The U.S. Court of Appeals for the Second Circuit affirmed the U.S. Bankruptcy Court for the Southern District of New York’s dismissal of a complaint brought by Rosenman Family, LLC, an investor with Bernard L. Madoff Investment Securities LLC (BLMIS), against the trustee of BLMIS’s estate. The complaint alleged that Rosenman was entitled to a return of $10 million it wired to BLMIS, because, Rosenman argued, the funds were stolen or embezzled by BLMIS and thus never became BLMIS’s property and/or part of BLMIS’s bankruptcy estate.

The bankruptcy court dismissed Rosenman’s complaint on the ground that Rosenman was a “customer” under the Securities Investor Protection Act (SIPA). The court found that Rosenman had deposited cash with BLMIS for the purpose of purchasing securities, thereby invoking SIPA. The bankruptcy court concluded that Rosenman’s investment was part of the estate.