STUART M. BERNSTEIN, United States Bankruptcy Judge:
Irving H. Picard, as trustee ("Trustee") for the liquidation of Bernard L. Madoff Investment Securities LLC ("BLMIS") under the Securities Investor Protection Act, 15 U.S.C. §§ 78aaa et seq. ("SIPA"), commenced this adversary proceeding to avoid and recover transfers by BLMIS to certain initial and subsequent transferees. Following the disposition of motions to dismiss, see Picard v. Merkin (In re BLMIS), 515 B.R. 117 (Bankr. S.D.N.Y. 2014) ("Dismissal Decision") and settlements by two defendants, only a few claims remain.
Currently before the Court are motions for summary judgment (the "Motions") by defendants (i) J. Ezra Merkin ("Merkin") and Gabriel Capital Corporation ("GCC," and together with Merkin, the "Merkin Defendants") and (ii) Ralph C. Dawson, as receiver for Ascot Partners, L.P. ("Ascot Partners") and Ascot Fund Ltd. ("Ascot Fund," and together with Ascot Partners, the "Ascot Entities," and collectively with the Merkin Defendants, the "Defendants"). For the reasons that follow, Ascot Partners is entitled to summary judgment dismissing Count Nine, but the Motions are otherwise denied.
The essential facts regarding Bernard Madoff's Ponzi scheme have been recounted in numerous decisions of the Second Circuit, the District Court and this Court, including the Dismissal Decision. Beginning in the early 1990s
The Trustee commenced this adversary proceeding on May 7, 2009, and filed his Third Amended Complaint, dated Aug. 30, 2013 ("TAC") (ECF Doc. # 151)
The defendants moved to dismiss the TAC. As described in the Dismissal Decision, the Court concluded that the Trustee had failed to allege that Merkin had actual knowledge of Madoff's fictitious trading, but did allege that he willfully blinded himself to that fact. Based upon the lack of actual knowledge, the Court dismissed all of the avoidance claims other than Count Two, which alleged actual fraudulent transfers under 11 U.S.C. § 548(a)(1)(A). Dismissal Decision, 515 B.R. at 137-41. The Court also dismissed the equitable disallowance claims alleged in Counts Eleven and Twelve, id. at 153-57, but denied the branch of the motions seeking dismissal of the portion of the subsequent transfer claims that corresponded to the surviving fraudulent transfer claims under § 548(a)(1)(A), id. at 149-53, the general partner liability claims against Merkin, id. at 153, and the equitable subordination of claims. Id. at 157-61. The Trustee subsequently settled with and dismissed his claims against Gabriel and Ariel. (See Stipulation of Dismissal and Consent Order, dated Sept. 8, 2015 (ECF Doc. # 282).) As a result, the following Counts and Defendants remain:
COUNT DEFENDANT(S) DESCRIPTION 2 Ascot Partners Avoid and recover transfers totaling $280,000,000 made within two-years of the Filing Date as intentional fraudulent transfers pursuant to 11 U.S.C. §§ 548(a)(1)(A), & 550(a) and 15 U.S.C. § 78fff-2(c)(3), and disallow any claim Ascot Partners may have against BLMIS pursuant to 11 U.S.C. § 502(d) until the transfers are returned to the Trustee. 9 Ascot Partners, Recover subsequent transfers pursuant to 11 U.S.C. Ascot Fund, GCC, § 550(a). Merkin 10 Merkin Impose general partner liability against Merkin for obligations of Ascot Partners. 13 Ascot Partners Equitably subordinate the customer claim filed by Ascot Partners pursuant to 11 U.S.C. § 510(c).
The Defendants have now moved for summary judgment on the TAC's remaining counts.
