21

- 872 In re: Bernard L. Madoff Investment Securities LLC

1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3

____________________ 4
5 August Term, 20 2 1 6
7 (Argued: March 16 , 2 022 Decided: S e p t e m b e r 2 0 , 2 0 2 2 ) 8
9 Docket No

. 21

- 872 10
11

____________________ 12
13 IRVING H. PICARD, TRUSTEE FOR THE 14 SUBSTANTIVELY CONSOLIDATED SIPA 15 LIQUIDATION OF BERNARD L. MADOFF 16 INVESTMENT SECURITIES LLC, AND 17 BERNARD L. MADOFF , 18
19 Plaintiff

- Appellee , 20
21 SECURITIES INVESTOR PROTECTION CORPORATION, 22
23 Plaintiff

- Applicant

- Appellee , 24

v. 25
26 JABA ASSOCIATES LP , THE ESTATE OF 27 JAMES GOODMAN, ANDREW 28 GOODMAN, IN HIS CAPACITY AS A 29 GENERAL PARTNER OF JABA 30 ASSOCIATES LP, AUDREY M. GOODMAN, 31 IN HER CAPACITY AS A GENERAL AND 32 LIMITED PARTNER OF JABA ASSOCIATES 33 LP, AND IN HER CAPACITY AS 342 PERSONAL REPRESENTATIVE OF THE 1 ESTATE OF JAMES GOODMAN, BRUCE 2 GOODMAN, IN HIS CAPACITY AS A 3 GENERAL PARTNER OF JABA 4 ASSOCIATES LP , 5
6 Defendants

- Appellants

. 1 7
8

____________________ 9
10 Before: POOLER, WESLEY , and MENASHI , Circuit Judges

. 11
12 Appeal from the United States District Court for the Southern District of 13
New York ( Koeltl , J .) granting summary judgment to the plaintiff, Irving H. 14
Picard, pursuant to the Securities Investor Protection Act of 1970, 15 U. S.C. §§ 15

78aaa

- 78lll (“SIPA”)

. The district court grant ed recovery of $2,925,000 that was 16
transferred from Bernard L. Madoff Investment Securities LLC (“BLMIS” ) to the 17
defendants in the two years prior to BLMIS’s filing for bankruptcy. Because there 18

is no g enuine dispute of material fact that Bernard L. Madoff transferred the 19

assets of his business to the d efendants , which made it recoverable property 20

under SIPA , the district court properly granted summary judgment to Picard

. 21

Affirmed. Judge Wesley concurs in a separate opinion. 22

1 The Clerk of the Court is directed to amend the caption as above

.3 ____________________ 1

LANCE GOTTHOFFER , Chaitman LLP, ( Helen 2 Chaitman , on the brief ) New York, N

. Y

. , for Defendant s

3 Appellant s

. 4
5 AMY E. VANDERWAL , Baker & Hostetler LLP, (David 6 J. Sheehan, Seanna R. Brown, Tracy Cole, on the brief ) 7 New York, N.Y. , for Plaintiff

- Appellee Irving H. Picard, 8 Trustee for the Substantively Consolidated SIPA Liquidation 9 of Bernard L. Madoff Investment Securities LLC, and 10 Be rnard L. Madoff

. 11
12 NATHANAEL KELLEY, Associate General Counsel, 13 Securities Investor Protection Corporation, (Kevin H. 14 Bell, Senior Associate General Counsel, Kenneth G. 15 Caputo, General Counsel , on the brief ) Washington, D.C., 16 for Plaintiff

- Appellee Securities Investor Protection 17 Corporation

. 18
19 POOLER, Circuit Judge : 20

Defendants JABA Associates LP and its general partners

— Estate of James 21
Goodman; Audrey Goodman (as General Partner and Personal Representative); 22

Bruce Goodman ; and Andrew Goodman

— appeal from the March 24, 2021 23
judgment of the United States District Court for the Southern District of New 24
York (Koeltl, J. ) granting summary judgment to the plaintiff, Irving H. Picard 25
(“Trustee”) , pursuant to the Securities Investor Protection Act of 1 970, 15 U.S.C. 26
§§ 78aaa

- 78lll (“SIPA ”). JABA was a good faith customer of Bernard L. Madoff 274 Investment Securities LLC (“BLMIS”) and held BLMIS Account Number 1EM357 1
(the “JABA Account”). The Trustee brought this action to recover the allegedly 2

ficti ti ous profits transferred from BLMIS to the defendants in the two years prior 3

to BLMIS ’ s filing for bankruptcy

. The district court granted recovery of 4
$2,925,000 that BLMIS transferred to defendants in the two yea rs prior to 5
BLMIS’s filing for bankruptcy , which made it recoverable property under SIPA

. 6

Sec

. Inv

. Prot

. Corp. v. Bernard L. Madoff Inv

. Sec

. LLC , 528 F. Supp. 3d 219 7
(S.D.N.Y. 2021) ( “ SIPC ” )

. The district court also awarded 4 percent prejudgment 8

interest. Id. at 245

- 4 7

. 9
The defendants first argue that the district court improperly granted 10
summary judgment . They contend that there is a dispute of material fact as to 11

whether Bernard L. Madoff transferred the assets of his sole proprietorship to the 12

defendants , which determines whether the property is recoverable under SIPA

. 13

Defendants question some of the Trustee’s evidence , particularly the Amended 14

Form BD . As detailed further below, when Mado ff reorganized his broker

- dealer 15
business from a sole proprietorship to a limited liability co mpany in 2001, he 16
filed an Amended Form BD with the Securities Exchange Commission to reflect 17
the change. Defendants argue that the Amended Form BD is inadmissibl e 185 hearsay and that an expert opinion the district court purportedly relied upon in 1
admitting the Amended Form BD was not credible

. We find plaintiffs waived 2
that argument by not objecting to the admission of the Amended Form BD and 3
by relying upon the f orm in their own motion for summary judgment. 4

Defendants also argue that certain evidence, including (1) the name used 5
on JPMorgan Chase & Co. accounts which were in Madoff’s p ersonal name and 6

w ere not changed to BLMIS ownership until September 2002, (2) the 7
endorsement stamp used on one account which was in Madoff’s personal name, 8

and (3) the use of Madoff’s personal name on checks emanating from another 9
bank account ( collectiv ely, the “ A ccount E vidence”) , is sufficient to create a 10
dispute of material fact that all assets of the sole proprietorship, including the 11
funds in the JPMorgan accounts at issue here, were transferred to BLMIS. 12

Yet the Amended Form BD , plus other evidence, indicates that BLMIS took 13
ownership of all the property used in the sole proprietorship and that , therefore , 14

t he district court properly concluded that the funds in the JPMorgan accounts are 15
recoverable customer property

. The A ccount E vidence that defendants cite is 16

insufficient to create a dispute of material fact in the face of overwhelming 17

evidence to the contrar y

. 186 Defendants finally argue that the district court erred in awarding 1
prejudgment interest

. The 4 percent interest the district court imposed was not 2
unduly harsh or punitive , and the district court properly justified the amount. 3

