In re: Bernard L. Madoff Investment Securities LLC, No. 12-2557 (2d Cir. 2014)Annotate this Case
The Trustee for the Bernard L. Madoff Investment Securities LLC (BLMIS) under the Securities Investor Protection Act (SIPA), 15 U.S.C. 78aaa et seq., filed suit against hundreds of BLMIS customers who withdrew more from their accounts than they had invested and profited from Madoff's scheme. Defendants moved to dismiss the actions on the ground that the payments received by BLMIS customers were securities-related payments that cannot be avoided under 11 U.S.C. 546(e). Section 546(e) establishes an important exception to a trustee's clawback powers and provides that certain securities-related payments, such as transfers made by a stockbroker in connection with a securities contract, or settlement payments cannot be avoided in bankruptcy. The court affirmed the district court's conclusion that the payments were shielded by section 546(e) and dismissal of the relevant claims under Rule 12(b)(6).