Bernie Madoff died on April 14, 2021, while incarcerated in the Federal Medical Center in Butner, North Carolina, but he lives on in bankruptcy jurisprudence. The December 2008 disclosure that Bernard L. Madoff Investment Securities LLC (BLMIS) was a Ponzi scheme led to its liquidation under the Securities Investor Protection Act (SIPA).1 A SIPA liquidation is designed to collect “customer property” for ratable distribution among customers based on their “net equity” — investments minus withdrawals (i.e., loss of principal).2 SIPA largely incorporates the Bankruptcy Code and allows the SIPA trustee to recover property transferred by the debtor that would have been customer property if and to the extent that the transfer would have been voidable or void under the Bankruptcy Code.3
Irving H. Picard, who was appointed trustee in the SIPA proceeding, brought countless actions seeking to avoid and recover transfers that he alleged were “fraudulent” (a) under Bankruptcy Code section 548(a)(1)(B “constructive fraud” fraudulent transfers in which the debtor received less than a reasonably equivalent value in exchange for the transfer, and (b) under section 548(a)(1)(A) of the Bankruptcy Code,4 “actual fraud” fraudulent transfers in which the transfers were allegedly made with actual intent to hinder, delay, or defraud creditors. Transfers “avoided” under section 548 can be recovered under section 550(a) of the Bankruptcy Code.5 The trustee’s website reports recoveries of $14.604billion, and his pursuit of recipients of BLMIS funds is ongoing.6
Many of the trustee’s avoidance and recovery actions dealt with transactions involving foreign parties and encountered hurdles related to the issue of whether the US avoidance and recovery law applies extraterritorially in light of the presumption against extraterritoriality that “[a]bsent clearly expressed congressional intent to the contrary, federal laws will be construed to have only domestic application.”7 If the presumption against extraterritoriality has not been rebutted, courts examine a statute’s “focus” to determine whether a case involves a domestic application. If so, the statute will apply.8 Decisions conflict on whether Congress intended that US avoidance and recovery provisions apply to extraterritorial transfers. The inconsistent decisions provide fertile ground for academic analysis and possible legislative reform, a matter that the National Bankruptcy Conference’s Avoidance Committee and International Aspects Committee will discuss and a topic beyond the scope of this brief report.9
Within the wider universe of the trustee’s litigation to recover transfers of customer property, recent decisions deal with possible roadblocks other than the presumption against extraterritoriality. The trustee lost one fraudulent-transfer case based on foreign sovereign immunity but survived motions to dismiss in two cases in which allegations of defendant complicity arguably hindered the ability of the defendants to avail themselves of the Bankruptcy Code’s “safe harbor” provisions (as discussed below).
Trustee Thwarted by Sovereign Immunity
Madoff as revenant materialized in a September 2023 opinion of the US District Court for the Southern District of New York, which allowed an agency of a foreign sovereign to escape liability in a fraudulent transfer action.10 In The Public Institution for Social Security v. Picard, the trustee sought to avoid and recover a $20 million transfer of funds that Fairfield Sentry Limited — a feeder fund — obtained from BLMIS and transferred to the Public Institution for Social Security (PIFSS), a Kuwaiti government agency. PIFSS moved to dismiss the complaint based on its alleged immunity under the Foreign Sovereign Immunity Act (FSIA).11 Subject to exceptions, FSIA grants a foreign state (country) immunity from the jurisdiction of the courts of the US.12
The definition of a “foreign state” includes “an agency or instrumentality of a foreign state,”13 and there was no dispute about whether PIFSS satisfied the definition. The Bankruptcy Court denied PIFSS’ motion to dismiss, ruling that the trustee’s claim fell within the “commercial activity” exception to sovereign immunity:
(a) foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case ...
