The United States Court of Appeals for the Second Circuit found in favor of the trustee (the Trustee) presiding over the liquidation of Bernard L. Madoff Investment Securities (BMIS), affirming the Trustee’s calculation of “net equity” in the BMIS liquidation. The Trustee calculates net equity to determine the value of claims submitted by victims of Madoff’s massive fraud.

The dispute focused on two methods for calculating net equity.

The Trustee argued that net equity should be based on the ‘Net Investment Method,’ which credited the amount of cash deposited by the customer into his or her BMIS account, less amounts withdrawn. The customers objecting to the Trustee’s proposed method advocated the so-called ‘Last Statement Method,’ which would calculate net equity based on the market value of securities reflected on their last BMIS customer statements...