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					      Slide 6 - Marko
      4. Explaining what happens in court.
      In case of Bankruptcy prior payments made by the debtor can be in effect or
      “avoided”(explanation – the money is returned or “clawed back” to the
      bankrupt’s estate).
      Preferences – if for example a debtor chose to pay all of his money to one
      or some of his creditors prior to bankruptcy, these payments can be
      “avoided”, because an insolvent debtor has insufficient funds, and, therefore,
      should not be allowed to choose one creditor over another.
      Fraudulent transfers
      actual fraud – insolvent debtor intentionally seeks to defraud his creditors.
      constructive fraud – the transfer is fraudulent in effect, even if not in intent
      According to the Bank code fraudulent transfers can be avoided if they
      occurred 2 years prior to the bankruptcy filing. The Bankruptcy code also
      adopts the applicable state law which in this case is New York debtor and
      creditor law under which the transfers can be avoided if occurred six years
      prior to the filing.

Slide 9 - Marko
      Another claim is (Count 10) that the defendants’ own claims should be
      disallowed– Securities laws override Bankruptcy code and the point is to
      provide stability in the securities market conveying a greater degree of
      certainty to securities transaction than to other transactions, thus Count 10
      must be dismissed.
      Equitable subordination – the court can subordinate(put in a lower
      priority), for purpose of distribution all or part of an allowed claim. : 1 st
      when court engages in some type of inequitable conduct; 2nd misconduct
      must have resulted in injury to the creditors.
      The Amended Complaint alleges that defendants did not receive fraudulent
      transfers in good faith, it also alleges that they engage in inequitable
      conduct, thus the Trustee can subordinate the claims by proving that the
      defendants invested with Madoff’s securuies with knowledge or
      disregarding the fraud.

      Slide 10 – Marko just read
      5. The decision of the judge, who wins and why.
      - approved - actual fraud and equitable subordination.
      In summary the court dismisses all Counts of the Amended Complaint
except Count 1 and 11.

				
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