An order issued by the U.S. Supreme Court this morning denied Farnum Place LLC’s petition for certiorari. Farnum Place had sought review of whether chapter 15 of the Bankruptcy Code requires a U.S. bankruptcy court to independently analyze a foreign debtor’s sale of a U.S. asset, after the U.S. Bankruptcy Court disapproved Fairfield Sentry’s sale of a $230 million Madoff customer claim.
A trade confirmation with Farnum Place was signed in late 2010, days before the U.S. Trustee for Madoff, Irving Picard, announced a settlement with Jeffry Picower’s estate including a $5 billion payment to the Madoff trustee, which caused the Madoff SIPA Claim to almost double in value overnight. In 2012, the BVI Commercial Court refused to disapprove the trade confirmation, on the grounds that it was entered in good faith, but granted sanction for the Liquidators to apply to the U.S. Bankruptcy Court for the Southern District of New York regarding the application of section 363 of the U.S. Bankruptcy Code to the proposed sale. After the Liquidators suffered defeats at both the U.S. Bankruptcy Court and the U.S. District Court for the Southern District of New York, the Second Circuit Court of Appeals determined on appeal that section 363 applied and remanded the matter back to the U.S. Bankruptcy Court to conduct a review of the proposed sale under section 363. The U.S. Bankruptcy Court, using the guidance from the Second Circuit, disapproved the sale under section 363. This result was in turn affirmed by the U.S. District Court for the Southern District of New York and the Second Circuit Court of Appeals. Farnum Place then petitioned for certiorari. The Supreme Court’s decision denying Farnum’s petition thus ends an over five-year battle by the Joint Liquidators to disapprove the sale and maintain the benefit of the Madoff SIPA Claim proceeds for the benefit of Fairfield Sentry shareholders.
The financial benefit for the Fairfield Sentry estate is significant. The difference between the original sale price and the estimate of projected distributions in the Madoff estate is $100 million, all which accrues to the benefit of those who suffered losses in Fairfield Sentry.
BTG Global Advisory members Kenneth Krys and Charlotte Caulfield are acting as Joint Liquidators. Kenneth said “The denial of certiorari by the U.S. Supreme Court is extremely welcome, and brings this matter to a close in the U.S. It will allow the Liquidators to declare another distribution to shareholders, hopefully before year end.”