We affirm. 4

BACKGROUND 5
The litigation stemming from the Ponzi scheme Madoff r a n through 6
BLMIS, his broker

- dealer firm, is well

- known to this Court. See , e.g. , In re Bernard 7
L. Madoff Inv. Sec. LLC , 77 3 F.3d 411 (2d Cir. 2014) ; In re Bernard L. Madoff Inv. Sec. 8

LLC (“ Gettinger ”), 976 F.3d 184 (2d Cir. 2020) ; In re Bernard L. Madoff Inv. Sec. LLC , 9
721 F.3d 54 (2d Cir. 2013) ; In re Bernard L. Madoff Inv. Sec. LLC , 654 F.3d 229 (2d 10

Cir. 2011)

. BLMIS was a securities broker

- dealer th rough which Madoff operated 11
three business units: (1) a proprietary trading business; (2) a market

- making 12
business; and (3) an investment advisory business ( the “IA Business”). BLMIS 13
collected funds from brokerage customers and purported to invest those funds 14
on behalf of the customers, but it did not actually invest the money . Instead, it 15

sent its customers fabricated statements using historical trading activity and 16

returns that had never been generated , and therefore were reflecting fictitious 17
trades and gains . When customers sought to withdraw money from their 187 accounts, BLMIS satisfied those requests with the proceeds of other customers ’ 1

investments that were held in a commingled ch ecking account

. See , e.g. , In re 2
Bernard L. Madoff Inv. Sec. LLC , 773 F.3d at 415. The scheme collapsed in 3
December 2008, when there was not enough new capital to support the 4
withdrawals that customers sought. Gettinger , 976 F.3d at 188 . Madoff was 5
subsequently arrested on criminal charges , and , on the day of his arrest, the SEC 6

fil ed a civil action in the United States District Court for the Southern District of 7
New York alleging that Madoff and BLMIS had operated an unlawful Ponzi 8

scheme. Id. 9
The Securities Investor Protection Corporation (“SIPC”) then became 10
involved and applied for an order granting BLMIS customers protection under 11

SIPA

. Id. After the scheme collapsed, Picard was appointed trustee for BLMIS 12
pursuant to SIPA , and liquidation p roceedings began in the district court

. 15 13

U.S.C. § 78aaa et seq. ; In re Bernard L. Madoff Inv. Sec. LLC , 773 F.3d at 414

. Under 14
SIPA, “[w] henever customer property is not sufficient to pay in full [customers ’ 15
net equity claims], the trustee may recover any property transferred by the 16
debtor which, except for such transfer, would have been customer property if 17
and to the extent that such transfer is voidable or void under the provisions of 188 [the Bankruptcy Code] .” 15 U.S.C. § 78fff

– 2(c) (3) . Recovered property is treated 1
as customer property and distributed ratably among customers based on their 2
net equity. Id. 3

I. The Underlying Transfers at Issue 4

This appeal pertains to the bank accounts BLMIS used for customer cash 5

that were acquired through the operation of the Ponzi scheme. BLMIS used two 6

bank accounts held with JPMorgan t hat commingled customer money: a 7
commercial checking account (the “ 703 Account”) and a controlled disbursement 8
account (the “509 Account”) that was funded by the 703 Account. The 703 9
Account was the primary bank account used for BLMIS customer deposits , with 10
97 percent of the money coming into the account being customer deposits

. 11

C ustomer withdrawals were sent from both the 703 and 509 Accounts. 12

Madoff’s firm operated as a sole proprietorship for over 40 years before he 13
converted it to a single member limited liability company , with Madoff as the 14

sole member , in the early 2000s. On January 12, 2001, using the same SEC 15
Registrant Nu mber Madoff was originally assigned in 1960 (8

- 8132 ) , Madoff 16
reorganized his firm to an LL C

. Madoff informed the SEC of the change in 179 corporate form by filing an Amended Form BD

. 2 On the Amended Form BD , 1

Madoff attested that , “ [e]ffective January 1, 2001, predecessor will transfer to 2
successor all of predecessor’s assets and liabilities, related to predecessor’s 3
business. The transfer will not result in any change in ownership or control.” 4
Supp. App’x at 57

- 58

. 3 After filing this form with the SEC , BLMIS succeeded to 5
the sole proprietorship’s SEC Registrant Number, and , as far as the SEC was 6
concerned, the sole proprietorship no longer operated as a broker

- dealer or in 7
any other capacity. The Amended Form BD asked the applicant to check a box 8

next to the type of business in which it was engaged , and Madoff checked the 9

boxes next to “ market

- making ” and “ proprietary trading activities , ” but did not 10
check the box next to investment advisory (“IA”) services. 4 Supp. App’x at 55

- 56. 11

2 The SEC requires those who wish to become broker

- dealers to file Form BD, the Uniform Application for Broker

- Dealer Registration. See 15 U.S.C. §§ 78o(a)

- (b); 17 C.F.R. § 249.501(a). A successor that continues the business of the broker

dealer previously registered with the SEC that changes the predecessor ’ s operating form must file a Form BD Amendment. SEC Rule 15b1

- 3(b), 17 C.F.R. § 2 40.15b1

- 3(b)

.
3 A copy of the Amended Form BD that Madoff filled out is attached here in the appendix to this opinion

. 4 The Trustee notes that Madoff himself admitted that he was hiding his IA business from the SEC at this point. See SEC Office of Investigations, Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme10 Also in 2001, BLMIS entered into an Amended and Restated Operating 1
Agreement wherein on the form Madoff stated that he t ransferred all assets , 2
including bank accounts, held by the sole proprietorship to BLMIS , effective 3
January 1, 200 1. See SIPC v. BLMIS , Adv. No. 08

- 01789 (CGM) (Bank r . S.D.N.Y. ), 4

ECF Nos. 20429

- 4, 20467

- 4, 20571

- 4, 20578

- 4, 20649

- 4 . Other documentary 5
evidence that suggests that BLMIS subsumed all parts of the sole proprietorship 6

include s a change in letterhead that li sted the firm as “Bernard L. Madoff 7
Investment Securities LLC,” letters from BLMIS , account opening agreements, 8
and trading documents that were sent to customers that had previously listed 9
“BLMIS” prior to 2001 and stated “BLMIS LLC” after 2001. 10

There is minimal evidence that indicates that the JPMorgan a ccounts 11
continued to be owned by the sole proprietorship and not BLMIS. Some of that 12

evidence is that BLMIS continued to send the same checks to customers both 13
before and after it became an LLC, w hich were drawn from the 509 Account and 14
listed the name “Bernard L. Madoff” in the top left corner. The endorsement 15
stamp on the 703 Account checks continued to say “ [f] or deposit only Bernard L. 16

(Public Version) , Report No. OIG

- 509, at 182 n.121 (Aug. 31, 2009), https://www.sec.gov/files/oig

- 509.pdf

.11 Madoff

. ” App’x at 408

- 09. And while BLMIS was formed in 200 1, Madoff did not 1
change the names on the JPMorgan a ccounts from his own name to “Bernard L. 2

