Madoff fund litigator on SCOTUS denial to hear HSBC v. Picard

0
Madoff fund litigator on SCOTUS denial to hear HSBC v. Picard
espartgraphic / Pixabay

Today’s Supreme Court decision to deny review of HSBC Holdings PLC vs Picard has major ramifications on the ability of Irving Picard, the bankruptcy trustee of the Madoff estate, to pursue billions of dollars of transfers for the benefit of Madoff victims, and also significant implications for future international bankruptcy proceedings.

Get The Full Series in PDF

Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q1 2020 hedge fund letters, conferences and more

Selendy & Gay partner David Flugman, who represents Herald Fund SPC, one of the largest investment fund victims of the Madoff Ponzi scheme, shares the following comment:

Option Trading and the Future of Option Alpha with Option Alpha’s Kirk Du Plessis

Arena Investors Chilton Capital Management Schonfeld Strategic Advisors Robert Atchinson Phillip Gross favorite hedge fundsValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis


“By denying review, the Supreme Court has affirmed the Second Circuit's decision. Now the many cases on pause while this issue was being litigated should move forward, and the Madoff trustee will have the chance to recover up to $2.1 billion in transfers between those foreign investors.”

HSBC vs Picard: Background

Petitioners in the case are foreign individuals and entities who invested with Madoff through offshore "feeder funds" - intermediary vehicles designed to pool money from investors.

Madoff represented that each of these funds had a brokerage account established at BLMIS through which Madoff bought and sold securities as part of his “split-strike conversion strategy.” As the world would later learn, however, the money was never actually invested. Instead, it was deposited into a U.S. bank account, from which new contributions were used to enrich Madoff and his associates, while servicing older redemptions as part of a massive Ponzi scheme.

The feeder funds in question here were all foreign entities—two of which were organized under the laws of the British Virgin Islands (the Fairfield and Kingate Funds) and one under the laws of the Cayman Islands (Harley International (Cayman) Limited Funds). Likewise, the funds’ investors (including Petitioners) were predominantly foreign. Each of these feeder funds placed all or substantially all their assets with BLMIS and have since entered foreign liquidation proceedings of their own.

In practice, every redemption to Petitioners required two foreign transfers—from Madoff to the feeder fund, and then from the feeder fund to the foreign investor—and each of those subsequent transfers are alleged to have taken place entirely outside the United States.

Read David Flugman's in-depth analysis of the decision here.

Previous article Grizzly Founder discusses the activist aspect of being a short seller
Next article African-American business leaders on George Floyd
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

No posts to display