Irving Picard, Seanna Brown Recognized by Bloomberg for Victory Against Madoff Investors in the Second Circuit

News / September 29, 2020

A September 29, 2020 article by Bloomberg Opinion columnist Nir Kaissar entitled, “Madoff Clawbacks Point to a Recipe for Fairness,” recognized BakerHostetler Partner Seanna R. Brown, as well as SIPA Trustee and BakerHostetler Partner Irving H. Picard. The article highlighted the SIPA Trustee’s recent victory in the Picard v. Gettinger, et al. matter before the Second Circuit. On September 24, 2020, the Second Circuit affirmed the district court’s judgment, holding that investors cannot give value for fictitious profits received in a Ponzi scheme.

As Kaissar wrote, the Second Circuit ruled that “…investors who profited from Madoff’s scheme must return their ill-gotten gains so that less fortunate investors can recover more of their losses. Of course, the three-judge panel ground its ruling in law rather than considerations of fairness – in legal jargon, it found that the Securities Investment Protection Act, which aims to return money to swindled investors, trumps a more general provision in the bankruptcy code that might otherwise prevent the clawback. But in this case, the legal outcome is also the equitable one.”

Kaissar continued, “It may seem harsh to take back profits from Madoff’s investors given that they were presumably unaware of the scam. But the alternative – allowing them to keep them at the expense of other defrauded others – is worse. Remember that in a Ponzi scheme, newer investors’ money is used to pay older investors, so profit paid to one is literally money stolen from another.” The article also quotes Brown saying, “The court rightly recognized that a dollar of profit paid to any one investor is a loss to another, no matter the label put on that dollar.”

The case is Picard v. Gettinger, et al., case numbers 19-429, 19-443, 19-501, and 19-510, in the U.S. Court of Appeals for the Second Circuit.

Read the article.

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