Madoff Bankruptcy Decision Offers Protection for Foreign Investors


In re Madoff Securities Extends Morrison Framework to Prevent Avoidance of Purely Foreign Transfers under SIPA and the Bankruptcy Code -

Applying the U.S. Supreme Court’s landmark decision in Morrison v. National Australian Bank Ltd., 130 S. Ct. 2869 (2010), to the highest profile and widest-ranging securities fraud case in decades, Judge Jed S. Rakoff of United States District Court for the Southern District of New York ruled Monday, July 7, 2014, that the trustee administering Bernie Madoff’s insolvent estate may not use the U.S. Bankruptcy Code to claw back “purely foreign” transactions between foreign entities. By applying Morrison to such a visible case with a number of foreign defendants, the court recognized an important protection for foreign investors who may not have anticipated that their investments — and their returns — could otherwise be subject to clawback under US law.

Background -

Madoff funded his now-famous Ponzi scheme partly through the investments from so-called “feeder funds” — investment vehicles that pooled investments from outside investors and in turn invested those monies in Madoff’s putative investment company, Bernard L. Madoff Investment Securities LLC (BLMIS). Many of these feeder funds were organized and operated outside of the United States and, not surprisingly, many of their investors were foreign persons or entities.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Latham & Watkins LLP | Attorney Advertising

Written by:


Latham & Watkins LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.