Bernard L. Madoff Investment Securities LLC, case number 10-2378-bk, in the U.S. Court of Appeals for the Second Circuit.

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