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Madoff Trustee Moves for Direct Appeal to Second Circuit in a Clawback Fight Against RBS

March 28, 2017, New York – On March 15, 2017, the trustee Irving Picard for Bernie Madoff’s fraudulent investment scheme sought certification of a bankruptcy court’s final judgment for immediate appeal to the United States Court of Appeals for the Second Circuit under 28 U.S.C. § 158(d)(2)(A) and Federal Rule of Bankruptcy Procedure 8006(f). The call for a direct appeal stemmed from the bankruptcy court’s findings that the trustee cannot pursue clawbacks to recover Ponzi scheme proceeds transferred from foreign Madoff feeder funds to other foreign investment funds mostly owned by European banks. The bankruptcy court’s decision had resulted in the dismissal of the Picard’s complaint against RBS, formerly known as ABN Amro bank, wherein the trustee intended to recover about $22 million which were purportedly fraudulently transferred from a Madoff feeder fund to the bank. The Court had dismissed the trustee’s claims due to international comity and extraterritoriality grounds.

With this direct appeal, the Trustee now requests the Second Circuit to determine if he can claw back Ponzi scheme proceeds transferred from foreign Madoff feeder funds. The Trustee urged the Second Circuit to rule on whether and in what circumstances the Bankruptcy Code permits the recovery of property fraudulently transferred by the debtor when it has been subsequently transferred in transactions with allegedly extraterritorial components. RBS has requested the court to deny the trustee’s motion for direct appeal, alleging that the question needs to go to the district court. RBS argued that the trustee has failed to establish the legal grounds to justify bypassing the district court on the issue, especially as the dispute stems from a 2014 district court order on clawbacks from foreign banks.

The case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, et al., case number 1:08-ap-01789, in the U.S. Bankruptcy Court for the Southern District of New York.


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