The United States Court of Appeals for the Second Circuit has affirmed a lower court ruling in In re Bernard L. Madoff Investment Securities LLC refusing to claw back transfers of fictitious profits made to customers in connection with a Ponzi scheme. The decision reaffirms the Second Circuit’s broad and literal interpretation of section 546(e) of the Bankruptcy Code, which provides a safe harbor for transfers made in connection with a securities contract that might otherwise be attacked as preferences or fraudulent transfers.
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