The Securities Investor Protection Act (SIPA) Trustee and his counsel are governed by the SIPA process, which includes:

• Establishing a fund of customer property: All customer-related assets are put into a co-mingled fund of customer property. Allocation of property to the fund of customer property is based on a motion made by the SIPA Trustee subject to approval by the United States Bankruptcy Court for the Southern District of New York.
• Completing determinations of claims, the value of customer property and total net equity prior to distributions: The SIPA Trustee must first determine the number of allowed claimants and the amount and value of the property under the SIPA Trustee’s control. Distributions to pay allowed customer claims will be made when there is clarity for reasonable estimates that can be made of both the amount of customer property available for distribution and the total net equity of all allowed customer claims.
• Providing cash advances from the Securities Investor Protection Corporation (SIPC), a membership organization funded by the securities industry: Advances from SIPC are available to the court-appointed SIPA Trustee to distribute to customers with allowed claims, as a way to speed financial relief to these customers, up to the maximum amount of $500,000 per allowed claim. As of March 25, 2024, SIPC has committed approximately $850.4 million to the Bernard L. Madoff Investment Securities LLC (BLMIS) liquidation for this purpose. SIPC committed advances will continue to increase as additional claims that have been deemed determined become allowed over time.
• According to the provisions of SIPA, under which SIPC was created, SIPC is entitled to be reimbursed for cash advanced to customers once respective customer claims have been fully satisfied. As of the fifteenth pro rata interim distribution in the BLMIS liquidation proceeding, SIPC has received $258.1 million in reimbursement from the Customer Fund for advances paid on accounts now fully satisfied, leaving $592.2 million in SIPC advances outstanding.
• Making advances for administrative costs: The SIPA Trustee and SIPC have agreed that, at this time, they have no reasonable expectation that the General Estate will be sufficient to pay the administrative expenses of the BLMIS liquidation. Accordingly, any fees and expenses allowed by the United States Bankruptcy Court for the Southern District of New York will be paid from advances by SIPC, a membership organization funded by the securities industry.
• Distributing customer property pro rata based on net equity: Each verified allowed claimant is entitled to a pro rata share, or a percentage of the fund of customer property, based on a calculation related to the customer’s individual “net equity.” Distributions may be in stages.

   - Claims Procedures Order
   - Claims Determinations
   - Objections
   - Claims Trading
   - General Creditor Claims
   - Net Equity Methodology
   - Time-Based Damages

Claims Procedures Order
On December 23, 2008, the United States Bankruptcy Court for the Southern District of New York entered the Claims Procedures Order that specified the procedures for the filing, determination and adjudication of customer claims in the Securities Investor Protection Act (SIPA) liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS). This order specified that BLMIS customers would share pro rata in customer property, based on their net equity.

The last date for filing customer claims under SIPA and the Claims Procedure Order was July 2, 2009. The SIPA Trustee published notices to BLMIS customers in all major newspapers regarding the liquidation, mailed thousands of customer claim forms to those who requested them and made request forms available for download via this website.

Claims Determinations
Once a claim is determined, a letter of determination is sent to the claimant by the SIPA Trustee. Every six months, the SIPA Trustee files a detailed interim report on the status of claims. In addition, claims numbers are updated weekly on this website.

Objections
If a claimant disputes the SIPA Trustee's determination, the claimant may object and request a hearing before the United States Bankruptcy Court for the Southern District of New York. This must be done within 30 days of the date of the determination letter unless the time is extended. If the claimant fails to request a hearing within those 30 days or fails to appear at the scheduled hearing, the SIPA Trustee's determination is final.

Claims Trading
Customer claims may be transferred in full in the BLMIS liquidation proceeding. On November 10, 2010, the Court entered an order approving certain uniform procedures and forms with respect to the trading of claims. Notice of a claim transfer must be provided in accordance with those procedures.

The SIPA Trustee does not take a position with regard to claims trading.

General Creditor Claims
All “good faith” BLMIS customers were defrauded. Regardless of whether their claims for distributions from the Customer Fund are denied or approved, their claims are also deemed to be general creditor claims against the General Estate. Other creditors in the liquidation, such as service providers and vendors, also have claims against the BLMIS General Estate. Once the SIPA Trustee fully satisfies the net equity claims of BLMIS customers, the next step in the BLMIS liquidation is to distribute customer property in accordance with the other priorities in SIPA. After customer net equity claims, the next priority is to distribute customer property to SIPC as subrogee. Thereafter, any customer property remaining becomes part of the General Estate.

Once those priorities are satisfied, the next step is to allocate recoveries to the General Estate and to distribute those recoveries pro rata to general creditors in the order of priority established in the Bankruptcy Code.

Net Equity Methodology
The SIPA Trustee determined that he would calculate a customer's net equity based on the real assets that customers lost to Madoff's scheme: the cash deposited, less any amount withdrawn (the "Net Investment" or "Cash In/Cash Out" Method).

