Krys v. BNP Paribas Securities Services Luxembourg

UNITED STATES BANKRUPTCY COURT FOR PUBLICATION

SOUTHERN DISTRICT OF NEW YORK

In re: Chapter 15

Fairfield Sentry Limited, et al. Case No. 10-13164 (JPM)

(Jointly Administered)

Debtors in Foreign Proceedings.

FAIRFIELD SENTRY LTD. (In

Liquidation), et al.,

Plaintiffs,

Adv. Pro. No. 10-03627 (JPM)

v.

BNP PARIBAS SECURITIES SERVICES

LUXEMBOURG, et al.,

Defendants.

MEMORANDUM OPINION AND ORDER DENYING

DEFENDANT’S MOTION TO DISMISS

APPEARANCES:

CLEARY GOTTLIEB STEEN & HAMILTON LLP

Attorneys for the Defendant, BNP Paribas Securities Services Luxembourg

One Liberty Plaza

New York, New York 10006

By: Roger A. Cooper

Ari D. MacKinnon

Thomas S. Kessler

BROWN RUDNICK LLP

Attorneys for the Plaintiffs Joint Liquidators

Seven Times Square

New York, NY 10036

By: David J. Molton

Jeffrey L. Jonas

Marek P. Krzyzowski

JOHN P. MASTANDO III

UNITED STATES BANKRUPTCY JUDGE

I. INTRODUCTION

Pending before the Court is the motion of the Defendant, BNP Paribas Securities Services

Luxembourg (“BNP” or “Defendant”), to dismiss the Fifth Amended Complaint (the “Amended

Complaint” or “Am. Compl.”) for lack of personal jurisdiction. Mot. to Dismiss, ECF1 No. 168.

The parties did not request oral argument on the Motions, and instead indicated that they were

resting on the papers. See Letter re: Status of Remaining Oral Arguments, ECF No. 306. For the

reasons set forth herein, the Court DENIES the Defendant’s Motion to Dismiss.

II. JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157 and the

Amended Standing Order of Reference dated January 31, 2012 (Preska, C.J.). This Court

previously concluded that it has subject matter jurisdiction over this and related actions. See In re

Fairfield Sentry Ltd., 2018 WL 3756343 (Bankr. S.D.N.Y. Aug. 6, 2018) (“Fairfield I”). Personal

jurisdiction is contested by the Defendant and will be discussed below.

III. BACKGROUND

This adversary proceeding was filed on September 20, 2010. See Amended Complaint

Against All Defendants (the “Complaint” or “Compl.”), ECF No. 6. Kenneth M. Krys and Greig

Mitchell (the “Liquidators” or the “Plaintiffs”), in their capacities as the duly appointed

Liquidators and Foreign Representatives of Fairfield Sentry Limited (In Liquidation) (“Sentry”)

and Fairfield Sigma Limited (In Liquidation) (“Sigma” and, together with Sentry, the “Fairfield

Funds” or the “Funds”) filed the Amended Complaint on August 11, 2021. Am. Compl., ECF No.

1 Citations to this Court’s electronic docket refer to the docket of Adv. Pro. No. 10-03627-jpm unless otherwise

noted.

143. Via the Amended Complaint, the Liquidators seek the imposition of a constructive trust and

recovery of $46,993,332.47 in redemption payments made to BNP by Sentry and Sigma. Id. ¶¶ 8,

179-93.

A. THE BLMIS PONZI SCHEME

This adversary proceeding arises out of the decades-long effort to recover assets of the

Bernard L. Madoff Investment Securities LLC (“BLMIS”) Ponzi scheme.2 Am. Compl. ¶ 1, ECF

No. 143. The Defendant, BNP, is a Luxembourg bank. Memorandum of Law in Support of BNP

Paribas Securities Services Luxembourg’s Motion to Dismiss for Lack of Personal Jurisdiction

under Rule 12(b)(2) (the “Memorandum of Law” or “Mem. L.”) at 1, ECF No. 169. It is

incorporated in France. Reply Memorandum of Law in Further Support of BNP Paribas Securities

