08-01789-smb Doc 11912 Filed 10/27/15 Entered 10/27/15 15:46:35 Main Document Pg 1 of 125 BAKER & HOSTETLER LLP 45 Rockefeller Plaza New York, New York 10111 Telephone: (212) 589-4200 Facsimile: (212) 589-4201 Irving H. Picard Email: [email protected] David J. Sheehan Email: [email protected] Seanna R. Brown Email: [email protected] Heather R. Wlodek Email: [email protected] Attorneys for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and the Estate of Bernard L. Madoff UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK SECURITIES INVESTOR PROTECTION CORPORATION, Plaintiff-Applicant, Adv. Pro. No. 08-01789 (SMB) v. SIPA Liquidation BERNARD L. MADOFF INVESTMENT (Substantively Consolidated) SECURITIES LLC, Defendant. In re: BERNARD L. MADOFF, Debtor. TRUSTEE’S FOURTEENTH INTERIM REPORT FOR THE PERIOD APRIL 1, 2015 THROUGH SEPTEMBER 30, 2015 08-01789-smb Doc 11912 Filed 10/27/15 Entered 10/27/15 15:46:35 Main Document Pg 2 of 125 TABLE OF CONTENTS Page I. EXECUTIVE SUMMARY .................................................................................................1 II. BACKGROUND .................................................................................................................4 III. FINANCIAL CONDITION OF THE ESTATE ..................................................................4 IV. ADMINISTRATION OF THE ESTATE ............................................................................5 A. Marshaling And Liquidating The Estate Assets ......................................................5 V. CLAIMS ADMINISTRATION ...........................................................................................6 A. Claims Processing ....................................................................................................6 i. Customer Claims ..........................................................................................6 ii. General Creditor Claims ..............................................................................6 iii. The Trustee Has Kept Customers Informed Of The Status Of The Claims Process .................................................................................7 iv. The Hardship Program .................................................................................8 B. Objections To Claims Determinations ...................................................................10 C. Settlements Of Customer Claims Disputes ............................................................11 VI. PROCEEDINGS RELATED TO THE INTERPRETATION OF SIPA ...........................11 A. Net Equity Dispute .................................................................................................11 B. Time-Based Damages ............................................................................................14 C. “Customer” Definition ...........................................................................................15 D. Fact-Based Objections ...........................................................................................21 E. Inter-Account Transfers .........................................................................................22 F. Profit-Withdrawal Issue .........................................................................................24 VII. RECOVERIES AND CONTINGENCIES ........................................................................25 A. Recoveries Accomplished During Prior Report Periods .......................................25 B. Recoveries Accomplished During This Report Period ..........................................25 C. Earlier Settlements .................................................................................................26 VIII. THE TRUSTEE’S ALLOCATION OF FUNDS AND DISTRIBUTIONS TO CUSTOMERS .............................................................................................................27 A. The Customer Fund................................................................................................27 B. The Trustee’s Initial Allocation of Property to the Fund of Customer Property and Authorizing the First Interim Distribution to Customers .................28 C. The Trustee’s Second Allocation of Property to the Fund of Customer Property and Authorizing the Second Interim Distribution to Customers .............29 - i - 08-01789-smb Doc 11912 Filed 10/27/15 Entered 10/27/15 15:46:35 Main Document Pg 3 of 125 TABLE OF CONTENTS (continued) Page D. The Trustee’s Third Allocation of Property to the Fund of Customer Property and Authorizing the Third Interim Distribution to Customers ................30 E. The Trustee’s Fourth Allocation of Property to the Fund of Customer Property and Authorizing the Fourth Interim Distribution to Customers ..............31 F. The Trustee’s Fifth Allocation of Property to the Fund of Customer Property and Authorizing the Fifth Interim Distribution to Customers .................33 G. The Trustee’s Sixth Allocation of Property to the Fund of Customer Property and Authorizing the Sixth Interim Distribution to Customers ................34 H. The General Estate .................................................................................................36 IX. LITIGATION .....................................................................................................................36 A. The District Court—Motions to Withdraw the Reference, Motions to Dismiss and Related Appeals .................................................................................37 i. Proceedings Relating to Motions to Withdraw ..........................................37 (a) The Administrative Order ..............................................................37 (b) Consolidated Briefing Orders ........................................................38 (c) The 546(e) Appeal .........................................................................42 B. Litigation in the Bankruptcy Court and Related Appeals ......................................43 i. Avoidance Actions .....................................................................................43 (a) District Court Proceedings .............................................................43 (b) Bankruptcy Court Proceedings ......................................................44 ii. Subsequent Transferee Actions ..................................................................46 iii. Bad Faith/Feeder Fund Actions .................................................................49 (a) Picard v. ABN AMRO Bank N.A. .................................................49 (b) Picard v. ABN AMRO (Ireland) Ltd. ............................................53 (c) Picard v. HSBC Bank plc...............................................................56 (d) The Luxalpha Action .....................................................................59 (e) The Kohn Action............................................................................60 (f) Picard v. Nomura Int’l plc .............................................................64 (g) Picard v. Avellino ..........................................................................68 (h) Picard v. BNP Paribas ....................................................................70 (i) Picard v. Citibank ...........................................................................72 (j) Picard v. Cohmad Sec. Corp. .........................................................75 - ii - 08-01789-smb Doc 11912 Filed 10/27/15 Entered 10/27/15 15:46:35 Main Document Pg 4 of 125 TABLE OF CONTENTS (continued) Page (k) Picard v. Irwin Lipkin, et al. ..........................................................77 (l) Picard v. J. Ezra Merkin .................................................................78 (m) Picard v. Kingate ............................................................................85 (n) Picard v. Legacy Capital Limited ..................................................87 (o) Picard v. Magnify Inc. ...................................................................88 (p) Picard v. Crupi ...............................................................................90 (q) Picard v. Mendelow .......................................................................91 (r) Picard v. Banco Bilbao ..................................................................92 (s) Picard v. Andrew H. Madoff ..........................................................95 (t) Picard v. Richard M. Glantz ........................................................101 (u) Picard v. Fairfield Greenwich ......................................................103 (v) Picard v Vizcaya ..........................................................................106 (w) Picard v Rye/Tremont ..................................................................108 C. Injunction Proceedings .........................................................................................111 i. Picard v. Marshall ....................................................................................111 ii. Picard v. A&G Goldman Partnership ......................................................113 X. INTERNATIONAL INVESTIGATION AND LITIGATION ........................................114 A. Austria and Italy ...................................................................................................115 B. Bermuda ...............................................................................................................115 C. BVI .......................................................................................................................116