Banks Lose Bid to Dismiss Litigation in Madoff Ponzi Scheme Cases

In an unpublished memorandum decision issued Tuesday, the U.S. Bankruptcy Court for the Southern District of New York denied a motion to dismiss a trustee’s adversary proceeding attempting to recover $55 million from alleged subsequent transferees in connection with the Bernie Madoff Ponzi scheme. Securities Investor Protection Corporation v. Madoff Investment Securities LLC, Adv. Pro. No. 12-01698, 2023 WL 2504787 (Bkrtcy.S.D.N.Y. Mar. 14, 2023) (slip copy).


The adversary proceeding was brought by the Securities Investor Protection Corporation and Irving H. Picard, trustee for the SIPA liquidation of Bernard L. Madoff Investment Securities LLC and chapter 7 trustee in Bernard L. Madoff’s bankruptcy case. The defendants include Banque Internationale Luxembourg S.A. and Dexia Investor Services.

The complaint alleged, among other things, that the defendants knowingly and willfully assisted Madoff by providing banking and investment services to Madoff’s customers and by participating in Madoff’s fictitious investments. The trustee sought to recover approximately $55 million transferred to the defendants as part of such investments as fraudulent transfers.

The defendants moved to dismiss the adversary proceeding for lack of personal jurisdiction. For the reasons discussed below, the court denied the motion.


The opinion discusses New York’s long-arm statute and evaluated whether the defendants had sufficient minimum contacts with the state to establish personal jurisdiction. The court identified sufficient contacts and determined that the exercise of jurisdiction was reasonable under the circumstances.

Specifically, the court determined that the defendants had purposefully availed themselves of the benefits of their investments with Madoff and could have foreseen being haled into a New York court. The court also found that the plaintiff’s claim arose out of the defendants’ conduct in the forum state itself.

The trustee sufficiently alleged that the defendants had knowingly directed funds to be invested with and redeemed from Bernard L. Madoff Investment Securities LLC, which was managed and operated out of New York. Moreover, although the defendants’ agreement to a forum selection clause to be dispositive, the court considered it as a factor.


On this basis, the court denied the defendants’ motion to dismiss the adversary proceeding. The court considered motions to dismiss by other defendants in other opinions that are not discussed here, although there are some overlapping issues. (Statutes and cases cited in this opinion are provided below.)

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