NEW YORK – The trustee liquidating Bernard L. Madoff’s business cannot sue to recover money transferred by foreign financial firms to investors abroad, according to a federal judge.
U.S. District Judge Jed S. Rakoff in Manhattan ruled that the trustee, Irving H. Picard, cannot use a provision of bankruptcy law to force the customers of overseas feeder funds, which pooled their assets for investment in Madoff’s fraud, to return the money to Picard.
Rakoff’s ruling was provided by lawyers for the foreign banks that won the decision and isn’t yet available publicly. The ruling, dated Sunday, is a victory for a group of European banks including UniCredit SpA and Unicredit Bank Austria AG, which had asked Rakoff to dismiss Picard’s claims.
In 2012, Rakoff ruled in favor of UniCredit, dismissing racketeering and other claims filed by Picard, eliminating most of the trustee’s $59 billion in claims. In Sunday’s ruling, Rakoff said that Picard cannot use the bankruptcy provision, which allows trustees to recover certain payments and distribute them to creditors, including fraud victims, in cases involving transactions between the foreign banks and their customers outside the United States.
A Picard spokeswoman said he and his lawyers are reviewing Rakoff’s ruling. She did not comment on whether the trustee plans to appeal, or how much money is involved in Picard’s claims.
The U.S. Supreme Court last week rejected an appeal by Picard to hear his case claiming an estimated $30 billion from a different group of banks, including JPMorgan Chase & Co., which the trustee alleged helped funnel money into Madoff’s scheme.
Madoff, 76, is serving a 150-year sentence in a federal prison in North Carolina for running a Ponzi scheme that defrauded investors of billions of dollars.