August Term 2020

(Argued in Tandem: March 12, 2021 | Decided: August 30, 2021)

Docket Nos. 20-1333, 20-1334

IN RE: BERNARD L. MADOFF INVESTMENT SECURITIES LLC ______________

IRVING H. PICARD, TRUSTEE FOR THE LIQUIDATION OF BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Plaintiff-Appellant,

and

SECURITIES INVESTOR PROTECTION CORPORATION, Appellant,

v.

CITIBANK, N.A., CITICORP NORTH AMERICA, INC., Defendants-Appellees. † ______________

IRVING H. PICARD, TRUSTEE FOR THE LIQUIDATION OF BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Plaintiff-Appellant,

and

† The Clerk of Court is respectfully directed to amend the caption as set forth above. SECURITIES INVESTOR PROTECTION CORPORATION, Appellant,

v.

LEGACY CAPITAL LTD., KHRONOS LLC Defendants-Appellees. ______________ Before: WESLEY, SULLIVAN, MENASHI, Circuit Judges.

Plaintiff-Appellant Irving H. Picard was appointed as the trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (“BLMIS”) pursuant to the Securities Investor Protection Act (“SIPA”), 15 U.S.C. §§ 78aaa et seq., to recover funds for victims of Bernard Madoff’s Ponzi scheme. SIPA empowers trustees to recover property transferred by the debtor where the transfers are void or voidable under Sections 548 and 550 of the Bankruptcy Code, 11 U.S.C. §§ 548, 550, to the extent those provisions are consistent with SIPA. Under Sections 548 and 550, a transferee may retain transfers it took “for value” and “in good faith.” Picard brought actions against Defendants-Appellees, Citibank, N.A., Citicorp North America, Inc., Legacy Capital Ltd., and Khronos LLC, to recover payments they received either directly or indirectly from BLMIS. The district court held: (1) a lack of good faith in a SIPA liquidation requires that the defendant-transferee has acted with “willful blindness;” and (2) the trustee bears the burden of pleading the defendant-transferee’s lack of good faith. Relying on the district court’s legal conclusions, the bankruptcy court dismissed the actions, finding Picard did not plausibly allege Defendants-Appellees were willfully blind to the fraud at BLMIS. We disagree with both rulings of the district court. Accordingly, we VACATE the judgments of the bankruptcy court and REMAND for further proceedings consistent with this opinion. Judge Menashi concurs in the Court’s opinion, and files a separate concurring opinion. _________________

ROY T. ENGLERT, JR., Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP, Washington, D.C., Special Counsel (David J.

2 Sheehan, Seanna R. Brown, Amy E. Vanderwal, Matthew D. Feil, Chardaie C. Charlemagne, Baker & Hostetler LLP, New York, NY; Matthew M. Madden, Leslie C. Esbrook, Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP, Washington, D.C., Special Counsel, on the brief), for Plaintiff- Appellant Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC.

NATHANAEL S. KELLEY, Associate General Counsel (Kenneth J. Caputo, General Counsel, Kevin H.