The Defendants raise other arguments as well. Ascot Fund contends that Merkin's knowledge should not be imputed to it, (Ascot Brief at 34-36; Ascot Reply at 20-22), Ascot Partners maintains that the Trustee has failed to identify any subsequent transfers that it received, (Ascot Brief at 36-37; Ascot Reply at 19-20), and the Merkin Defendants argue that the subsequent transfer and partner liability claims in Count Nine and Count Ten should be dismissed because Ascot Partners — the only initial transferee — will have sufficient assets to satisfy the judgment. (Merkin Brief at 27-28; Merkin Reply 19-22.) Lastly, Ascot Partners seeks the dismissal of the equitable subordination claim
Rule 56 of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding by FED. R. BANKR. P. 7056, governs motions for summary judgment. Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). The moving party bears the initial burden of showing that the undisputed facts entitle it to judgment as a matter of law. Rodriguez v. City of New York, 72 F.3d 1051, 1060-61 (2d Cir. 1995). If the movant carries this initial burden, the nonmoving party must set forth specific facts that show triable issues, and cannot rely on pleadings containing mere allegations or denials. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); see Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where, as here, the defendant is the movant, it is entitled to summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp., 477 U.S. at 322, 106 S.Ct. 2548.
A court's function is not to resolve disputed issues of fact, but only to determine whether there is a genuine issue to be tried. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ("at the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial"). In deciding whether material factual issues exist, all ambiguities must be resolved and all reasonable inferences must be drawn in favor of the nonmoving party. Matsushita Elec., 475 U.S. at 587, 106 S.Ct. 1348; accord Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 151, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) ("Thus, although the court should review the record as a whole, it must disregard all evidence favorable to the moving party that the jury is not required to believe.").
Merkin was a money manager and partner in several investment funds, and occasionally conducted his business through his wholly-owned corporation, GCC. (See Ariel Offering Memorandum
Merkin was the general partner of Ascot Partners and had the ultimate responsibility for its management, operations and investment decisions. (See Ascot Partners Offering Memorandum at GCC-P 0335405.) GCC served as Ascot Fund's investment advisor until the 2003 master-feeder reorganization, (see Termination Agreement
The principal issue raised by the Motions is whether the Trustee can demonstrate at trial that Merkin willfully blinded himself to the fact that Madoff was not engaged in the actual trading of securities. Willful blindness consists of two elements or prongs: "(1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact." Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754, 131 S.Ct. 2060, 2070, 179 L.Ed.2d 1167 (2011). The substance of the Motions focuses on the first prong; it contends that Merkin conducted appropriate due diligence of BLMIS and Madoff, and did not suspect that Madoff was running a Ponzi scheme. In that event, he could not have consciously avoided learning the true state of facts as required by the second prong.
The Defendants identify several categories of facts in support of their Motions. First, Madoff had a "sterling reputation." (Transcript of Feb. 24-25, 2015 Deposition of Merkin ("Merkin Dep. Tr.")
Second, once Merkin's funds began investing directly with BLMIS, employees of GCC entered each BLMIS trade confirmation into GCC's portfolio management system. (Transcript of Aug. 9, 2011 Deposition of Michael J. Achilarre
Third, Merkin hired the accounting firm of BDO Seidman, LLP ("BDO") to perform yearly audits of his funds, including the Ascot Entities. (Transcript of Oct. 10, 2012 Deposition of Robert Castro ("Castro Dep. Tr.")
Merkin points to several other facts in support of his contention that he did not suspect Madoff's fraud or have any reason to: he spoke to Madoff roughly once a month over the course of many years, (Merkin Dep. Tr. at 186:13-17, 212:6-213:6, 428:18-431:7); he was comforted by the ease with which his funds received redemptions from BLMIS noting that "it was always easier to get money out than to put money in and that to me is a very positive sign," (id. at 217:13-15); he maintained a file (the "Madoff File")
The Trustee submitted evidence that Merkin learned about the possibility of fraud at BLMIS and also voiced his own concerns. Merkin was cautioned about Madoff as early as 1992 by Victor Teicher — a money manager for Gabriel and Ariel. Teicher warned Merkin that Madoff's returns were too consistent, (Transcript of Feb. 9, 2009 Deposition of Victor Teicher ("Teicher Dep. Tr.")
