District Court Upholds Bankruptcy Court Ruling That Prime Brokers Are Initial Transferees Under The Bankruptcy Code

On December 17, 2007, the United States District Court for the Southern District of New York upheld in part and reversed in part a decision by the Bankruptcy Court for the Southern District of New York that had found Bear Stearns Securities Corp. liable for the disgorgement of $141.4 million in margin payments it received from the Manhattan Investment Fund in the year before the Fund filed for bankruptcy. While the District Court embraced most of the Bankruptcy Court’s rulings, it found an issue of fact existed as to whether Bear Stearns had a valid good faith defense to the fraudulent conveyance claim, and remanded for a trial on that issue. Attached is a Memorandum summarizing the ruling.

Please do not hesitate to use the contact information included in the Memorandum if you have any questions.