Services Luxembourg’s Motion to Dismiss for Lack of Personal Jurisdiction under Rule 12(b)(2)

(the “Reply”) at 1, ECF No. 286. Further, BNP is part of a family of corporate entities who share

information and a common parent entity — BNP Paribas S.A., a multi-national financial services

firm (collectively, the “BNP Companies”). Am. Compl. ¶ 59. BNP allegedly invested, either for

its own account or for the account of others, into several funds, including Sentry and Sigma, that

channeled investments into BLMIS. Id. ¶¶ 2, 5, 16.

Fairfield Sentry was a direct feeder fund. It was established for the purpose of bringing

investors into BLMIS, thereby allowing Madoff’s scheme to continue. Id. ¶¶ 5; 46–47; see also

In re Picard, 917 F.3d 85, 93 (2d Cir. 2019) (“A feeder fund is an entity that pools money from

numerous investors and then places it into a ‘master fund’ on their behalf. A master fund—what

Madoff Securities advertised its funds to be—pools investments from multiple feeder funds and

2 The Court will not recount all details concerning the Ponzi scheme perpetrated by Madoff. Details of that

scheme have been recounted by many courts. See, e.g., In re Madoff, 598 B.R. 102, 106 (S.D.N.Y. 2019), aff’d 818

F. App’x 48 (2d Cir. 2020).

then invests the money.”). Fairfield Sigma, in contrast, was an indirect feeder fund, established to

facilitate investment in BLMIS through Fairfield Sentry for foreign currency. Am. Compl. ¶¶ 46–

47. The BNP Companies created and administered another BLMIS feeder fund, the Oreades Fund,

but allegedly liquidated it in May 2004 “because of the high probability of fraud at BLMIS and its

fear of [potential liabilities] to the Oreades Fund’s investors.” Id. ¶¶ 60, 87.

BLMIS used investments from feeder funds, such as the Fairfield Funds, to satisfy

redemption requests from other investors in the scheme. Id. ¶¶ 5–7. Without new investors,

BLMIS would have been unable to make payments to those who chose to withdraw their

investments, and the scheme would have fallen apart. Id. ¶¶ 5–7, 13–15.

The Amended Complaint alleges that investors received payments on account of their

shares in the Fairfield Funds based on a highly-inflated Net Asset Value (“NAV”). Id. ¶ 7. BNP

was allegedly one such investor. Id. To calculate the NAV, administrators used statements

provided by BLMIS that showed “securities and investments, or interests or rights in securities

and investments, held by BLMIS for the account of Sentry.” Id. ¶ 49. In fact, no securities were

ever bought or sold by BLMIS for Sentry, and none of the transactions on the statements ever

occurred. Id. ¶ 50. The money sent to BLMIS by the Fairfield Funds for purchase of securities

was instead used by Bernard Madoff to pay other investors or was “misappropriated by Madoff

for other unauthorized uses.” Id. The NAVs were miscalculated, and redemption payments were

made in excess of the true value of the shares. Id. ¶ 53. The Fairfield Funds were either insolvent

when the redemption payments were made or were made insolvent by those payments. Id ¶ 52.

Bernard Madoff was arrested for alleged violations of federal securities laws on December

11, 2008. Id. ¶ 168. The United States Attorney brought criminal charges against him, alleging

that Madoff ran a Ponzi scheme. Id. On December 11, 2008, the Securities Exchange Commission

filed an action in the Southern District of New York to halt the continued offerings of securities.

Id. ¶ 169. In March 2009, Madoff pleaded guilty to criminal charges against him and confessed

to operating a Ponzi scheme and fabricating statements and trade confirmations. Id. ¶¶ 170–71.

Madoff was sentenced to 150 years in federal prison. Id. ¶ 171.

