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Paul, Weiss secured a victory at the Second Circuit for Citco, a global fund administrator, in a dispute concerning its administration of funds invested in Bernie Madoff’s firm, when the court dismissed the sole remaining claim brought by the funds’ liquidators.

The dispute involves three Fairfield Investments funds based in the British Virgin Islands (BVI) that had invested in Bernard L. Madoff Investment Securities (BLMIS) and were forced into liquidation after BLMIS was exposed as a Ponzi scheme in 2008. Beginning in 2010, court-appointed liquidators of the Fairfield funds brought chapter 15 proceedings that were consolidated in the U.S. Bankruptcy Court for the Southern District of New York in order to recover redemption payments made by the Fairfield funds to investors prior to the collapse of BLMIS.

In 2019, the liquidators brought suit against certain Citco entities in connection with the fund administration, banking, and custodial services that they provided for the Fairfield investors. Following a series of orders from the bankruptcy court, the only remaining claim asserted against the Citco entities was for common law constructive trust under BVI law. Both the bankruptcy court and the district court held that this foreign common law claim was not subject to the Bankruptcy Code’s Section 546(e) safe harbor provision, which shields certain pre-bankruptcy securities transactions from most avoidance claims. In its decision, the Second Circuit reversed both lower courts and held that the BVI constructive trust claim was, in fact, subject to the safe harbor provision, thereby dismissing all outstanding claims against the Citco entities.

The Paul, Weiss team includes litigation partners Andrew Gordon and Gregory Laufer, and counsel Robert Kravitz, Hallie Goldblatt and Daniel Negless; and restructuring partner Kyle Kimpler.