The U.S. Court of Appeals for the Second Circuit affirmed the U.S. Bankruptcy Court for the Southern District of New York’s dismissal of a complaint brought by Rosenman Family, LLC, an investor with Bernard L. Madoff Investment Securities LLC (BLMIS), against the trustee of BLMIS’s estate. The complaint alleged that Rosenman was entitled to a return of $10 million it wired to BLMIS, because, Rosenman argued, the funds were stolen or embezzled by BLMIS and thus never became BLMIS’s property and/or part of BLMIS’s bankruptcy estate.

The U.S. Bankruptcy Court for the District of Massachusetts recently denied a motion for summary judgment on the issue of damages by investors in Access Cardiosystems, Inc. against one of the defendants, Randall Fincke. The investors had asserted claims against Mr.

Given the overarching Madoff Ponzi scheme as well as other mini-Madoff schemes that surfaced in its wake, many have been following issues arising from the ability of a trustee to claw back transfers (either as preferential or as fraudulent transfers) from investors who redeemed their interests in a private investment fund or managed account that turned out to be a Ponzi scheme. The law generally provides that an investor’s principal investment is protected so long as it is received in good faith and for value.

In a May 28, 2010 decision, Judge Alan Gold of the United States District Court for the Southern District of Florida granted a motion to dismiss claims filed against lenders on a revolving loan agreement to the Fontainebleau resort and casino project in Las Vegas. The claims were brought by two term loan lenders for the project, Avenue CLO Fund, which had provided term loan funding, and Aurelius Capital, which had acquired the interests of other term lenders following the project’s bankruptcy.

After nearly fifteen years of unsuccessful attempts to recover $71 million worth of securitized bonds after the 1990 bankruptcy of Continental Airlines, Inc., Bluebird Partners L.P. may have suffered its final defeat. In a recent decision by a New York trial court in Bluebird Partners v. The Bank of New York, et al., No. 601016/1996 (New York Co. June 7, 2010), the court granted summary judgment to defendant Bank of New York (“BNY”), holding that the bank behaved prudently in establishing a litigation reserve fund as the collateral trustee in the airline’s bankruptcy.

On September 16, HM Treasury published its third consultation on new insolvency arrangements for investment firms. The consultation sets out the government’s final proposals for a special administration regime (SAR) for investment firms.

Background

Introduction

The Advisory Committee on Bankruptcy Rules recently issued a report to the Standing Committee on Rules of Practice and Procedure on amendments and new rules that were published for comment the previous year. The Advisory Committee’s report recommends substantial revisions to the amendments that were initially proposed to Bankruptcy Rule 2019. The revisions are responsive to the numerous comments, suggestions and objections made by hedge funds, institutional investors and other distressed debt investors.

Background

The automatic stay is one of the most fundamental bankruptcy protections. It enjoins the initiation or continuance of any action by any creditor against the debtor or the debtor’s property, including causes of action possessed by the debtor at time of the bankruptcy filing. The automatic stay offers this protection while bringing all of the debtor’s assets and creditors into the same forum, the bankruptcy court.