The Amended Complaint alleges that BNP, “had knowledge of the Madoff fraud, and

therefore knowledge that the Net Asset Value was inflated” when the redemption payments were

made. Id. ¶ 183. The Amended Complaint further asserts that between 1997 and 2008, BNP

“ascertained multiple indicia of fraud” though its affiliates’ operation of the Oreades Fund. Id. ¶

185. Executives of several BNP Companies expressed concerns over the propriety of Madoff’s

accounting practices. See Id. ¶ 184-85. Despite their concerns, BNP Companies still lent money

to BLMIS feeder funds and investors. Id. ¶ 186. The Amended Complaint further alleges that

during diligence for at least three of those lending transactions, the BNP Companies learned their

competitors declined to lend to BLMIS due to concerns about Madoff. Id.

B. THE PRIOR LITIGATION AND PROCEDURAL HISTORY

The Fairfield Funds were put into liquidation in the BVI in 2009. Am. Compl. ¶¶ 26–28,

ECF No. 143. The BVI court issued orders appointing the foreign representatives, Kenneth Krys

and Greig Mitchell, as liquidators of the Fairfield Funds. Id. ¶ 28. Pursuant to the appointment

order of the BVI court, the “Foreign Representatives are responsible for all aspects of the Funds’

business, including protecting, realizing, and distributing assets for the Funds’ estates.” Id. ¶ 177.

The Liquidators commenced actions in the BVI against investors who had redeemed shares of the

Fairfield Funds before the collapse of the scheme. Mem. L. at 6, ECF No. 169; Fairfield Sentry

Ltd. v. Citibank, N.A. London, 630 F. Supp. 3d 463, 475 (S.D.N.Y. 2022); see also In re Fairfield

Sentry Ltd. v. Theodoor GGC Amsterdam (In re Fairfield Sentry Ltd.), 596 B.R. 275, 284 (Bankr.

S.D.N.Y. 2018) (“Fairfield II”).

The Liquidators filed petitions in this Court in June 2010 under Chapter 15 of the

Bankruptcy Code, seeking recognition of the BVI proceedings as foreign main proceedings. Am.

Compl. ¶ 29, ECF No. 143. This Court granted that recognition on July 22, 2010. Id. All cases

filed by the Plaintiffs were administratively consolidated before this Court in November 2010. See

Consolidation Order, Adv. Pro. No. 10-03496, ECF No. 25.

The Plaintiffs asserted multiple causes of action in those consolidated adversary

proceedings including, inter alia, mistaken payment and constructive trust.3 Compl. ¶¶ 61–84,

ECF No. 6; see also 630 F. Supp. 3d at 479. In October 2011, this Court stayed the U.S.

proceedings pending resolution of the BVI proceedings. See Am. Order Staying Redeemer

Actions, Adv. Pro. No. 10-03496, ECF No. 418.; Fairfield I, 2018 WL 3756343, at *3 (Bankr.

S.D.N.Y. Aug. 6, 2018).

In April 2014, the Privy Council, the highest judicial authority in the BVI, affirmed

dismissal of the Plaintiffs’ BVI law claims for restitution based on mistaken payment. Fairfield

Sentry Ltd. (In Liquidation ) v. Migani, [2014] UKPC 9 (“Migani ”).4 The Privy Council held that

the Plaintiffs’ claims for restitution are governed by BVI law. Id. ¶ 17. Under BVI law, the

Plaintiffs’ claims to recover redemption payments depended on whether Sentry was bound to make

those payments under the “true NAV per share, ascertained in the light of information which

subsequently became available about Madoff’s frauds, or . . . the NAV per share which was

determined by the Directors at the time of redemption.” Id. ¶ 19. The Privy Council concluded

3 Other causes of action included unjust enrichment, money had and received, unfair preferences under BVI's

Insolvent Act § 245, undervalue transactions under the Insolvent Act § 246, breach of contract, and breach of the

implied covenant of good faith and fair dealing. See Fairfield Sentry Ltd. v. Citibank, N.A. London, 630 F. Supp. 3d

at 463, (S.D.N.Y. 2022).

