Madoff Trustee’s Win Over Citibank Stands as Justices Deny Review

The U.S. Supreme Court declined to review whether Citibank has the burden to prove that it acted in good faith in accepting $343 million from Bernie Madoff’s Ponzi scheme, as the banking giant faces a trustee’s attempt to claw back the money.

Citibank petitioned to the high court after the U.S. Court of Appeals for the Second Circuit said the Madoff estate trustee seeking to recover fraudulent transfers doesn’t have the burden of proving Citibank’s bad faith. It’s the recipient who must prove good faith, the appellate court said.

The Second Circuit ruling “altered the course” of nearly 100 lawsuits bythe trustee seeking to recover a total of $4 billion for Madoff’s victims, Citibank said.

Irving Picard, the trustee appointed to recover money lost in Madoff’s historic $19 billion scheme, sued Citibank and others to recover $343 million of “fictitious profits” earned in the Ponzi scheme.

A New York federal judge dismissed the case, but the Second Circuit reversed.

The bankruptcy code allows a trustee to recover fraudulent conveyances unless the recipient paid value and received the transfer in good faith, without knowledge of the fraud.

The Madoff cases were brought under the Securities Investor Protection Act of 1970, but SIPA actions in the case rely on bankruptcy law.

Picard waived his right to respond to the petition.

The case is Citibank, N.A. v. Picard, U.S., No. 21-1059, cert. denied 2/28/22.