During the same timeframe, Merkin suggested to investor Joel Ehrenkranz that he consider investing with BLMIS. Ehrenkranz was concerned that BLMIS self-cleared its own trades instead of clearing trades through a third-party such as Merrill Lynch, Morgan Stanley or Goldman Sachs, (Transcript of Mar. 20, 2014 Deposition of Joel Ehrenkranz
Merkin was aware that BLMIS employed Friehling & Horowitz — a small firm with one active accountant — as its independent auditor. (Transcript of Feb. 9, 2009 Deposition of Merkin
While the movants tout Merkin's Madoff File as evidence of his due diligence, the Trustee argues that at least some of the documents in it raised suspicions of fraud at BLMIS. For example, the Madoff File contained a February 1996 document titled "Comparing Promeo [sic] Manager Series B and the S&P500" ("Primeo Analysis").
The Madoff File also contained a typewritten transcript of a part of a January 14, 2002 conversation between Merkin and Madoff ("Jan. 2002 Tr.")
Merkin also questioned BLMIS' uncanny consistency. He told Madoff that "nobody really knows of anybody who does what you do who is competitive with you, at least that's available to the investing public.... I don't know anybody who has a strategy just like yours and who have your returns, but not adjusted to volatility." (Id. at GCC-P 0393365.)
The conversation also covered Madoff's unusual fee structure. Merkin's initially guessed that Madoff charged "somewhere between 3% and 4%" of principal investment to which Madoff replied: "What would you say if I told you I don't make
Subsequently, in June 2003, Merkin expressed his concerns about BLMIS to two representatives of "Research Company A" — a company engaged to perform ongoing due diligence for third-parties' investments in the Ascot Entities. Since the funds had substantial exposure to BLMIS, due diligence involved analyzing BLMIS. Research Company A's founder and its research director participated on a call with Merkin. According to the research director, (1) Merkin lacked a good explanation on the scalability of BLMIS' option trades, and had "come to accept" that there were "things that [he didn't] understand," (Transcript of Nov. 22, 2013 Deposition of research director
Perhaps the most compelling piece of evidence supplied by the Trustee concerned Merkin's reaction to the revelation of another, similar fraudulent scheme. In August 2005, a group of Connecticut investment funds known as the "Bayou Group" was exposed as a Ponzi scheme. The principals were arrested and pleaded guilty to various fraud charges. See Adams v. Marwil (In re Bayou Grp., L.L.C.), 363 B.R. 674, 677-78 (S.D.N.Y. 2007), aff'd, 564 F.3d 541 (2d Cir. 2009). In the wake of the Bayou Group Ponzi scheme, Merkin circulated an email on September 7, 2005 to himself, Rick Annis, Launny Steffens, Greg Ho and David S. Gottesman.
(Hoang Decl., Ex. 49.)
Merkin knew that BLMIS met three of these criteria. It cleared its own trades (a subject of numerous warnings in the past), it used a small accounting firm that could not possibly handle BLMIS' auditing work (also the subject of a past warning) and
Merkin also recognized that the Bayou debacle would trigger questions about Madoff. Madoff and Merkin had a conversation about the Bayou Group fraud after it was exposed:
(Hoang Decl., Ex. 21 at 3:1-9.)
The Trustee also provided evidence supporting the inference that Merkin consciously avoided confirming his suspicions about BLMIS' fraudulent operations. In fact, Merkin admitted that he stopped asking Madoff questions. While discussing issues going to the scalability of BLMIS' investment operation in 2002, Merkin proclaimed that "you could stop caring" because Madoff had "been defying gravity for long enough," and, in fact, "[he didn't] really care, because [he'd] made [his] peace with Bernie." (Jan. 2002 Tr. at GCC-P 0393364.)
Merkin also advised others to avoid asking about BLMIS:
(Id. at GCC-P 0393371-GCC-P 0399372 (emphasis added).)
His post-Bayou conduct may be the most puzzling. As set forth above, Merkin sent an email to other fund managers listing indicia of fraud that they should be asking their money managers about. Merkin knew that several of the red flags he identified applied to BLMIS, but there is no evidence that he did anything to confirm that BLMIS was a legitimate operation and not a Ponzi scheme like Bayou.
Finally, according to the Trustee's expert Dr. Steve Pomerantz, due diligence consistent with industry norms would have revealed numerous red flags related to the Merkin funds' BLMIS accounts. (Initial Expert Report of Dr. Steve Pomerantz,
With this background, I turn to the remaining Counts that the Defendants ask me to dismiss. Count Two of the TAC seeks to avoid and recover withdrawals made within two-years of the Filing Date from BLMIS to Ascot Partners' BLMIS account in the amount of $280,000,000 (the "Transfers") as intentional fraudulent transfers pursuant to 11 U.S.C.
