August 28, 2018, New York – A group of investors that earned millions in Ponzi scheme proceeds from Bernie Madoff’s defunct investment firm urged a New York federal judge last month to overrule the recommendations of a bankruptcy judge and grant them judgment over a trustee’s efforts to claw back $41 million.
In a letter to judge, they contended that the Trustee alleges fraudulent transfer claims under Section 548(a)(1)(A) of the Bankruptcy Code and seeks amounts received from by the Defendants in excess of the net cash each deposited with their broker over time, characterizing the amounts received in excess of their deposits as so-called “fictitious profits.” While the defendants did not dispute that the Trustee had made out a prima facie case of fraudulent transfer, they alleged that the bankruptcy statute sets forth affirmative defenses that are the crux of the legal issues in dispute. They argued that there are additional crucial questions before the court such as – whether a 2013 opinion by District Court Judge Jed Rakoff in the antecedent debt decision, on which the Trustee continues to rely, has been superseded by later Second Circuit decisions in this case etc.
The Defendants contended that the proposed bankruptcy court decision would deny the Defendants’ motion and grant the Trustee’s cross-motion for summary judgment. The Defendants have objected to that proposed decision on particularized grounds and thereby requested oral arguments to help clarify the issues for decision and help facilitate a well-informed basis for making a decision on the merits of the defenses presented