Madoff Investment Securities ” until September 2002. App’x at 408. 3
In 2006, after the SEC started investigating B L MIS’s involvement in the 4

Ponzi scheme , Madoff filed a F orm ADV, the application form required for an 5
investment advisor to register with the SEC. On Form ADV, Madoff used the 6
same SEC Registrant Number assigned to his business (8

- 8132) and signed the 7

form on behalf of “Bernard L. Madoff Inves tment Securities LLC.” 8

II. The JABA Transfers 9
As detailed by the district court, prior to the collapse of BLMIS, the 10

defendants initiated three inter

- account transfers and seven cash deposits to the 11
JABA account totaling $2,945,000 in principal , as well as two inter

- account 12
transfers to a different BLMIS account of $25,000

. SI P C, 528 F. Supp. 3d at 228

. 13
The defendants made 59 withdrawals totaling $10,148,000 from the JABA 14

Account. Id. T he defendants withdrew $7,228,000 from the JABA account in 15
excess of prin cipal. Id. Within the relevant two

- year period prior to December 15, 16
2008, the defendants withdrew $2,925,000 in excess of principal from the JABA 1712 Account. Id. The defendants do not dispute the date, receipt, or amount of the 1

t wo

- y ear t ransfers. 2

III. The District Court Decision 3
The district court granted summary judgment to the Trustee and denied 4

the defendants’ cross

- motion for summary judgment , holding that BLMIS 5
transferred $2,925,000 in fictitious profits to the defendants in the two

- year 6

recovery period, which entitled the Trustee to recover the money , and granted 7
prejudgment interest at the rate of 4 percent

. S IPC , 528 F. Supp. 3d at 246

- 4 7

. The 8
district court first reviewed the admissibility of the evidence . The defendants 9
argued that the Trustee’s motion rested upon inadmissible evidence, namely the 10
expert reports, BLMIS books and records, trial testimony and plea allocutions. Id. 11

at 231 . The defendants argued that the Trustee’s expert reports were inadmiss ible 12
because they were based on BLMIS books and records, which themselves were 13
permeated with fraud. Id. The district court found the expert reports admissible 14

under Fed eral R ule of Evi dence 702 because it was “ plain that the reports help 15

the trier of fact to understand the evidence, are based on sufficient data, are 16
based on reliable principles and methods, and that the experts have reliably 17
applied the principles and methods to the facts of the case .” Id. The district court 1813 also found the defendants ’ claim that BLMIS ’s books and records were 1
inadmissible pursuant to the hearsay exception for records of a regularly 2
conducted activity under Fed eral R ule of Evid ence 803(6) because they are 3
“permeated with fraud” to be an unpersuasive argument and found t hem 4

admissibl e

. Id. at 232

. As the district court pointed out, if defendants’ argument 5

were true, a “ case involving fraud would never benefit from expert testimony 6
about the alleged fraud because the records at issue were fraudulent. But a 7
discerning revie w of the records, particularly when supported by bank 8
statements, can show the details of money that was received by an enterprise and 9
money that was distributed, even if aspects of the records

— such as securities 10
that were listed but not purchased

— were fal se.” Id. 11
The defendants argued that plea allocutions and trial testimony were also 12
inadmissible. In particular, Frank DiPascali, a former BLMIS employee, testified 13
for 16 days under oath in the criminal trial of Daniel Bonventre, BLMIS's 14
operations manager, that United States Treasury Bills (“T

- Bills”) purchased with 15
IA Business money were purchased for the sake of BLMIS ’ s own cash 16
management strategy and were not purchased for any customer accounts. Id. at 17

226 . DiPascali passed away before defendants here had the opportunity to 1814 depose him. Id. at 233

. The district court found that , pursuant to Fed eral R ule of 1

Evid ence 807 , DiPascali’s prior testimony 

### was sufficiently trustworthy and 2


### admissible. The court found that the various plea allocutions were admissible 3



### under Fed eral R ule of Evid ence 803(22) , the hearsay exception for judgment of 4


### a previous conviction, and Fed eral R ule of Evid ence 807 , the residual 5


### exception

. Id. 6

The district court also found that the Trustee had Article III standing to 7
bring the action against the defendants. The defendants conceded that the 8
Trustee has standing to recover funds transferred by BLMIS but argue d that the 9
JPMorgan Accounts and the IA Business were not property o f BLMIS and instead 10

were owned by Madoff personally , and therefore the Trustee lacked Article III 11
standing to recover th e transfers at issue in this case because the Trustee did not 12
suffer an injury under SIPA

. Id. at 234. 13
The district court found that there was no dispute of material fact that all 14
property of the sole proprietorship was transferred to BLMIS , and that such a 15
contention was supported by the Amended Form BD. Id. at 234

- 3 5

. The 16
defendants argued that the unchec ked box next to the statement on the form that 1715 BLMIS would operate an investment advisory business and the inconsistent 1
names on the account statements and checks gave rise to a dispute of material 2

fact. Id. at 235

. Additionally, the district court relied on a report filed by the 3
Trustee’s expert, Bruce G. Dubinsky, which explained that Madoff not checking a 4
box listing investment advisory services as a business of BLMIS is not dispositive 5

of the question of ownership of the JPMorgan accounts, and th at the Amended 6
Form BD made clear that all assets previously owned by the sole proprietorship, 7
including the JPMorgan a ccounts, were transferred to BLMIS

. Id. The district 8
court also noted that the defendants did not present any evidence of their own 9
that the unchecked box or the names on the checks and the JPMorgan accounts 10
were dispositive. Id. 11
The defendants also argued that the bankruptcy court’s decision in In re 12

Bernard L. Madoff Inv. Sec. LLC (“ Avellino ”), 557 B.R. 89, 110 (Bankr. S.D.N.Y. 13
2016) , reconsideration denied , 2016 WL 6088136 (Bankr. S.D.N.Y. Oct. 18, 2016) , 14
compelled a finding that the Trustee did not have standing. In Avellino , the 15
bankruptcy court held that only Alan Nisselson, the Chapter 7 trustee for the 16

Madoff estate , could recover actual transfers by the sole proprietorship, but 17

because he is not a SIPA trustee he could not rec over customer property 1816 withdrawn prior to January 1 , 2001

. Id. The defendants argue d below 1

that Avellino compels the result that the Trustee d id not have standing to bring 2

this suit. S IPC , 528 F. Supp. 3d at 235 . The district court distinguished Avellino on 3
the ground that it held only that the Trustee could not recover transfers prior to 4
2001, before BLMIS reorganized as an LLC

. Id. However, in this case the Trustee 5
only seeks to recover t wo

- y ear t ransfers, which the bankruptcy court in Avellino 6

held the Trustee may avoid and recover against similarly situated defendant s. Id. 7

T he district court granted summary judgment to the Trustee holding that 8
SIPA authorized recovery of defendants’ fictious profits. Id. at 235

- 41 . Under 11 9
U.S.C. § 548(a)(1)(A) , the Trustee may avoid and recover transfers of ficti ti ous 10
profits where : (1) a transfer of an interest of the debtor in property (2) was made 11

wit hin two years of the bankruptcy petition date, and (3) the transfer was made 12
with “actual intent to hinder, delay, or defraud” a creditor. Adelphia Recovery Tr. 13
v. Bank of Am., N.A ., Nos. 05

