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In what may be the beginning of the final chapter of more than a
decade of litigation involving efforts to recover $41 million of
the fictitious profits paid to certain investors in Bernard
Madoff’s defunct brokerage firm as part of the largest Ponzi
in history, the U.S. Supreme Court on May 3, 2021, denied a
petition to review a 2020 decision by a three-judge panel of the
U.S. Court of Appeals for the Second Circuit. The decision held
that the investors did not have a defense to avoidance and recovery
on the basis that they received the payments “for value.”
See Picard v. Gettinger (In re Bernard L. Madoff Investment
Securities LLC)
, 976 F.3d 184 (2d Cir. 2020), cert. denied
sub nom. Gettinger v. Picard
, No. 20-1382, 2021 WL 1725218
(U.S. May 3, 2021).

In particular, the Second Circuit panel ruled that the investors
could not rely on a Bankruptcy Code provision insulating good-faith
transferees from avoidance liability because that provision
conflicts with the Securities Investor Protection Act
(“SIPA”), which prioritizes customers over general
creditors and only selectively incorporates the Bankruptcy Code to
the extent not inconsistent with SIPA’s provisions. The Second
Circuit also ruled that the trustee overseeing the brokerage
firm’s liquidation properly figured the amount subject to
recovery despite…

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