Setback for Madoff Victims as the Bankruptcy Court Knocks Down Defendant’s Value Argument to Retain the Fictitious Profit
April 28, 2016, New York – U.S. Bankruptcy Judge Stuart Bernstein in New York said earlier last week that Andrew H. Cohen, a former trader in Madoff’s market-making business, should return $1.14 million he withdrew from his personal account in Madoff’s bogus investment advisory unit. As per the proposed findings of fact and conclusions of law signed by Judge Bernstein, Cohen deposited a total of $2,921,539 and withdrew a total of $4,065,000. Of the withdrawals, a total of $1,143,461 was withdrawn by Cohen in excess of the principal, representing fictitious profits, and all of these withdrawals took place within the two-year period prior to the filing date.
Cohen argued against returning the money on the grounds that he received the cash for value on a debt Madoff owed. Cohen also argued that he is entitled to recover as direct and consequential damages the amount of $773,869.00 he paid in taxes on account of fictitious profits and $45,760.95 in legal fees and expenses he incurred defending claims brought against him as a result of Madoff’s fraud. However, Judge Bernstein rejected these arguments in post-trial findings on April 25, wherein the judge recommended that the District court enter a judgment in the Trustee’s favor. Judge Bernstein stated that “even if the defendants had claims against BLMIS under state or federal law, the transfers from BLMIS exceeding the return of defendants’ principal were not made ‘for value’.
The Court found that Cohen was a good faith transferee (he did not willfully blind himself to Madoff’s fraud) and his liability was limited to the fictitious profits he received within two years of the filing date. Accordingly, the Bankruptcy Court respectfully recommended that the District Court adopt the proposed findings of fact and conclusions of law, and enter a judgment in favor of the Trustee and against the defendant in the sum of $1,143,461. This conclusion may prove a setback for many Madoff investors, who were hoping to retain millions in fake profit from the Madoff’s Ponzi scheme.
The case is Securities Investor Protection Corp. vs. Andrew H. Cohen, 08-01789, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).
New Jersey Court – Relevant Inquiry for Determining Ordinary Course Analysis is Whether Transactions Reflect Divergence from Industry Norms
Dots, LLC v. Milberg Factors, Inc. (In re Dots, LLC), 562 B.R. 286 (Bankr. D.N.J….Read More
BAP Affirms the Ohio Court Ruling in Avoiding the Transfer as Preference Because Appellant Did not Have Valid Perfected Lien Over the Vehicles
Dymarkowski v. Savage (In re Hadley), No. 16-8010, 2016 Bankr. LEXIS 4445 (U.S. B.A.P. 6th…Read More
Delaware: Claim, Not Invoice , Creates an Obligation to Pay
Pirinate Consulting Grp., LLC v. Md. Dep’t of the Env’t (In re Newpage Corp.), Nos….Read More
Trustee Demonstrates Multiple Badges of Fraud to Successfully Avoid the Transfer as Fraudulent Under §548.
Corzin v. DiGiammarino (In re Maglione), Nos. 14-50685, 14-05110, 2016 Bankr. LEXIS 3722 (U.S. Bankr….Read More
Madoff Trustee Begins Seventh Pro Rata Interim Distribution of Recovered Funds to Madoff Claim Holders
New York, June 30, 2016 – Irving H. Picard, Securities Investor Protection Act (SIPA) Trustee…Read More