November 28, 2016
On November 22, 2016, the Firm prevailed on its motion to dismiss in an action by the trustee of Bernard L. Madoff Investment Securities LLC (“BLMIS”) against the Firm’s client, Fairfield Investment Fund Limited (“FIFL”). The Trustee sought to claw back over $330 million in alleged redemptions by FIFL from Fairfield Sentry Limited (“Sentry”), one of BLMIS’s largest alleged feeder funds. SDNY Bankruptcy Judge Bernstein (i) granted the motion to dismiss all claims against FIFL as a subsequent transferee of Sentry under principles of comity, deferring to the British Virgin Islands (“BVI”) courts overseeing Sentry’s liquidation proceedings for purposes of any claw backs of redemptions from Sentry, (ii) agreed with FIFL’s argument that the presumption against extraterritoriality prohibited the Trustee from applying Bankruptcy Code Section 550(a) to recover funds that were transferred from one foreign entity to another foreign entity between bank accounts located abroad and (iii) denied as futile the Trustee’s motion to amend the operative complaint against FIFL.
A copy of the Bankruptcy Court Decision is available here.