4 Migani is available https://jcpc.uk/uploads/jcpc_2012_0061_judgment_416722c30e.pdf and, without

numbered paragraphs, on the Westlaw database at Fairfield Sentry Ltd (In Liquidation) v Migani, 2014 WL 1219748.

that the NAV had to be definitively determined at the time of the subscription or redemption. Id.

¶ 21. The redemption payments made under the NAV were thus not subject to restitution and the

payee was not unjustly enriched by receiving funds, even if the amount was mistaken. Id. ¶¶ 18–

19.

After Migani, the Plaintiffs allegedly obtained evidence of bad faith of Citco, the Fairfield

Fund’s administrator, when it issued redemption certificates. See Fairfield I, 2018 WL 3756343,

at *5–6 (Bankr. S.D.N.Y. Aug. 6, 2018). Plaintiffs moved to amend the complaint, seeking to add

allegations that Citco lacked good faith when it issued certificates for redemptions and was aware

that the NAV was inflated at the time. See id. at *6. The Plaintiffs argued that the certificates

would not be binding under the Funds’ Articles if they were not issued in good faith. Id.

In December 2018, this Court found that the Plaintiffs could allege bad faith on behalf of

Citco in the U.S. proceedings and could seek recovery of the redemption payments only “where a

Defendant knew the NAV was inflated at the time of redemption.” Fairfield II, 596 B.R. at 295.

Of the common law claims, the Court allowed only the Plaintiffs’ claims for constructive trust

against the so-called “Knowledge Defendants” to proceed. Id. at 301 (“The suggestion that the

subsequent disclosure of facts indicating that the valuation was made in bad faith vitiates the

contract and requires restitution lacks support. The only exception concerns the Knowledge

Defendants that received redemption payments with the knowledge that the NAV was wrong. In

those circumstances, the Liquidators may seek to impose a constructive trust.”). In December

2020, this Court ruled that § 546(e) bars Plaintiffs’ BVI avoidance claims to recover unfair

preferences and undervalue transactions. In re Fairfield Sentry Ltd., 2020 WL 7345988, at *1

(Dec. 14, 2020) (“Fairfield III”).

Following these decisions, only the constructive trust claims survived. Id.; In re Fairfield

Sentry Ltd., No. 10-13164 (SMB), 2021 WL 771677, at *1 (Bankr. S.D.N.Y. Feb. 23, 2021)

(“Fairfield IV”), aff'd, 630 F. Supp. 3d 463 (2022). The Liquidators filed a further motion to

amend the complaints against the Knowledge Defendants. Mot. to Amend, ECF No. 146; Mot. to

Amend, Adv. Pro. No. 10-03496, ECF No. 3737. On August 5, 2021, this Court granted the motion

to amend the complaint and lifted the stay of the redeemer actions. Order Granting Mot. to Amend,

ECF No. 166; Order Lifting Stay of Redeemer Actions, ECF No. 165.

C. THE PENDING MOTION

The Amended Complaint seeks the imposition of a constructive trust on 15 redemption

payments received from the Fairfield Funds. See Am. Compl. ¶ 193, Ex. A, Ex. B, ECF No. 143.

The Amended Complaint alleges that Defendant had knowledge of the fraud at BLMIS and

therefore knowledge that the NAV was inflated. Id. ¶ 183. “By reason of their receipt of some or

all of the Redemption Payments, Defendants have been unjustly enriched to the detriment of Sentry

and Sigma and other shareholders and creditors of Sentry and Sigma.” Id. ¶ 190.

Under BVI law, “lack of good faith, i.e. bad faith, includes wrongdoing by one who acts

recklessly as well as one who acts with actual knowledge that he is acting wrongfully or willfully

blinds himself to that fact.” Fairfield II, 596 B.R. at 293. As this Court previously found:

To establish a constructive trust claim under English law, which would apply in the

BVI, ‘the plaintiff must show, first, a disposal of his assets in breach of fiduciary

duty; second, the beneficial receipt by the defendant of assets which are traceable

as representing the assets of the plaintiff; and third, knowledge on the part of the

defendant that the assets he received are traceable to a breach of fiduciary duty.’