- cv
- 9050, 03

- md

- 1529, 2011 WL 1419617, at *2 14
(S.D.N.Y. Apr. 7, 201 1) , aff ’ d sub nom. Adelphia Recovery Tr. v. Goldman, Sachs & 15

Co ., 748 F.3d 110 (2d Cir. 2014)

. The district court noted there is a presumption of 16

fraudulent intent when the debtor operat ed a Ponzi scheme and the court found 17
there was no dispute of material fact that Madoff operated a Ponzi scheme after 1817 applying a four

- factor test to determine whether the presumption should apply. 1

Id. at 236

- 4 0 . After examining all the evidence, the district court determined that 2
the Ponzi scheme presumption should apply and that there was fraudulent 3
intent sufficient to allow the Trustee to recover defendants’ profits. Id. at 240

. 4

This holding is not challenged on appeal. 5
The district court then reviewed the defendants’ affirmative defenses, id. at 6

2 41

- 45 , none of which have been presented on appeal, before awarding the 7
Trustee prejudgment interest. The Trustee sought prejudgment interest from the 8

date the Trustee filed the complaint against the defendants on November 12, 9

201 0 until the date of the district court’s judgment. Id. at 245

- 4 6 . The district court 10

looked at the following factors: “the award should be a function of (i) the need to 11
fully compensate the wronged party for actual damages suffered, (ii) 12
considerations of fairness and the relative equities of the award, (iii) the remedial 13
purpose of the statute involved, and/or (iv) such other general principles as are 14
deemed relevant by the court.” Id. ( quoting Wickham Contracting Co., Inc. v. Local 15

Union No. 3, Intern. Broth. of Elec. Workers , 955 F.2d 831, 833

- 34 (2d Cir. 1992) ). The 16

district court found that the 4 percent interest rate represent ed the prime rate of 17
interest on December 15, 2008, the date of the protective decree beginning the 1818 BLMIS SIPA liquidation, and compensate d the Trustee for the loss of the use of 1

the t wo

- y ear t ransfers for the year s that t he litigation has lasted, and reduces the 2
profits to the defendants from having withheld the fund s

. Id. 3

DISCUSSION 4
Although the case before us contains a hefty record spanning decades , the 5
defendants challenge but a few aspects of the district court’s decision. 6

D efendants appeal from the district court’s holdings that : ( 1 ) the content of the 7

Amended Form BD is admissible; (2 ) the evidence sufficiently proved that 8
Madoff transferred the JPMorgan accounts from the sol e proprietorship to 9

BLMIS ; and ( 3 ) the Trustee is entitled to p r e judgment i nterest. 5 The Trustee and 10
the SIPC additionally argue that the transfers at issue comprise customer 11
property which they argue is recoverable to the Trustee wherever it lies. That is 12
to say, it matters not if BLMIS or the sole proprietorship ultimately owned the 13

5 The parties have also presented arguments as to the propriety of the Avellino bankruptcy decision. We need not reach this issue as we can affirm the district court on the evidence that was before it. We ca n further distinguish Avellino as the district cour t did: the Trustee only seeks to recover transfers made within the two

- year period and thus we need not determine whether Avellino was correctly decided. Thus, we may wait until a final decision has been rendered in Avellino and an appeal , if any, in that case is properly before us.19 JPMorgan a ccounts as long as the funds held in the ac count comprise customer 1
property

. Her e , the district court properl y analyzed the evidence before it and 2

we can affirm on the record before us

. 3

I. Admissibility of Evidence 4

A. Standard of Review 5
The defendants argue that the Amended Form BD is inadmissible and that 6
the district court erred by considering it. W hen a party challenges the district 7

court ’ s evidentiary rulings underlying a grant of summary judgment, we 8

undertake a two

- step inquiry. First, “we review the trial court ’ s evidentiary 9
rulings, which define the summary judgment record .” LaSalle Bank Nat ’ l Ass ’ n v. 10
Nomura Asset Cap. Corp ., 424 F.3d 195, 211 (2d Cir. 2005) . Because the “principles 11
governing admissibility of evidence do not change on a motion for summary 12
judgment,” Raskin v. Wyatt Co ., 125 F.3d 55, 66 (2d Cir. 1997) , we review the 13

district court ’ s decision to exclude evidence as hearsay for abuse of discreti on, 14
United States v. Coplan , 703 F.3d 46, 84 (2d Cir. 2012) . “[O]nly admissible evidence 15
need be considered by the trial court in ruling on a motion for summary 16
judgment,” and a “district court deciding a summary judgment motion has 17

broad discretion in cho osing whether to admit evidence.” Presbyterian Church of 1820 Sudan v. Talisman Energy, Inc ., 582 F.3d 244, 264 (2d Cir. 2009) (internal quotation 1
marks omitted) . A district court abuses its discretion when it bases its ruling “on 2

an erroneous view of the law o r on a clearly erroneous assessment of the 3
evidence, or render[s] a decision that cannot be located within the range of 4
permissible decisions.” In re Sims , 534 F.3d 117, 132 (2d Cir. 2008) (citations and 5
internal quotation marks omitted) . At the second stage of our inquiry, “with the 6
record defined, we review the trial court ’ s summary judgment decision de novo ,” 7
construing all evidence in the light most favorable to the nonmoving party. 8

LaSalle Bank , 424 F.3d at 205, 211 (internal quotation marks omitted)

. 9

B. Amended Form BD 10

B efore the district court , the defendants did not object to the admission of 11

the Amended Form BD and rel ied upon the form as a key piece of evidence 12

because of the unchecked box next to the statement that BMLIS would operate an 13
investment advisory business

. Now, however, the defendants argue that the 14

Form is inadmissible hearsay. The d efendants argue that the Amended Form 15

BD’ s content does not fall within the b usiness r ecords e xception of Rule 803(6) 16
because the SEC did not verify the information that Madoff put on the form, 1721 including the statement that the assets of the s ole p roprietorship would be 1

transferred to BMLIS

. 2

The d efendants have waived this argument by making it for the first time 3

before this Court

. Lugo v. Hudson , 785 F.3d 852, 855 (2d Cir. 2015) (“Because this 4
issue is raised for the first time on appeal, we need not consider it.”). In addition, 5
by relying on this evidence in seeking summary judgment, the defendants have 6

“ waived any objections to the admissibility of the reports by offering them 7

themselves

. ” Capobianco v. City of New Yor k , 422 F.3d 47, 55 (2d Cir. 2005)

. The 8

defendants below relied on the unchecked box on the Amended Form BD as a 9

central piece of evidence that BLMIS did not control the JPMorgan accounts. See 10

