Irving H Picard, Securities Investor Protection Act (SIPA) Trustee for the liquidation of Bernard L Madoff Investment Securities LLC (BLMIS), has filed a motion today in the United States Bankruptcy Court…
For the Southern District of New York seeking approval of a settlement agreement with Herald Fund SPC and Primeo Fund, two feeder funds primarily invested in BLMIS.
Under the terms of the agreement, the settlement will benefit the
BLMIS Customer Fund by approximately USD497 million. The agreement, once approved, will increase total Customer Fund recoveries to more than USD10.3 billion.
“By any measure, the settlement terms are highly advantageous, not only to BLMIS direct customers with allowed claims, but also potentially to the indirect investors in the Herald Fund,” says Oren Warshavsky, lead counsel for the matter and architect of the settlement on behalf of the SIPA Trustee. “Every account in the SIPA liquidation must first be brought to a level playing field, so that those entitled to Customer Fund assets may receive distributions. These recoveries – once approved by the Court – will be combined with existing, available funds and distributed on a fair and orderly basis to all BLMIS customers with allowed claims. That will now include Herald Fund SPC.”
The Herald Fund will receive an allowed claim of approximately USD1.6 billion in the BLMIS liquidation. With this allowed claim, Herald is entitled to catch-up payments from the four interim distributions to BLMIS victims to date. Out of these catch-up payments, the first approximately USD497 million will be used to pay the amount owed by Herald Fund to the BLMIS Customer Fund. As of approval of the settlement, Herald Fund SPC becomes an allowed claimant and will receive further distributions along with all other BLMIS customers with allowed claims not yet fully satisfied.
“These were complex negotiations conducted across international borders. This settlement is a testament to the determination of the SIPA Trustee and the sophisticated asset-tracing and recovery skills of our legal teams, who negotiate on the SIPA Trustee’s behalf for the benefit of all BLMIS customers,” says Geoffrey North, a partner at BakerHostetler LLP, the court-appointed counsel to the SIPA Trustee. “In the filing, the SIPA Trustee noted that the agreement avoids the cost and delay of what could otherwise have been lengthy and contentious litigation.”
Both Primeo and Herald, currently in liquidation in the Cayman Islands, deposited more in BLMIS than they ultimately withdrew before the bankruptcy was announced on 11 December, 2008. In accordance with the United States Bankruptcy Code, the SIPA Trustee and his team negotiated a return of the approximately USD497 million for equitable distribution to all BLMIS customers with allowed claims whose claims are not yet fully satisfied. To date, the SIPA Trustee has allowed 2,528 claims related to 2,198 BLMIS accounts. Of these accounts, 1,131 accounts – or all allowed claims totalling USD925,000 or less – have been fully satisfied.