Certain claimants disagreed with the SIPA Trustee as to the definition of "net equity" in the Madoff fraud and how that term should be applied to determine the amount of the valid customer claim of each claimant. They argued that the SIPA Trustee should have calculated their net equity – which determines their percentage of recovered customer property – based on the amounts shown on the final customer statements issued by BLMIS in November 2008 (the "Last Statement Method").

The SIPA Trustee rejected that method, as those statements were fiction.

United States Bankruptcy Court for the Southern District of New York

After the filing of a number of objections, the SIPA Trustee filed a motion with the United States Bankruptcy Court for the Southern District of New York seeking an order affirming his use of the Net Investment Method in calculating "net equity."

Both SIPC and the SEC submitted briefs supporting the SIPA Trustee's motion.

A hearing was held at the United States Bankruptcy Court for the Southern District of New York on February 2, 2010.

On March 1, 2010, the United States Bankruptcy Court for the Southern District of New York granted the SIPA Trustee’s motion for an order denying customer claims for amounts listed on the BLMIS last customer statement and affirming the SIPA Trustee’s determination of net equity and entered a memorandum decision. On March 8, 2010, the United States Bankruptcy Court for the Southern District of New York entered an order implementing that decision.

The memorandum by the Honorable Judge Burton R. Lifland noted that “[a]ny dollar paid to reimburse a fictitious profit is a dollar no longer available to pay claims for money actually invested.” Further, the order noted that those claimants who withdrew funds from their BLMIS accounts that exceeded their initial investments “would receive more favorable treatment by profiting from the principal investments of [those claimants who have withdrawn less money than they deposited], yielding an inequitable result.”

Finally, the memorandum noted that the Net Investment Method, unlike the Last Statement Method, allowed The SIPA Trustee to “unwind, rather than legitimiz[e], the fraudulent scheme.”

Appeal to the United States Court of Appeals Certified

Certain claimants elected to appeal the decision. The appeal was certified directly to the United States Court of Appeals.

On September 20, 2010, both the SIPA Trustee and the Securities Investor Protection Corporation (SIPC) filed briefs in support of the "Cash In/Cash Out" net equity methodology.

On September 21, 2010, the SEC filed an amicus brief that supported the SIPA Trustee's Net Investment Method, asserting that it is required by SIPA and is consistent with precedent.

Oral arguments were held on March 3, 2011 before a panel of three Justices of the United States Court of Appeals for the Second Circuit.

On August 16, 2011, the United States Court of Appeals for the Second Circuit issued an order affirming the decision of United States Bankruptcy Court for the Southern District of New York as "legally sound," noting that "Use of the Last Statement Method in this case would have the absurd effect of treating fictitious and arbitrarily assigned paper profits as real and would give legal effect to Madoff's machinations."

Petition for Panel Rehearing, or, in the Alternative, Rehearing en banc Filed

A petition was filed with the United States Court of Appeals for the Second Circuit for a panel rehearing, or, in the alternative, for rehearing en banc.

Panel Rehearing or Rehearing en banc Denied

On November 8, 2011, the petition was denied.

Petitions for Writs of Certiorari Filed with Supreme Court of the United States

Three petitions for writs of certiorari were filed with the Supreme Court of the United States seeking review of the United States Court of Appeals decision. The SIPA Trustee submitted briefs in opposition on March 9, 2012. SIPC submitted briefs in opposition on March 9, 2012, and the SEC submitted a brief in opposition on May 24, 2012. On June 4, 2012, one of the writs of certiorari was withdrawn, a result of settlement with the SIPA Trustee.

Petitions for Writs of Certiorari Denied - Net Equity Upheld

On June 25, 2012, the Supreme Court entered an order that it refused to grant the petitions, thereby allowing lower court decisions regarding the net equity methodology to stand, ending the appeals process, and resolving the matter.

Time-Based Damages
The SIPA Trustee determined that a customer's net equity would not include payments for inflation or interest adjustments on funds deposited with BLMIS. Over time, more than 1,200 objections were filed relating to this issue, or the “time-based damages” issue. Due to these objections, in August of 2012, the SIPA Trustee was compelled by the Bankruptcy Court to reserve 3 percent of all Customer Fund recoveries while the issue was heard. In September 2013, the United States Bankruptcy Court for the Southern District of New York approved the SIPA Trustee’s motion to deny time-based damages adjustments to customer claims. This decision was appealed. On February 20, 2015, the Second Circuit reaffirmed the decision of the Bankruptcy Court that claimants in the SIPA liquidation of BLMIS are not entitled to time-based damages. In July of 2015, certain BLMIS claimants filed a petition for a writ of certiorari with the Supreme Court of the United States, seeking review of the decision by the United States Court of Appeals for the Second Circuit regarding time-based damages. The petition was denied by the Supreme Court on October 5, 2015 and the time-based damages issue reached a final, unappealable conclusion.