SIPC , 528 F. Supp. 3d at 235 (“ T he defendants did not present any expert 11
testimony to support their proposition that the JPMorgan Accounts were owned 12
by Madoff personally instead of by the LLC. Rather, the defendants rely on the 13
fact that on the Amended Form BD, Madoff did not check a box listing that the 14
LLC would operate an investment advisory business [.] ”). While they have 15
changed their argument here, it is unavailing. Had the defendants wished to 1622 exclude the Amended Form BD, they had ample opportunity to do so before the 1

district court. 6 2
We also reject the defendants’ argument that the Amended Form BD is 3

inadmissible hearsay because “ the source of information or the method or 4
circumstances of preparation indicate a lack of trustworthiness.” Fed. R. Evid. 5
803(6)

. The d efendants argue that the Amended Form BD is inadmissible because 6
Madoff pled guilty to submitting false documents to the SEC. In addition to not 7
having made this argument below, the defendants do not argue that the source 8
of information or the method or circumstance of preparation indicate a lack of 9

trustworthiness , beyond stating in conclusory fashion that “Madoff pled guilty to 10
submitting false documents to the SEC. Thus, it is patently unreliable and 11

6 The defendants also rely on a July 14 , 2021 order on a motion in limine in a related case before Judge Furman , also of the Southern District of New York, which did not exclude the Amended Form BD from evidence, but instead r uled that the Trustee must lay the proper foundation at trial to admit the content of the form under Fed eral R ule of Evid ence 703 . We note, however, that Judge Furman also relied upon the Amended Form BD in his motion for summary judgment, writing that the Amended Form BD, while supporting the Trustee’s claim, also created a dispute of material fact because of the unchecked box. See Picard v. RAR Entrepreneurial Fund, Ltd ., No. 20

- cv
- 1029, 2021 WL 827195, at *11 (S.D.N.Y. Mar. 3, 2021)

. The fact that the Trustee needed to lay a foundation at trial does not make it inadmissible hearsay, despite what the defendants claim.23 untrustworthy. Hence, the untrustworthy contents of Form BD are inadmissible 1
hearsay.” Appellants ’ Br. at 29. 2

R ule 803(6 ) aims to ensure that documents were not created for “personal 3
purpose[s]

. . . or in anticipation of any litigation” so that the creator of the 4
document “had no motive to falsify the record in question.” United States v. 5

Kaiser , 609 F.3d 556, 574 (2d Cir. 2010) ( quoting United States v. Freidin , 849 F.2d 6
716, 719 (2d Cir. 1988) )

. The rule “ favors the admission of evidence rather than its 7
exclusion if it has any probative value at all. ” Id. (internal quotation marks 8
omitted). 9

The d efendant s ha ve failed to meet their burden of showing that the 10
source of information or the method or circumstance of preparation indicate a 11

lack of trustworthiness. The fact that Madoff himself was untrustworthy does not 12
necessarily make the Amended Form BD itself untrustworthy. Such a bro ad 13
ruling would keep out evidence in fraud trials because the person at the center of 14

the fraud committed duplicitous acts

. 15
The defendants next argue that the Amended Form BD was 16
inappropriately admitted as a business record based on the expert report fil ed by 17
Bruce Dubinsky, whom defendants claim gave prior testimony that rendered 1824 him not credible

. The district court stated that “[t ]he Dubinsky Report explains 1
that the fact that Madoff did not check a box listing investment advisory services 2
as a business of the LLC is not dispositive of the question of ownership of the 3
JPMorgan accounts, and that the Amended Form BD made clear that all assets 4
previously owned by the sole proprietorship, including the JPMorgan Accounts, 5

were transferred to the LLC.” SIPC , 528 F. Supp. 3d at 235 . Yet there is nothing in 6
the ruling that suggests that the district court relied on Dubinsky’s opinion in 7

ad mitting the Amended Form BD. T herefore , we need not reach any of 8
defendants’ arguments regarding Dubinsky’s credibility as an expert. 9

II. Whether There Is Sufficient Evidence to Grant Summary Judgment 10

A. Standard of Review 11

“ We review a district court ’ s decision to grant summary judgment de novo , 12
construing the evidence in the light most favorable to the party against which 13
summary judgment was granted and drawing all reasonable inferences in its 14

favor.” Harris v. Miller , 818 F.3d 49, 57 (2d Cir. 2016) (internal quotation marks 15
omitted). We affirm “only if there is no genuine issue of material fact and the 16
prevailing party was entitled to judgment as a matter of law,” id. , but summary 17
judgment “must be rejected if the evidence is such that a reasonable j ury could 1825 return a verdict for the nonmoving party , ” Abdu

– Brisson v. Delta Air Lines, Inc ., 1
239 F.3d 456, 465 (2d Cir. 2001) (internal quotation marks omitted). 2

B. Evidence There Was a Transfer of an Interest of the Debtor in 3 Property 4
5 The defendants argue that there is a dispute of material fact as to whether 6
BLMIS took control of the JPMorgan accounts, rendering summary judgment 7
inappropriate

. In the district court, the defendants argued that the Trustee could 8

not avoid the transfers because there was no evidence that the JPMorgan 9

a ccounts and the IA Business were property of BLMIS . Defendants argued those 10

accounts were owned by Madoff personally , such that the Trustee could not claw 11

back the transfers. SI PC, 528 F. Supp. 3d at 234

. Bo th parties agree that prior to 12
2001, Madoff’s sole proprietorship held the JPMorgan a ccounts used by the IA 13
Business, and that Madoff converted his firm to an LLC in 2001. Defendants 14
claim that after Madoff converted his firm, Madoff’s sole proprietorship 15
continued to run the IA Business, while the proprietary trading business and 16

market

- making business were operated by BLMIS. 7 17

7 In fact, it is undisputed that the LLC had at least some investment a dvisory clients . Madoff’s investment advisory clients who opened accounts after 200126 Defendants claim their argument is supported by inconsistenc i es in the 1
name on the JPMorgan accounts, the name on the endorsement stamp for the 703 2
Account, and the name used on the 509 Account checks . They ar gu e this is 3
enough to raise a question of material fact. Wh ile the LLC was formed in January 4
2001, Madoff did not change the name on both of the JP Morgan a ccounts to 5

BLMIS until September 2002

. Additionally, the endorsement stamp on the 703 6

Account checks remained “ [f] or deposit only Bernard L. Madoff , ” and the 509 7

Account checks continued to bear Madoff’s personal name long after 2001

. All 8
checks paid to JABA indicated the account was owned by “Bernard L. Madoff.” 9

However, this sparse evidence is insufficient to create a dispute of material 10

fact , as the district court correctly found

. It is undisputed that the LLC operated 11
an investment advisory business because it executed client agreements for 12
investment advisory services and sent statements to investment advisory clients

. 13

entered into customer agreements with the LLC, see Exhibit 3, SIPC v. BLMIS, No. 08

- 01789 (Bankr. S.D.N.Y. Dec. 22, 2020), ECF No. 10662

- 3, and previous clients

— including JABA Associates

— received statements on the LLC’s letterhead, Supp. App’x 1411

- 16 . At oral argument, the defendants clarified that their position is that Madoff was operatin g two IA Businesses: one through the sole proprietorship and one through the LLC. Or al Argument Audio Recording at 7 : 57