In re Fairfield Sentry Ltd., 2021 WL 771677 (Bankr. S.D.N.Y. Feb. 23, 2021) (quoting El Ajou v.

Dollar Land Holdings Ltd. [1994] 2 All E.R. 685, 700).

The Amended Complaint alleges that BNP and several other defendants purposefully

availed themselves of the laws of the United States and the State of New York by “investing money

with the Funds, knowing and intending that the Funds would invest substantially all of that money

in New York-based BLMIS, and maintaining bank accounts in the United States at BNP Paribas,

and in fact receiving Redemption Payments in those United States-based and/or New York-based

accounts.” Am. Compl. ¶ 20. The Amended Complaint further alleges that BNP “selected U.S.

dollars as the currency in which to invest and execute their transactions in Sentry, upon information

and belief, designated United States-based and/or New York-based bank accounts to receive their

Redemption Payments from the Funds, and actively directed Redemption Payments at issue in this

action into those bank accounts.” Id.

The parties engaged in personal jurisdiction discovery between September 2021 and

August 2022. See Am. Scheduling Order, ECF No. 179; Second Am. Scheduling Order, ECF No.

224. Due to alleged spoilation of evidence, Plaintiffs filed a motion for sanctions on January 20,

2023. Memorandum of Law in Opposition to BNP Paribas Securities Services Luxembourg’s

Motion to Dismiss (the “Opposition” or “Opp’n”) at 6, ECF No. 263; Motion for Sanctions, ECF

No. 243. After briefing and oral argument on March 15, 2023, the Court “concluded that (i)

Defendant spoliated evidence in violation of Federal Rule of Civil Procedure 37(e) as made

applicable here by Federal Rule of Bankruptcy Procedure 7037; (ii) Defendant acted with intent

in doing so; and (iii) such spoliation has prejudiced the Liquidators.” Order Granting Motion for

Sanctions under Rule 37(e) Against BNP Paribas Securities Services Luxembourg (the “Spoilation

Order”) at 1, ECF No. 247. The Court entered an adverse inference against Defendant “that any

spoliated evidence would have been favorable to the Liquidators in establishing personal

jurisdiction.” Id. at 2.

Defendant has moved to dismiss the Amended Complaint for lack of personal jurisdiction,

arguing that the Amended Complaint has not sufficiently alleged minimum contacts with the forum

to establish personal jurisdiction over Defendant and that exercising personal jurisdiction would

be unreasonable. See Mem. L. at 3–5, ECF No. 169.

The Liquidators filed an opposition to the Motion and submitted the declarations of David

Flugman and Sara Joyce. Opp’n, ECF No. 263; Declaration of David S. Flugman in Support of

Liquidators’ Opposition to BAN Paribas Securities Services Luxembourg’s Motion to Dismiss

(“Flugman Decl.”), ECF No. 264; Declaration of Sara K. Joyce, ECF No. 265.5 The Liquidators

argue that exercising jurisdiction over Defendant would be reasonable and that Defendant’s United

States contacts — conducting due diligence on the Fairfield Funds, knowingly and intentionally

investing in the Fairfield Funds, using U.S. correspondent accounts to invest in and receive

payments from Sentry, and conducting other business activities — support personal jurisdiction.

See Opp’n at 2–4. Defendant filed a reply memorandum, along with a declaration of Ari

MacKinnon and an expert declaration of Vance Price. See Reply, ECF No. 286; Declaration of

Ari MacKinnon in Support of BNP Paribas Securities Services Luxembourg’s Reply Memorandum

of Law in Further Support of Its Motion to Dismiss for Lack of Personal Jurisdiction, ECF No.

286-1; Expert Declaration of Vance S. Price, ECF No. 286-5. Plaintiffs filed a sur-reply and a

supplemental declaration of Sarah Joyce. See Sur-Reply Memorandum of Law in Further Support

of Liquidators’ Opposition to Defendant’s Motion to Dismiss, ECF No. 296; Supplemental

Declaration of Sarah K. Joyce, ECF No. 297.