In the context of the BLMIS SIPA case, "`good faith' means that the transferee neither had actual knowledge of the [BLMIS] fraud nor willfully blinded himself to circumstances indicating a high probability of such fraud." Good Faith Decision, 516 B.R. at 23. In the Dismissal Decision, the Court ruled that the Trustee failed to plead "actual knowledge," 515 B.R. at 140-41, so the remaining inquiry for purposes of Count Two is whether Merkin, as the general partner of Ascot Partners, willfully blinded himself to the BLMIS fraud.
The willful blindness inquiry asks whether an individual took deliberate action to avoid confirming a fact after learning that there was a high probability that such fact was true. Global-Tech, 563 U.S. at 769, 131 S.Ct. 2060; accord Meoli v. Huntington Nat'l Bank (In re Teleservices Grp., Inc.), 444 B.R. 767, 814-15 (Bankr. W.D. Mich. 2011) ("Including willful blindness as a substitute for actual knowledge, though, adds a temporal aspect to the analysis."); cf. Woodman v. WWOR-TV, Inc., 411 F.3d 69, 84 n.14 (2d Cir. 2005) (The doctrine of conscious avoidance "does not tolerate a person shutting his eyes to a fact ... after realizing its high probability....") (emphasis in original). Although Merkin has proffered evidence of early and in some cases pre-investment due diligence, the question is what did he learn about BLMIS as the years passed, and what did he do with that information.
As noted, the evidence supports the inference that Merkin strongly suspected that Madoff was running a Ponzi scheme based upon what he learned, what he was told and what he said. Merkin was warned by Teicher, Ehrenkranz and Nash of BLMIS red flags including the impossibly consistent returns, the self-clearing of trades and the use of a too-small accounting firm to conduct audits. Merkin also learned that BLMIS' returns were inconsistent with the expected returns of an investor employing the SSC Strategy, Madoff's investment strategy lacked scalability, the amount of assets BLMIS had under management was unknown and BLMIS charged management fees that were significantly below market. In addition, Merkin advised two representatives of Research Company A during a 2003 meeting not to make BLMIS a large part of their portfolio despite the consistent returns and alluded to BLMIS being a Ponzi scheme.
The Merkin Defendants also claim that the maintenance of the Madoff File evidences Merkin's diligence. (Merkin Brief at 9.) They cite to their Supplemental Responses to interrogatories for support, (see Supplemental Responses at 3-4 (supplemental answer to interrogatory nos. 1,2,3,7,8,9,10,11, and 13)), but the Supplemental Responses were signed only by the attorney and not Merkin as required under Federal Civil Rule 33(b)(5). See 7 CLAUDIA WILKEN & ROBERT M. BLOOM, MOORE'S FEDERAL PRACTICE § 33.104 (3d ed. 2016) ("[D]espite counsel's substantial assistance, it is not proper or acceptable for the attorney alone to sign or verify responses."). Thus, they are not entitled to any weight for purposes of the Motions but even if they were, the fact that Merkin kept a file on Madoff, including a transcript of a part of the January 2002 phone conversation with Madoff,
The Defendants point out as well that Merkin and his family lost $110 million from their personal investment in his funds. (Merkin Dep. Tr. at 636:1-7 (stating that he and his family had exposure of roughly $110 million across the funds).) They ask the Court to infer that Merkin would not have put his and his family's money at risk if he was highly suspicious of BLMIS. However, Merkin's deposition testimony as to the losses was imprecise, (e.g., id. at 639:22-640:5 (thinks amounts invested by entity called JEM 2000 Trust was associated with him); id. at 640:18-641:2 (did not know whether investments by entities called Merkin Trusts and Merkin Trusts 2 were included in the loss total); id. at 641:14-19 (stating that amount invested by his mother-in-law "[m]ight have been" included)), and any favorable inference is undercut by the $685 million in fees Merkin received through 2007 for managing the same funds in which he and his family invested. (Hoang Decl., Ex. 17 at 23.)