(2) in which the action is based ... upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.14
PIFSS appealed the Bankruptcy Court’s decision, disagreeing with the court’s view that “the [commercial] ‘act’ … considered was the bundle of activities constituting the entirety of PIFSS’ engagement with Fairfield Sentry, including its subscription into the fund, as well as its redemption request and receipt of funds” and asserting that only its receipt of funds was relevant.15 On appeal, the Bankruptcy Court’s denial of PIFSS’ motion to dismiss was reversed.16 According to the District Court, “[d]efining the relevant ‘act’ to include its initial subscription into Fairfield Sentry made it easy for the Bankruptcy Court to conclude that the relevant ‘act’ had a direct effect on the United States.” In other words, the investment into Fairfield resulted in payments to BLMIS in the US.17 But the District Court perceived a more limited relevant act and decreed that “[t]he definition of the relevant ‘act’ is dispositive here.”18
Specifically, the relevant act could have been (a) the receipt of funds by PIFSS, (b) its redemption request and receipt of funds, or (3) the entire relationship, including subscription and investment. Citing Second Circuit precedent, the District Court noted that the parties’ entry into the original contract should not be considered as the relevant act and rejected the inclusion of the subscription and investment in its analysis.19 According to the District Court, neither the redemption request nor the receipt of funds by PIFSS had any direct effect in the US. The request was made by PIFSS to Fairfield — both foreign entities — and the redemption payment was made between them outside of the US with funds that Fairfield Sentry had previously withdrawn from BLMIS. Consequently, the redemption payment had no direct effect on BLMIS in the US. As a result, the District Court granted PIFSS’ motion to dismiss on the basis of sovereign immunity.20
Of Not-So-Safe Harbors
In a different proceeding, Picard v. UBS Europe SE (f/k/a UBS (Luxembourg) S.A.), the BLMIS trustee brought fraudulent-transfer claims, seeking to avoid and recover direct and subsequent transfers of alleged customer property against (a) two related offshore feeder funds (Funds) that were the initial transferees from BLMIS and (b) a number of European banks, brokers, and related persons that were the subsequent transferees (Subsequent Transferees) and had acted as advisers and service providers to the Funds.21 The Funds received nearly $500 million from BLMIS within the two years prior to the SIPA filing and transferred more than $28 million to the Subsequent Transferees.22
The Subsequent Transferees moved to dismiss the fraudulent-transfer actions on a number of grounds, including a lack of personal jurisdiction (as to three of the defendants),23 failure to plead actual fraud,24 failure to state a claim due to the “safe harbor provision” of the Bankruptcy Code,25 and failure to plead receipt of customer property.26 On the first issue, the Bankruptcy Court ruled that personal jurisdiction existed because the defendants “purposefully availed [themselves] of the privilege of doing business in the forum and could foresee being haled into court there.”27 In other words, they knew they were doing business with BLMIS, had regular communications with it, and received payments from it: “Defendants’ alleged contacts with New York are not random, isolated or fortuitous.”28
On the second issue, the defendants attacked the claims on the basis that the claims were protected from clawback under the Bankruptcy Code’s “safe harbor” provision in section 546(e).29 According to the defendants, the Bankruptcy Code’s safe harbor provision, intended to provide stability to the capital markets and to protect capital market transactions from being undone by Bankruptcy Code avoidance provisions, insulated the relevant transfers.30 The trustee countered, arguing that the safe harbor provision does not apply to intentional fraudulent transfer. In turn, the defendants claimed that the trustee failed to plead this exception.31
Typically, a plaintiff would have to clearly plead the exception for it to be invoked. But because of the very nature of the Ponzi scheme allegations in the Madoff cases (and in the complaint specifically), the complaint arguably pleaded actual fraud with sufficient specificity. According to the Bankruptcy Court:
The “Ponzi scheme presumption” allows courts to presume actual intent to defraud on part of the operator of the Ponzi scheme. Donell v. Kowell, 533 F.3d 762, 770 (9th Cir. 2008) (“The mere existence of a Ponzi scheme is sufficient to establish actual intent to defraud.”). In this case, the Ponzi scheme presumption allows the Court to presume that BLMIS made the initial transfers with actual intent to defraud because Madoff has admitted to operating a Ponzi scheme.32
In addition, the court noted that prior decisions of the District Court in the BLMIS case established that section 546(e) does not apply to transfers “to customers who were in on the fraud … because they must have known the transfers … were not ‘settlement payments’ … [or] transactions for the ‘purchase, sale or loan of a security.’”33 Those decisions were binding on the Bankruptcy Court. Consequently:
The allegations that Defendants were complicit in BLMIS’s fraud prevents the Court from dismissing the case on account of the Defendants’ affirmative § 546(e) defense. The Trustee has alleged that LIF-USEP was aware of BLMIS’s impossible trading activity and performance. … (“[T]he members of the network received evidence of BLMIS’s fraud and shared that information among themselves. They thus willingly participated in Madoff’s fraud throughout LIF-USEP’s existence. And they profited from the fraud, receiving fraudulent transfers of customer property that the Trustee now seeks to recover through this action.”).34
The final two grounds for dismissal that the Subsequent Transferees asserted were equally unavailing. The Subsequent Transferee defendants asserted that the trustee failed to allege that they had received customer property. But the sole business of the Fund, which made the transfers to the Subsequent Transferees, was investing exclusively in BLMIS, and it “received hundreds of millions of dollars in initial transfers of customer property from BLMIS. … Any and all subsequent transfers … are very likely comprised of BLMIS customer property.”35
Defendants also raised the defense embodied in section 550(b), the recovery provision, that protects “(1) a transferee that takes for value, … in good faith, and without knowledge of the voidability of the transfer avoided; or (2) any immediate or mediate good faith transferee of such transferee.” The Subsequent Transferees claimed that they provided value, did not know the transfers were voidable, and acted in good faith.