5 Pursuant to various orders of this Court, portions of certain filings and supporting documents were filed under

seal. The Court will refrain from referring to any bank account numbers or names of individual employees, named

only in sealed documents, in full.

IV. DISCUSSION

A. THE LAW OF PERSONAL JURISDICTION

To subject a defendant to personal jurisdiction in the United States, due process requires

that the defendant have sufficient minimum contacts with the forum in which the defendant is sued

“‘such that the maintenance of the suit does not offend traditional notions of fair play and

substantial justice.’” Picard v. Bureau of Labor Ins. (In re BLMIS), 480 B.R. 501, 516 (Bankr.

S.D.N.Y. 2012) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “In adversary

proceedings, courts must determine whether the defendant has minimum contacts with the United

States, rather than with the forum state.” Picard v. Fairfield Greenwich Grp. (In re Fairfield

Sentry Ltd.), 627 B.R. 546, 565 n.13 (Bankr. S.D.N.Y. 2021) (citing In re Lehman Bros. Holdings

Inc., 535 B.R. 608, 619 (Bankr. S.D.N.Y. 2015)). “When jurisdiction is satisfied through

Bankruptcy Rule 7004,6 a bankruptcy court need not address its state’s long-arm statute.” Id. n.12;

see also Owens-Illinois, Inc. v. Rapid Am. Corp. (In re Celotex Corp.), 124 F.3d 619, 630 (4th Cir.

1997).

An analysis of minimum contacts “focuses on the relationship among the defendant, the

forum, and the litigation,” a relationship that “must arise out of contacts that the defendant himself

creates with the forum State.” Walden v. Fiore, 571 U.S. 277, 284 (2014) (quotations omitted).

6 “The summons and complaint and all other process except a subpoena may be served anywhere in the United

States.” Fed. R. Bankr. P. 7004(d). A bankruptcy court may exercise personal jurisdiction over a defendant served

under Rule 7004(d) “[i]f the exercise of jurisdiction is consistent with the Constitution and the laws of the United

States.” Fed. R. Bankr. P. 7004(f).

There are three conditions necessary for the Court to exercise specific jurisdiction7 over the non-

resident defendant:

First, the defendant must have purposefully availed itself of the privilege of

conducting activities within the forum State or have purposefully directed its

conduct into the forum State. Second, the plaintiff's claim must arise out of or relate

to the defendant’s forum conduct. Finally, the exercise of jurisdiction must be

reasonable under the circumstances.

U.S. Bank Nat’l Ass’n v. Bank of Am. N.A., 916 F.3d 143, 150 (2d Cir. 2019) (internal quotation

marks and citations omitted).

To survive a motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule

of Civil Procedure Rule 12(b)(2), the Plaintiffs “must make a prima facie showing that jurisdiction

exists.” SPV Osus Ltd. v. UBS AG, 882 F.3d 333, 342 (2d Cir. 2018) (quoting Penguin Grp. (USA)

Inc. v. Am. Buddha, 609 F.3d 30, 34–35 (2d Cir. 2010)). A trial court has considerable procedural

leeway when addressing a pretrial dismissal motion under Rule 12(b)(2). Dorchester Fin. Sec.,

Inc. v. Banco BRJ, S.A., 722 F.3d 81, 84 (2d Cir. 2013).