Despite the knowledge that Madoff was likely operating a fraudulent enterprise, the evidence supports the inference that Merkin did nothing to allay his suspicions. His ongoing due diligence relied on GCC's reports and BDO's audits to alleviate his concerns but (i) GCC's monthly process consisted of matching the BLMIS trade confirmations against the BLMIS monthly
"Summary judgment is notoriously inappropriate for determination of claim in which issues of intent, good faith and other subjective feelings play dominant roles." Krishna v. Colgate Palmolive Co., 7 F.3d 11, 16 (2d Cir. 1993) (citation and internal quotation marks omitted); Meiri v. Dacon, 759 F.2d 989, 998 (2d Cir.) (recognizing that "summary judgment is ordinarily inappropriate where an individual's intent and state of mind are implicated"), cert. denied, 474 U.S. 829, 106 S.Ct. 91, 88 L.Ed.2d 74 (1985). While summary judgment may nonetheless be granted on a "state of mind" issue when the non-movant fails to come forward with contrary evidence, Meiri, 759 F.2d at 998 ("The summary judgment rule would be rendered sterile, however, if the mere incantation of intent or state of mind would operate as a talisman to defeat an otherwise valid motion."), the Trustee has adduced evidence supporting the inference that Merkin was aware of the high probability that BLMIS was a Ponzi scheme and turned his back. In short, Merkin's state of awareness and what he did present disputed issues of fact.
Accordingly, the motion for summary judgment dismissing Count Two is denied.
Count Nine seeks to recover subsequent transfers of the avoided initial transfers pursuant to Bankruptcy Code § 550(a)(2) from GCC and Ascot Fund, as well as subsequent transfers to Merkin or for his benefit.
The more difficult issue relates to the imputation of Merkin's willful blindness to the Ascot Fund. Bankruptcy Code § 550(b)(1) provides a complete defense to a subsequent transferee to the extent he "takes for value ... in good faith, without knowledge of the voidability of the transfer." Accord Picard v. Legacy Capital Ltd. (In re BLMIS), 548 B.R. 13, 37-39 (Bankr. S.D.N.Y. 2016) (describing application of the section 550(b)(1) defense to BLMIS subsequent transfer claims). The "good faith" requirements in Bankruptcy Code §§ 548(c) and 550(b)(1) are the same — i.e. the subsequent transferee must not know or willfully blind himself to the fact that BLMIS was not engaged in the actual trading of securities. Good Faith Decision, 516 B.R. at 23.
While the Court observed in the Dismissal Decision that it did not appear Merkin's knowledge could be imputed to Ascot Fund, 515 B.R. at 151, the evidence submitted with the Motions shows otherwise. From February 20, 1992 until December 31, 2002, GCC served as the Ascot Fund's investment advisor. (Termination Agreement
Despite the changes, Merkin "assured" Ascot Fund investors that he would "continue to direct the management and investing of Ascot Partners as its sole General Partner, [and Merkin did not] anticipate that these changes [would] have any substantive impact on investors in either the offshore [i.e. Ascot Fund] or domestic [i.e. Ascot Partners] fund." (Id. (emphasis added).)
Deposition testimony of Ascot Fund directors corroborated the prominent role Merkin — through his role as general partner
The Merkin Defendants argue that subsequent transfer claims against them should be dismissed for a separate reason. (Merkin Brief at 27-28; Merkin Reply at 19-22.) They maintain that Ascot Partners has or will have an allowed net equity claim of $506 million consisting of (1) a $226 million customer claim (the "SIPA Claim"), and (2) a $280 million claim under Bankruptcy Code § 502(h). The Trustee has already distributed 55.685% (as of the filing of the Merkin Brief
This argument fails as a matter of law for several reasons. First, the Trustee may recover avoided transfers from an initial transferee or a subsequent transferee, 11 U.S.C. § 550(a)(1)-(2), and need not seek recovery first from the initial transferee. IBT Int'l, Inc. v. Northern (In re IBT Int'l Admin. Servs., Inc.), 408 F.3d 689, 706 (11th Cir. 2005) ("In short, once the plaintiff proves that an avoidable transfer exists he can then skip over the initial transferee and recover from those next in line."); see SIPC v. BLMIS (In re BLMIS), 501 B.R. 26, 31 (S.D.N.Y. 2013) ("[T]here is no basis in the language of either section 550(a) or in the Bankruptcy Code's avoidance provisions to assume that avoidance actions must be brought — or fully adjudicated — against an initial transferee for recovery proceedings to go forward against a subsequent transferee."); 5 ALAN N. RESNICK & HENRY J. SOMMER, COLLIER ON BANKRUPTCY ¶ 550.02[1] at 550-6 (16th ed. 2016) ("The better view, adopted by the majority of courts, is that a transfer may be found avoidable and a recovery may be had from a subsequent transferee without suing the initial transferee.").