.27 See supra note 7. The defendants argue that the sole proprietorship nevertheless 1
continued to operate a separate and independent investment advisory business. 2
But that argument ignores the overwhelming e vidence that BLMIS took over all 3
aspects of the sole proprietorship. With the Amended Form BD, Madoff 4

indicated that he would change the corporate form of the business and retained 5
the same SEC Registrant Number (8

- 8132) he had since January 1960. On these 6
forms, Madoff attested that he was transferring all of the predecessor’s assets to 7
the successor and that the transfer would not result in any change in ownership 8

or control. After the SEC filing, BLMIS succeeded to the sole proprietorship’s 9
SEC Registrant Number, and , as far as the SEC was concerned, the sole 10
proprietorship no longer operated as a broker

- dealer or in any other capacity. 11

The Amended Form BD stated that all assets transferred to BLMIS and that no 12
“accounts, fun ds, or securities of customers of the applicant are held by or 13
maintained by [any] other person, firm, or organization [

. ] ” Supp. App’x at 52

- 53. 14

Where the f orm asked what kind of businesses in which it was engaged, 15

Madoff selected “market

- making” and “pro prietary trading activities , ” yet the 16
box next to investment advisory services was unchecked. Supp. App’x at 55

- 56. 17

Defendants below argued that this unchecked box sufficed to create a genuine 1828 issue of material fact

. Before us, however, defendants argue that the Amended 1

Form BD is inadmissible , although they rely on the unchecked box on the f orm in 2

the alternative

. D efendants also point to a district court decision in a related case 3
before Judge Furman that partially r elied on th e one unchecked box on the 4

Amended Form BD in denying the Trustee’s motion for summary judgment

. See 5
Picard v. RAR Entrepreneurial Fund, Ltd ., 2021 WL 827195

. In reviewing the same 6

evidence that was before the district court here , Judge Furman denied summary 7
judgment on the ground that there was insufficient evidence to support a finding 8

that “ no reasonable factfinder could conclude that either Madoff himself or the 9
sole propri etorship retained ownership over the 703 and 509 Accounts even after 10

the LLC's formation in 2001

. ” Id. at *11

. 8 11

8 After a trial on the issue of whether the investment advisory business, including the JPMorgan a ccounts, w as tran sferred to BLMIS, making the transfers recoverable under SIPA, a jury returned a unanimous verdict in favor of the Trustee. Picard v. RAR Entrepreneurial Fund, Ltd. , No. 20

- cv
- 01029 (S.D.N.Y. Mar. 7, 2022), ECF No. 132

. Other cases that have analyzed similar facts have held that similar transfers were made by the LLC. Two of these wer e decisions rendered after trial. See Sec. Inv. Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (“ Bam II ”), 624 B.R. 55 (Bankr. S.D.N.Y. 2020) ; Sec. Inv. Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (“ Nelson ”), 610 B.R. 197 (Bankr. S.D.N.Y. 2019)

. Yet other cases all confronted similar evidence at the motion for summary judgment and found there was sufficient evidence to determine that BLMIS caused the transfers at issue here,29 We disagree and affirm the district court’s finding that the record did not 1
raise a question of material fact as to whether BLMIS owned the JP Morgan 2

accounts. As the district court pointed out: (1) when Madoff changed the form of 3
his business from sole proprietorship to an LLC, the business retained the same 4
SEC registration number ; (2) the Amended Form BD noted that the LLC “will 5

transfer to su ccessor all of predecessor's assets and liabilities related to 6
predecessor ’ s business. The transfer will not result in any change in ownership or 7
control,” and “there were no assets or liabilities of the sole proprietorship listed 8
as ‘not assumed by the successor,’” SIPC , 528 F. Supp. 3d at 234

- 3 5 ; and (3) the 9

f orm also indicated that no “accounts, funds, or securities of customers of the 10
applicant are held by or maintained by [any] other person, firm, or 11
organization , ” i d. at 235

. 12
Additionally, while the Trustee submitted an expert’s opinion that 13

Madoff ’s failure to check this box on the Amended Form BD was not dispositive 14

making it recoverable property under SIPA. See Sec. Inv. Prot. Corp. v. B ernard L. Madoff Inv. Sec. LLC (“ Miller ”), 631 B.R. 1 (Bankr. S.D.N.Y. 2021); Sec. Inv. Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (“ Keller ”), 634 B.R. 39 (Bankr. S.D.N.Y. 2021) ; In re Bernard L. Madoff Inv. Sec. LLC , No. 21

- cv
- 02334, 2022 WL 493734 (S .D.N.Y. Feb. 17, 2022)

.30 of the question of ownership and that the Form made clear that all assets of the 1
sole proprietorship were transferred to the LLC, the defendants do not point to 2
any expert opinion that would rebut this contention. In fact, the defendants do 3
not point to any evidence that the accounts were owned by Madoff personally 4

instead of BLMIS. T o survive summary judgment, defendants cannot simply 5
raise “some metaphysical doubt as to the material facts,” Bellam y v. City of New 6

York , 914 F.3d 727, 754 (2d Cir. 2019) (internal quotation mark s omitted), or 7
present evidence that is “merely colorable,” Anderson v. Liberty Lobby, Inc ., 477 8
U.S. 242, 249

- 50 (1986) . Instead, defendants must “designate specific facts 9

sho wing that there is a genuine issue for trial.” Parker v. Sony Pictures Ent., Inc ., 10
260 F.3d 100, 111 (2d Cir. 2001) (quoting Celotex Corp. v. Catrett , 477 U.S. 317, 324 11
(1986) )

. 12
Defendants claim that they did not need expert testimony regarding the 13
ownership of the bank accounts because owning a bank account is a common 14
experience for adults in the United States, and therefore one “does not need to 15
pay an expert witness

. . . to o pine on the ownership of a bank account

. ” 16
Appellants ’ Br. at 23

- 2 4. This argument is unavailing because Madoff was not 17
engaged in the type of banking the average U.S. adult would undertake. Rather, 1831 Madoff operated a massive Ponzi scheme which he took pains to hide for years. 1
As the district court pointed out, improperly filled

- out forms and other sleights 2
of hand are what one would expect when “exhuming the remnants of a Ponzi 3

scheme.” SIPC , 528 F. Supp. 3d at 235 (citation omitted). 4

Defendants claim the undisputed facts show that the LLC never owned the 5
JPMorgan accounts , but they have pointed to no material evidence of this. In 6
contrast, the Trustee relies on substantial evidence that BLMIS owned these 7

accounts. Because there is no dispute of materia l fact as to the ownership of the 8
JPMorgan a ccounts, the district court did not err in granting summary judgment 9
on this ground. 10

III. Pre j udgment Interest 11
Finally, the defendants argue that awarding prejudgment interest was an 12

abuse of discretion because they are innocent victims of fraud themselves and 13
should not be penalized for defending themselves in court. Defendants argue 14
that: (1) there was no statutory basis for an award of prejudgment interest under 15
11 U.S.C. § 548 ; (2) prejudgment interest is inappropriate where the defendants 16
did nothing wrong; (3) the Trustee was responsible for any delay; and (4) the 17
district court’s award of 4 percent interest was excessive and punitive. 1832 Some of the factors a district court consi ders when awarding prejudgment 1

interest include: “ (i) the need to fully compensate the wronged party for actual 2
damages suffered, (ii) considerations of fairness and the relative equities of the 3
award, (iii) the remedial purpose of the statute involved, an d/or (iv) such other 4
general principles as are deemed relevant by the court.” Wickham Contracting Co. , 5

