Securities Investor Protection Corp. v. 2427 Parent Corp., 779 F.3d 74

Bernard L. Madoff Investment Securities LLC (BLMIS) operated a multi-decade fraud: customers’ deposits were never invested, account statements were fictitious, and withdrawals were paid from other customers’ principal.
After BLMIS collapsed, Irving H. Picard was appointed SIPA trustee to liquidate the firm and distribute customer property per SIPA priorities.
SIPA establishes a separate fund of customer property to be distributed ratably according to each customer’s “net equity,” defined by the amount that would have been owed had the debtor liquidated all securities positions on the filing date, minus indebtedness.
In a prior decision the Second Circuit held that net equity in this case is the sum of a customer’s deposits minus withdrawals (not the fictitious account statements), but left open whether net equity can be adjusted for inflation or interest.
Claimants (former BLMIS investors) sought post‑liquidation inflation (and one claimant interest) adjustments to net equity to compensate early investors for loss of purchasing power; the Trustee, SIPC, and Bankruptcy Court rejected such adjustments.
The SEC urged that an inflation adjustment could be an accurate method here but expressly disclaimed seeking Chevron deference; the Bankruptcy Court certified and the Second Circuit heard direct appeal.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether SIPA permits an inflation adjustment to customer net equity	Inflation adjustment fairly compensates early investors for time‑value/purchasing‑power loss	SIPA’s text, structure, purpose, and books/records focus on nominal deposits/withdrawals; inflation adjustment inconsistent with SIPA	No — SIPA does not permit post‑liquidation inflation adjustments to net equity
Whether SIPA permits an interest adjustment to customer net equity	(one claimant) interest reflects time‑value of money	Same as above: SIPA returns nominal pre‑liquidation position; no compensation for use of funds	No — interest adjustment also impermissible under SIPA
Whether the SEC’s interpretation (supporting inflation adjustment) merits deference	SEC argues inflation adjustment is persuasive and accurate here	SEC disclaimed seeking Chevron; position is novel and inconsistent with prior SEC stances; not persuasive	No Skidmore/Chevron deference — SEC’s view not entitled to deference
Whether trustee discretion can authorize time‑based adjustments	Claimants urge trustee discretion to choose fair method	SIPA’s statutory framework and priority scheme limit such discretion where adjustment would alter ratable distribution of actual customer property	No — trustee lacks authority under SIPA to make post‑liquidation time‑based adjustments

In re Bernard L. Madoff Inv. Sec. LLC, 654 F.3d 229 (2d Cir. 2011) (prior Net Equity Decision holding deposits minus withdrawals govern net equity here)
SIPC v. Barbour, 421 U.S. 412 (U.S. 1975) (SEC’s supervisory role over SIPC noted)
In re New Times Sec. Servs., Inc., 371 F.3d 68 (2d Cir. 2004) (SIPA’s purpose and interpretation principles)
In re New Times Sec. Servs., Inc., 463 F.3d 125 (2d Cir. 2006) (SIPA’s treatment of customers and risk allocation)
Commodity Futures Trading Comm’n v. Walsh, 712 F.3d 735 (2d Cir. 2013) (upholding unadjusted distribution in long‑running Ponzi context)
SIPC v. Ambassador Church Fin./Dev. Grp., Inc., 788 F.2d 1208 (6th Cir. 1986) (denying post‑petition interest claims where net equity definition excludes interest)
Skidmore v. Swift & Co., 323 U.S. 134 (U.S. 1944) (standard for deference to agency interpretations)
United States v. Mead Corp., 533 U.S. 218 (U.S. 2001) (deference framework discussion)
Christensen v. Harris Cnty., 529 U.S. 576 (U.S. 2000) (Skidmore — ‘‘power to persuade’’ standard)
SEC v. SIPC, 758 F.3d 357 (D.C. Cir. 2014) (limited deference to novel SEC SIPA interpretation)