Second, the Merkin Defendants ignore Bankruptcy Code § 502(d). Section 502(d)
Third, and for like reason, Bankruptcy Code § 502(h) will give Ascot Partners a claim only to the extent the Trustee recovers the avoided Transfers from Ascot Partners. Bankruptcy Code § 502(h) provides that
11 U.S.C. § 502(h) (emphasis added). Furthermore, unless Ascot Partners returns the entire Transfer, its § 502(h) claim will be disallowed under § 502(d).
Accordingly, the motion for summary judgment dismissing Count Nine is granted as to Ascot Partners but is otherwise denied.
Count Ten seeks to impose general partner liability against Merkin for the debts of Ascot Partners, a Delaware partnership. See Dismissal Decision, 515 B.R. at 153. The Merkin Defendants argue that general partner liability cannot serve as a basis for recovery of an avoidance claim under the Bankruptcy Code. (Merkin Brief at 27 n.7; Merkin Reply at 22.) The Merkin Defendants previously made this argument in connection with their first motion to dismiss and lost it. Judge Lifland, then presiding over the BLMIS liquidation, held that the Trustee "is empowered under section 550(a) of the Code to recover avoided transfers from a partnership as initial transferee, or from the general partner of a partnership under applicable state partnership law." Picard v. Merkin (In re BLMIS), 440 B.R. 243, 269 (Bankr. S.D.N.Y. 2010), leave to appeal denied, No. 11 mc 0012 (KMW), 2011 WL 3897970 (S.D.N.Y. Aug. 31, 2011); accord Shubert v. Stranahan (In re Penn. Gear Corp.), Adv. P. Nos. 03-940, 03-0942 (DWS), 2008 WL 2370169, at *9 (Bankr. E.D. Pa. Apr. 22, 2008). That ruling is law of the case, and the Merkin Defendants have not explained why it should be reconsidered.
The Merkin Defendants also argue that the Trustee could not execute a judgment against Merkin as a general partner of Ascot Partners because the Trustee cannot
DEL. CODE ANN. tit. 6, § 17-403(d)(1)-(5) (West 2016).
The Merkin Defendants' raised this argument for the first time in their reply brief, and the Court will not consider it. Knipe v. Skinner, 999 F.2d 708, 711 (2d Cir. 1993) ("Arguments may not be made for the first time in a reply brief").
Accordingly, the motion for summary judgment dismissing Count Ten is denied.
Count Thirteen seeks to equitably subordinate Ascot Partners' customer claim pursuant to section 510(c) of the Bankruptcy Code. The Court discussed equitable subordination in detail in the Dismissal Decision, and denied dismissal because the TAC had adequately pled inequitable conduct. 515 B.R. at 157-61. As with the willful blindness inquiry, there are triable issues of fact regarding Merkin's inequitable conduct, and summary judgment is thus inappropriate. Katz, 462 B.R. at 456 (the Trustee may subordinate claims by "proving that the defendants invested with Madoff Securities with knowledge, or in reckless disregard, of its fraud").
Accordingly, the motion for summary judgment dismissing Count Thirteen is denied.
For the reasons stated, the Motions are denied except with respect to the portion of Count Nine seeking to recover subsequent transfers from Ascot Partners. The Court has considered the Defendants' remaining arguments and concludes that they lack merit. The parties are directed to submit a consensual order, or in the absence of consent, to settle an order on notice. The parties should also draft a pre-trial order using the form linked to the Court's chambers rules, and schedule a final pre-trial conference.