A showing sufficient to defeat a defendant’s challenge to personal jurisdiction “varies

depending on the procedural posture of the litigation.” Id. (quoting Ball v. Metallurgie Hoboken-

Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990)). Following discovery, “the plaintiff's prima facie

showing, necessary to defeat a jurisdiction testing motion, must include an averment of facts that,

if credited by the trier, would suffice to establish jurisdiction over the defendant.” Ball, 902 F.2d

7 Courts recognize “two types of personal jurisdiction: general and specific jurisdiction. A state court may

exercise general jurisdiction only when a defendant is ‘essentially at home’ in the State.” Ford Motor Co. v. Montana

Eighth Jud. Dist. Ct., 592 U.S. 351, 352, 141 S. Ct. 1017, 1019, 209 L. Ed. 2d 225 (2021) (quoting Goodyear Dunlop

Tires Operations, S. A v. Brown, 564 U.S 915, 919, 131 S. Ct. 2846, 180 L. Ed. 2d 796 (2011)). The Plaintiffs do not

allege that the Court has general jurisdiction over Defendant. See Mem. L. at 9, ECF No. 169 (“Plaintiffs do not allege

that the Court has general jurisdiction over [BNP], a Luxembourg bank that is not ‘at home’ in the United States, and

so [Plaintiffs] must plead facts supporting the exercise of specific jurisdiction over [Defendant].”); Opp’n at 2, ECF

No. 263 (arguing that the Court’s specific jurisdiction is founded on Defendant’s contacts with the forum that relate

to the claims at issue).

at 197. “In response to a post-jurisdictional discovery Rule 12(b)(2) motion, ‘the plaintiff need

persuade the court only that its factual allegations constitute a prima facie showing of

jurisdiction.’” Averbach v. Cairo Amman Bank, No. 19-CV-0004-GHW-KHP, 2023 WL

5016884, at *4 (S.D.N.Y. June 30, 2023) (quoting Dorchester Fin. Sec., 722 F.3d at 85). “Now

that jurisdictional discovery is complete, Plaintiffs’ burden is different, but it is not heavy.”

Averbach, 2023 WL 5016884, at *6 (citing 722 F.3d at 85). “Plaintiffs need only show that their

prima facie showing of jurisdiction is factually supported.” Id. at *6. When considering a motion

to dismiss before or after jurisdictional discovery has taken place, “the court must ‘construe the

pleadings and affidavits in the light most favorable to plaintiffs,’ and resolve all doubts, including

factual disputes, in the plaintiff's favor.” Id. at *4 (quoting Ball, 902 F.2d at 197). Further,

pursuant to the Spoliation Order, this Court will make “an adverse inference… against [the]

Defendant that any spoliated evidence would have been favorable to the Liquidators in establishing

personal jurisdiction….” Spoliation Order, ECF No. 247.

B. ANALYSIS OF PURPOSEFUL AVAILMENT

“[M]inimum contacts necessary to support [specific] jurisdiction exist where the defendant

purposefully availed itself of the privilege of doing business in the forum and could foresee being

haled into court there.” Charles Schwab Corp. v. Bank of Am. Corp., 883 F.3d 68, 82 (2d Cir.

2018) (quoting Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 170 (2d Cir.

2013) (“Licci IV”)). For specific personal jurisdiction, “‘[c]ourts typically require that the plaintiff

show some sort of causal relationship between a defendant's U.S. contacts and the episode in suit,’

and the plaintiff's claim must in some way ‘arise from the defendant's purposeful contacts with the

forum.’” Charles Schwab Corp., 883 F.3d at 84 (quoting Waldman v. Palestine Liberation Org.,

835 F.3d 317, 341, 343 (2d Cir. 2016)). “Although a defendant’s contacts with the forum state

may be ‘intertwined with [its] transactions or interactions with the plaintiff or other parties . . . [,]

a defendant’s relationship with a . . . third party, standing alone, is an insufficient basis for

jurisdiction.’” U.S. Bank Nat’l Ass’n, 916 F.3d at 150 (quoting Walden, 571 U.S. at 134)

(alteration in original). “It is insufficient to rely on a defendant’s random, fortuitous, or attenuated

contacts or on the unilateral activity of a plaintiff with the forum to establish specific jurisdiction.”

Id.