955 F.2d at 833

- 34 . Judgments based on both federal and state law apply the 6
federal interest rate to prejudgment interest calculations. Thomas v. iStar Fin. , Inc ., 7
629 F.3d 276, 280 (2d Cir. 2010)

. 8

While 11 U.S.C. § 548 does not expressly authorize an award of 9
prejudgment interest, the Supreme Court has upheld an award “despite th e 10
silence of the laws on the subject of interest.” Wickham , 955 F.2d at 834

. However, 11

p rejudgment interest may not be awarded when Congressional intent is to the 12
contrary , which may be obvious from the language of the statute itself. Id. “ E ven 13
when the statute is silent, intent to deny recovery of interest may be inferable 14
from (i) the state of the law on prejudgment interest, for the type of claim 15
involved, at the time the statut e was passed, and (ii) consistent denial by the 16
courts of prejudgment interest under the statute and failure by Congress, despite 17
amendments to the statute, to address prejudgment interest awards .” Id. 1833 Here, the defendants argue that the Bankruptcy Code d oes not authorize 1
an award of prejudgment interest because the statute is silent. Yet defendants do 2
not make any argument that this silence is dispositive, nor that we can make any 3
inference that an award of prejudgment interest is not authorized by the st atute. 4
In fact, prejudgment interest has been awarded against other similar ly situated 5
defendants in related SIPA litigation

. See, e.g ., Securities Investor Protection Corp. v. 6
Bernard L. Madoff Investment Securities LLC , No. 08

– 01789 (SMB), 2018 WL 7
1442312, at *15 (S.D.N.Y. Bankr. Mar. 22, 2018) , report and recommendation adopted , 8
596 B.R. 451 (S.D.N.Y. 2019) , aff ’ d, 976 F.3d 184 (2d Cir. 2020) ; Nelson , 610 B.R. at 9

238 ; Bam II , 624 B.R. at 65

- 66

. While there is no express authorization in Se ction 10
548, this does not mean that it is forbidden by the statute. Defendants point to no 11
case law that has expressly held the opposite and we decline to do so today. 12
Additionally, in light of the Wickham factors, we cannot find that the district 13
court abused its discretion in awarding prejudgment interest against the 14

defendants. While the defendants claim that it would be unfair to award 15
prejudgment interest because they were innocent, “ wrongdoing by a defendant 16

is no t a prerequisite to an award.” Lodges 743 & 1746, Int ’ l Ass ’ n of Machinists & 17
Aerospace Workers v. United Aircraft Corp ., 534 F.2d 422, 447 (2d Cir. 1975)

. 1834 D efendants may be operat ing in good faith and certainly have a right to litigate 1

their case , but that does not change the fact that they have benefited from other 2
customers’ stolen property and have not returned it for over a decade. 3
Nor do we agree with the defendants’ assertion that the district court’s 4
award of 4 percent interest was unnecessarily harsh or punitive. The district 5

court surveyed other cases where prejudgment interest was awarded that ranged 6
from awards of 9 percent to 4 percent. SIPC , 528 F. Supp. 3d at 246 . The district 7
court awarded 4 percent, the prime interest rate on December 15 , 2008, which is 8
the date of the protective decree beginning the BLMIS SIPA liquidation. Id. The 9
district court found that this amount compensated the Trustee for the loss of the 10

use of the t wo

- y ear t ransfers and reduces the profits to the defendants from 11
having withheld the funds. The district court appropriately balanced the equities 12
between the parties. Given this, the district court did not abuse its discretion in 13
granting an award of 4 percent prejudgment interest to the Trustee. 14

CONCLUSION 15

We have considered the defendants ’ remaining arguments on appeal and 16
conclude that they are without merit. We therefore AFFIRM the judgment of the 17

district court

. 1821

- 872 In re: Bernard L. Madoff Investment Securities LLC

WESLEY , Circuit Judge , concurring : 1
I concur in Judge Pooler’s fine opinion. The Majority opinion concludes th at 2

there is no genuine dispute of material fact as to whether BLMIS owned the 3
JPMorgan accounts . T he opinion endorses the district court’s view that the 4

accounts in fact were owned by BLMIS because they were integral parts of the IA 5

Business it operated exclusively

. While I agree with my colleagues and the district 6

court that BLMIS solely operated the IA Business once the firm became an LLC, I 7
do not think that determines the account ownership issue nor do I see a reason to 8

re solve it. F or me , it matters not. What matters is w ho ran the IA Business

— Madoff 9
individually or BLMIS ? If only the latter, then the Trustee can reach the transfers 10

made to the defendants from those accounts and that ends the matter. 11
As Judge Pooler points out , t he only evidence before the district court 12
regarding the IA Business after Madoff converted his firm into an LLC establishes 13

that the firm’s investment advisory customers only d id business with BLMIS

. 14
There is no genuine issue of material fact here

. BLMIS’s Amended and Restated 15
Operating Agreement stated that BLMIS was “formed to receive as at [sic] January 16
1, 2001, all of the assets, subjects to liabilities, associated with business being 172 conducted by Bernard L. Madoff, as sole proprietorship.” SIPC v. BLMIS , Adv. No. 1

08

- 01789 (CGM) (Bankr. S.D.N.Y.), Dkt Nos. 20429

- 4, 20467

- 4 , 20571

- 4, 20578

- 4, 2

20649

- 4

. The c ustomer agreements for th os e who became IA Business customers 3
prior to 2001 expressly stated these agreements would “ [i] nure to the benefit of .

. 4
. any successor organization

. ” S upp. App’x at 1517. As a result of the firm’s 5
reorganization , all the sole proprietorship’s investment advisory customers 6

became customers of BLMIS . Indeed, the firm’s correspondence and relationship 7
with its investment advisory customers reflected this change. For instance , th e 8

firm’s name atop the letterhead of the monthly customer statements it sent to IA 9
Business customers changed from “Bernard L. Madoff” to “Berna r d L. Madoff 10

