New York Securities Lawyer Blog
On July 26, 2012, Irving H. Picard, the Trustee (“Trustee”) for the liquidation of Bernard L. Madoff Investment Securities LLC (“BLMIS”) filed a motion before the Honorable Burton R. Lifland in the United States Bankruptcy Court for the Southern District of New York seeking entry of an order approving the second interim pro-rata distribution to customers with allowed Securities Investor Protection Corporation (“SIPC”) claims. Specifically, the Trustee’s motion seeks Judge Lifland to enter an order (1) approving the second allocation of property to the fund of customer property (the “Customer Fund”); and (2) authorizing a second pro rata interim distribution to customers whose claims for customer protection under the Securities Investor Protection Act (“SIPA”) have been allowed for amounts exceeding the SIPC statutory advance limits and not already satisfied by the initial pro rata interim distribution. According to the Trustee’s motion, as of June 30, 2012, the Trustee received 16,519 customer claims. Of the 16,280 customer claims which the Trustee determined, 2,436 were allowed, 13,679 were denied, 12 were determined as asserting no claim, and 153 were withdraw. In the Trustee’s initial motion for the initial allocation and pro rata interim distribution, the Trustee allocated $2,617,974,430.26 to the fund of customer property. Now, the Trustee seeks the Bankruptcy Court’s approval to allocate an additional $5,501,375,994.66 to the Customer Fund. This approximately $5 billion to be allocated to the Customer Fund was derived from: (1) the transfer of BLMIS bank accounts to the BLMIS estate; (2) pre-litigation and litigation settlements; (3) customer preference recoveries; (4) the sale of assets; (5) refunds; and (6) earnings on the Trustee’s investment and money market accounts. With the addition of $5,501,375,994.66 to the Customer Fund, the total amount allocated to the customer fund will be $8,119,350,424.92. Of the $8,119,350,424.92 allocated to the Customer Fund, $3355,499,915.98 was distributed to customers with allowed claims as part of the Trustee’s First Interim Distribution. In connection with the First Interim Distribution, $417,364,436.12 was reserved for accounts in litigation and $8,499,781.66 of SIPC subrogation was deferred. Therefore, the total amount available for the Second Interim Distribution will be $7,357,986,291.16. Of the $7,357,986,291.16, $220,000,000 will be held in reserve pending the outcome of certain appeals, $103 million will be held in reserve relating to the IRS settlement, and $115,190,556.49 will be held in reserve pending the outcome of the motion before the court regarding the time-value of monetary damages. Thus, after reserves, the amount available for the Second Interim Distribution is $6,919,795,734.67. Any objections to the Trustee’s motion will be filed on August 8, 2012. The Trustee will appear before Judge Lifland to argue his motion on August 22, 2012 at 10:00 a.m. We anticipate a final resolution of this motion to be rendered in late August 2012. The final determination will set the exact amount available to distribute to customers, as well as the amount the Court will require the Trustee to keep on reserve.