On July 7, 2014, U.S. District Judge Jed S. Rakoff issued an order finding that bankruptcy laws could not be applied extraterritorially to recover subsequent transfers from "feeder funds" that invested in Bernard Madoff's massive Ponzi scheme to foreign individuals and entities. The order cited the U.S. Supreme Court's 2010 opinion in Morrison v. Nat'l Australian Bank Ltd., 130 S.Ct. 2869 (2010) for the presumption that, absent contrary intent, Congressional legislation is meant to apply only within the territorial jurisdiction of the United States. The decision, which is below, will have profound implications not only on the potential recovery for victims of Madoff's scheme but also in the broader bankruptcy jurisprudence.
While trustee Irving Picard has recovered nearly $10 billion to date to be eventually distributed to Madoff's victims, he indicated that he had filed several dozen lawsuits to recover more than $7 billion in subsequent transfers. It remains unknown how much of that figure will be affected by the recent ruling, which it also likely to be appealed.
Download the Order here.