Investment Securities LLC.” S upp. App’x at 640, Figure 24; S upp. App’x at 1411

– 11

16. And as the Majority observed , the investment advisory customers who opened 12

accounts with the firm after it became an LLC in 2001 signed customer agreements 13

with BLMIS

. See supra note 7. 14

T he defendants offered not a shred of evidence , except names on the 15
JPMorgan checking accounts , to suggest that , after the firm became an LLC , either 16
the sole proprietorship maintained any investment advisory business relationship 17

with customers or that BLMIS did not operate an investment advisory business

. 183 Evidence related to ownership of the JPMorgan a ccounts only does not “designate 1
specific facts showing that there is a genuine issue for trial ” about whether BLMIS 2

or the sole proprietorship maintained an investment advisory business , Parker , 260 3
F.3d at 111, especially since it is undisputed that the funds received from 4

customers both before and after the firm became an LLC were commingled in the 5

accounts

. 6
The Trustee and the Majority rely on the Amended Form BD to contend that 7
ownership of the checking accounts was transferred from the sole proprietorship 8

to BLMIS in 2001. 1 But th e form , prepared by Madoff , is only direct evidence of 9

what he represented to the SEC about BLMIS. JPMorgan’s own recital on their 10

checks and statements is undoubtedly a significant indication of who owned the 11

accounts

. There is nothing in the record evidence even suggesting that JPMorgan, 12

1 As the Majority rightly notes , t he Amended Form BD is inconsistent

. T he form , as the Majority mentions, indicates that BLMIS succeed ed to all the sole proprietorship’s assets , but it does not indicate that BLMIS w ould operate an investment advisory business. T he Amended Form BD also list s the new name of Madoff’s business as “Bernard L. Madoff Investment Securities LLC,” S upp. App’x at 49, but represent s that the legal status and organ izational structure of his business would remain a sole proprietorship, S upp. App’x at 51. In hindsight , it is likely that the Amended Form BD was just another instrument of Madoff’s fraud.4 as the commercial bank maintaining and servicing the accounts, ever recognized 1

BLMIS as the owner of the accounts. 2

While the firm could unilaterally change the nature of its own busines s 3
structure and its relationship with its customers, it could not change the ownership 4

of the bank accounts it used without at least notifying JPMorgan. Notably, Madoff 5

sent letters to various governmental agencies and the Bank of New York, which 6

maintained the bank accounts for the firm’s proprietary trading and market

7
making business es , notifying them of the firm’s change to an LLC , but never to 8
JPMorgan. T here are no JPMorg an documents reflecting a change in ownership. 9
To show that a “transfer of an interest of the debtor in property” was made, 10
Adelphia Recovery Tr. , 2011 WL 1419617, the Trustee need only establish that “the 11
property he is seeking to recover was ‘customer property’ prior to the transfer,” 12

S upp. App’x at 1684; SIPC v. BLMIS , 631 B.R. 1, 8 (Bankr. S.D.N.Y. 2021). SIPA 13
defines customer property as “cash and securities . . . at any time receiv ed, 14
acquired, or held by or for the account of a debtor from or for the securities 15
accounts of a customer.” 15 U.S.C. § 78lll(4). 16

While I may quibble with the Majority as to whether there is a genuine 17
dispute of material fact regarding wh o owned the JPMorgan accounts, that is not 185 dispositive of this appeal. As other Circuit Courts have held , cash and securities 1
can still be customer property even if they were never deposited in a bank account 2

owned by the debtor. 2 The same goes for cash in a customer’s brokerage account 3
when that brokerage account was transferred to the debtor from a predecessor 4
brokerage firm

. See In re Brentwood , 925 F.2d at 329

– 29. “ T he relevant inquiry is 5
whether the brokerage firm actually received, acquired or possessed [the 6
customer’s] property” since SIPA protects customers “who attempt to invest 7

2 See Peloro v. U.S. , 488 F.3d 163, 173

– 74 (3d Cir. 2007) (holdin g that bearer bonds were customer property that had been mailed to the debtor and held by the debtor but seized by the FBI both before they were allocated to any debtor account and the SIPA liquidation proceedings had begun); In re Primeline Sec. Corp. , 29 5 F.3d 1100, 1107 (10th Cir. 2002) (holding that cash was still customer property where the customers, at the instruction of the debtor’s employee, wrote checks made out to the employee and various non

- debtor companies but the employee met with the custome rs at the debtor’s office, provided potential investors with business cards reflecting his position at the debtor, had customers complete debtor new account forms, and sent fraudulent statements on debtor letterhead); In re Old Naples Sec., Inc. , 223 F.3d 1296, 1303 (11th Cir. 2000) (holding that cash was still customer property where the customers gave it to an agent of the debtor who represented he would invest the cash with the debtor but actually deposited their money in a separate, non

- debto r company’s account and used some of the money in that account to pay the debtor’s expenses); In re Brentwood Securities, Inc. , 925 F.2d 325, 329

– 30 (9th Cir. 1991) (holding that cash was still customer property where it was originally deposited in the bro kerage account of the former brokerage firm of the debtor’s president and that brokerage account was later transferred to the debtor broker

- dealer after the president purchased the debtor); In re Stalvey & Assoc., Inc. , 750 F.2d 464, 469 (5th Cir. 1985) (f inding bonds to be customer property where the debtor, through the debtor’s president or one of its employees, “had at least access to the bonds . . . and physical possession of the bonds”).6 through their brokerage firm” and “reasonably follow[ ] the broker’s instructions 1

reg arding payment” but “are defrauded by dishonest brokers.” Primeline Sec. 2
Corp. , 295 F.3d at 1107; In re Old Naples , 2223 F.3d at 1303. Consequently, the real 3
metric is “control over all of the [customers’] funds,” not ownership of the bank 4
account housing the m

. In re Old Naples , 223 F.3d at 1304. 5
Here, there is no genuine dispute of material fact that the LLC directed the 6
transfers; the funds making up the transfers were customer property prior to being 7

made to the defendants even if they were not kept in a bank account owned by 8

BLMIS

. At the time of the transfers, t he defendants’ only investment advisory 9
relationship with the firm was with BLMIS . A s discussed above, once Madoff 10

converted the firm into an LLC, BLMIS solely operated the IA Business

. As a result, 11
the investment advisory relationship for the customers shifted from the sole 12
proprietorship to BLMIS

. N othing changed about how the firm ran its IA Business : 13

BLMIS maintained the same fraudulent scheme, BLMIS still used the only SEC 14
Registrant Number assigned to the firm from its inception , and BLMIS still 15
commingled money it received from its customers in the JPMorgan accounts and 16

used the same checks from those ac counts to send customer money

. BLMIS 17

controlled its customer s’ money in the JPMorgan a ccounts the same way the sole 187 proprietorship once did

. Thus, neither the name on the checks n or where BLMIS 1
parked customer money is relevant; the funds maintained in the accounts were 2
still “received, acquired, or held . . . for the account of” BLMIS “from or for the 3
securities account of” its investment advisory customers. 15 U.S.C. § 78lll(4); see 4

Peloro , 48 8 F.3d at 173

– 74; In re Primeline Sec. Corp. , 295 F.3d at 1107 ; In re Old Naples 5
Sec., Inc. , 223 F.3d at 1303; In re Brentwood , 925 F.2d at 329

– 29

. 6
I agree with the Majority that once Madoff converted the firm into an LLC, 7

BLMIS operated the firm’s only investment advisory business. I do, however, 8
disagree with the Majority’s conclusion that the evidence does not create a genuine 9
dispute of material fact as to whether BLMIS owned the JPMorgan accounts. As a 10

result , I believe this case is best resolve d by looking at the level of control BLMIS 11

exercised over the JPMorgan accounts in solely operating the IA Business

. In doing 12

that , I think it is clear BLMIS made the transfers

. I respectfully concur

. 13