Major Supreme Court Victory Limiting Claw-back Exposure for Innocent Investors in the Bernard Madoff Ponzi Scheme

Successfully convinced the U.S. Supreme Court to decline certiorari on an appeal in a closely watched bankruptcy case. The trustee liquidating Bernard Madoff’s former brokerage firm was seeking to appeal a Second Circuit ruling that significantly limited the trustee’s ability to “claw back” redemption payments made many years ago to victims of Madoff’s fraud. The Second Circuit’s decision upheld the application of Bankruptcy Code Section 546(e)’s “safe harbor” to the redemptions of innocent Madoff victims. Because of the Supreme Court ruling, those Madoff victim defendants will not have to repay nearly $2 billion they withdrew in good faith from the Madoff firm, and Loeb & Loeb clients and their families will save approximately $80 million. The Second Circuit’s decision upheld the application of the Bankruptcy Code § 546(e) safe harbor to the redemptions of good-faith Madoff victims. The practical effect of this decision was to insulate from avoidance all of the redemption payments made to good-faith victims more than two years before the commencement of the Madoff liquidation – the Madoff trustee had been seeking to recover payments made as far back as six years. The decision also bars the Madoff trustee from seeking to recover preferential transfers from good-faith victim defendants. Loeb & Loeb was one of three firms that briefed and argued the appeal as part of a good-faith customer joint defense team