While expressing skepticism on all points, the bankruptcy court ultimately denied the defendants’ motions to dismiss, determining that these issues are fact-intensive, cannot be made in the context of a motion to dismiss, and must be reserved for summary judgment or trial.
It is unclear whether the safe harbor defenses will prevail at the summary judgment or trial stages, but it is clear that the trustee has not slowed down his efforts to improve upon already impressive recovery statistics. The BLMIS litigation and Madoff’s dreadful legacy will likely outlive us all.
 15 U.S.C. 78aaa et seq.  Id. at 78fff-2(c)(1)(B).
 Id. at 78fff-2(c)(3). 15 U.S.C. §78fff(b) provides: “(b) Application of Title 11: To the extent consistent with the provisions of this chapter, a liquidation proceeding shall be conducted in accordance with, and as though it were being conducted under chapters 1, 3, and 5 and subchapters I and II of chapter 7 of title 11. For the purposes of applying such title in carrying out this section, a reference in such title to the date of the filing of the petition shall be deemed to be a reference to the filing date under this chapter.”
 Section 548(a)(1) provides: “(a) (1) The trustee may avoid any … of an interest of the debtor in property … that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily— (A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted …”
(B) (i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(ii) (I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation …”
 Section 550(a) provides: “(a) Except as otherwise provided in this section, to the extent that a transfer is avoided … the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from— (1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transferee.” Section 550(b) provides a defense to “good faith” transferees which could protect repayments of principal but not of fictitious profits: “(b) The trustee may not recover under section  (a)(2) of this section from— (1) a transferee that takes for value, including satisfaction or securing of a present or antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided; or (2) any immediate or mediate good faith transferee of such transferee.”
 “Recoveries,” Madoff Trustee, accessed Nov. 6, 2023.
 RJR Nabisco Inc. v. European Cmty., 579 U.S. 325, 326 (2016).
 Id.; see also In re Picard, Trustee, 917 F.3d 85 (2d Cir. 2019) (focus of recovery actions under §550 against foreign transferees were transfers from BLMIS to feeder funds that were made within the US and avoidable by domestic application of §548. The decision essentially followed the analysis suggested by Professor Morrison in the article cited below).
 See, e.g., In re French, 440 F.3d 145, 150 (4th Cir 2006) (§548 applies extraterritorially); In re Zetta Jet USA Inc. 624 B.R. 461 (Bankr. C.D. Cal. 2020); Jay Lawrence Westbrook, “Avoidance of Pre-Bankruptcy Transactions in Multinational Bankruptcy Cases,” 42 Tex. Intnat’l L.J. (2007); Edward R. Morrison, “Extraterritorial Avoidance Actions: Lessons from Madoff,” Brooklyn Journal of Corporate, Financial & Commercial Law (2014).
 The Public Institution for Social Security v. Picard, 2023 WL 6143985 (S.D.N.Y. Sept. 20, 2023) (the “PIFSS Decision”).
 28 U.S.C. §1330, §l332(a), §l39l(f), §§1602-1611, §1441(d).
Id. at §1604.
 Id. at §1603(a).
 28 U.S.C. § 1605(a)(2).
 See 2023 WL 6143985, at *1-2.
 See id. at *21.
 Id. at *6.
 Id. at *17.
Consulting Concepts Int'l, Inc. v. Kingdom of Saudi Arabia, No. 21-941-cv, 2022 WL 2236946, at *2 (2d
Cir. June 22, 2022) (summary order); see also Weltover, 504 U.S. 607 at 620 (concluding that the “rescheduling of the maturity dates” on certain bonds by the government of Argentina, rather than the “issuance of” those bonds, was the act that the plaintiff’s case was based upon, even though the issuance of the bonds was a predicate to any rescheduling).
 Shortly after the District Court’s decision was entered, the trustee appealed the decision. The appeal is still pending.
 Picard v. UBS Europe SE (f/k/a UBS (Luxembourg) S.A.), et al., No. 08-01789, Adv. Pro. No. 10-05311, Doc. Nos. 319 (the “