Vince Sullivan, 24 March 2021
A client of the notorious Ponzi scheme run by Bernard L. Madoff must return nearly $3 million in fictitious profits it received from the scheme after a New York federal judge found in favor of the trustee overseeing the Madoff fund’s liquidation.
U.S. District Court Judge John G. Koeltl granted summary judgment to Irving H. Picard, the trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff, and ordered JABA Associates to fork over $2,925,000 in payouts it received in the two years before Madoff’s scheme crumbled in December 2008.
Judge Koeltl said summary judgment in the recovery litigation was appropriate based on the Securities Investor Protection Act, which empowers a trustee to recover fraudulent transfers from a failed broker-dealer to a customer in the two years prior to a bankruptcy filing. In this case, JABA — a good-faith investor in the Madoff scheme that wasn’t aware of the fraud when it received the payments — received money through transfers that were intended by Madoff to defraud other investors, the court said.
“In this case, the transfer of property was made with actual intent to defraud,” Judge Koeltl wrote. “It is well established that the trustee is entitled to rely on a presumption of fraudulent intent when the debtor operated a Ponzi scheme.”