Irving H. Picard v. ABN AMRO Bank (Ireland) Ltd. et al

Filing 43

OPINION AND ORDER: Accordingly, the immediate question becomes whether, on the faces of the complaints here at issue, the initial transfers from Madoff Securities that the Trustee here seeks to recover, i.e., the redemption payments and the collatera l payments, were related to the swap agreements between the third-party synthetic funds and the defendants here.With respect to the redemption payments, the Trustee, as noted, seeks to recover from defendants transfers they received from the referenc e funds invested with Madoff Securities as redemptions of the defendants' shares in those funds. The defendants had invested in those funds as a hedge against their obligations under the relevant swap agreements, and they sought redemptions of t heir investments when their swap counter parties, the synthetic funds,requested a reduction in the collateral underlying the swaps.Specifically, the Trustee seeks to recover $30 million in redemption payments from AA Ireland; nearly $76 mil lion in redemption payments from ABN/RBS; and $130 in redemption payments from Citigroup. That these payments were made "in connection with/f the defendants swap agreements, in the sense of being related to those agreements, is a relatively straightforward proposition. It is clear from the faces of the complaints that the only inference one may reasonably draw from the allegations made is that the withdrawals by Madoff Securities customers were caused by the defendants, requests for re demptions. Although, it is true, the complaints attempt to portray the decision to request a redemption as a business judgment independent of the defendants, obligations under the swap agreement/see, e.g. , AC(6877) - 75, the underlying swap agreemen ts contemplated that the defendants would invest in the reference funds to perfectly hedge against their obligations under the swap agreements, see Swap Agreement- 10(c). See also Compl. (7825} - 11("In connection with swaps, even though it is not required to do so, to hedge its exposure to pay the return to the other party. All other provisions as further set forth in this order (Signed by Judge Jed S. Rakoff on 12/26/2013) (js) Modified on 12/26/2013 (js).

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