BNP asserts that “Plaintiffs have elsewhere conceded [that] every material element of the

transaction is ‘purely foreign.’” Mem. L. at 10, ECF No. 169. Defendant points to the Plaintiffs’

arguments before the District Court, wherein Plaintiffs argued that “every relevant component of

the transactions at issue here occurred outside the territorial jurisdiction of the United States.” Id.

at 2; see also Plaintiffs-Appellants’ Opening Brief for Second Round Appeal at 24, Fairfield Sentry

Ltd. v. Citibank NA London, No. 19-cv-3911 (S.D.N.Y. July 21, 2021), ECF No. 440 (the

“Opening Brief”). The Plaintiffs’ Opening Brief concerned the extraterritorial application of the

§ 546(e)8 safe harbor. See Opening Brief at 24 (arguing that the “Bankruptcy Court erred in

holding that Section 546(e)’s safe harbor could apply extraterritorially to shield from avoidance

settled securities transactions that occurred exclusively outside the United States.”).

As another bankruptcy court in this district has stated, the “tests for personal jurisdiction

and extraterritoriality are not the same.” Spizz v. Goldfarb Seligman & Co. (In re Ampal-Am.

Israel Corp.), 562 B.R. 601, 613 n.14 (Bankr. S.D.N.Y. 2017). In Spizz, the bankruptcy court was

able to simultaneously find that the “[t]ransfer was not domestic, and hence, cannot be avoided”

8 Section 546(e) of the Bankruptcy Code prohibits a trustee from avoiding a transfer that is a margin payment

or settlement payment “made by or to (or for the benefit of) a commodity broker, forward contract merchant,

stockbroker, financial institution, financial participant, or securities clearing agency, or that is a transfer made by or

to (or for the benefit of) a commodity broker, forward contract merchant, stockbroker, financial institution, financial

participant, or securities clearing agency, in connection with a securities contract. . . .” 11 U.S.C. § 546(e). “By its

terms, the safe harbor is a defense to the avoidance of the initial transfer.” Picard v. BNP Paribas S.A. (In re BLMIS),

594 B.R. 167, 197 (Bankr. S.D.N.Y. 2018) (emphasis in original).

under § 547, while also clarifying that by “attend[ing] meetings in New York around the time of,

and apparently in conjunction with, the commencement of the chapter 11 case,” a defendant may

be “subject to specific personal jurisdiction.” Id. at 613–14.

By arguing in the District Court that the redemption transfers were foreign for purposes of

extraterritoriality, Plaintiffs did not preclude arguing that there were contacts with the forum for

purposes of personal jurisdiction. To determine whether a transaction is foreign or domestic for

analyzing extraterritoriality issues for federal statutes, courts look at whether the “conduct relevant

to the statute's focus occurred in the United States.” RJR Nabisco, Inc. v. European Cmty., 579

U.S. 325, 326, 136 S. Ct. 2090, 2094, 195 L. Ed. 2d 476 (2016). To determine whether personal

jurisdiction is appropriate, however, courts analyze a defendant’s contacts with the forum “under

a totality of the circumstances test.” Licci IV, 732 F.3d at 170 (citing Best Van Lines, Inc. v.

Walker, 490 F.3d 239, 242 (2d Cir. 2007)).

Here, the Plaintiffs advance three arguments in support of their assertion that Defendant

has sufficient minimum contacts to establish personal jurisdiction. Opp’n at 14–15, ECF No. 263.

First, Plaintiffs claim that BNP “purposefully availed itself of the United States by intentionally

investing in BLMIS feeder funds, Sentry and Sigma, with the express intention of profiting from

BLMIS’s investments in the U.S. securities market….” Id. at 15. Second, Plaintiffs assert that

BNP used New York bank accounts to effectuate its investments and redemptions from Sentry.

Id. Third, Plaintiffs argue that BNP conducted other related business in the United States. Id. The

Court finds that each of the first and second arguments are independently sufficient to satisfy the

first prong of the test for specific jurisdiction. The third argument alone is insufficient; however,

it provides incremental support under the totality of the circumstances. Thus, overall, the

purposeful availment element of the test for personal jurisdiction is met.

1. Defendant’s Investment in BLMIS Feeder Funds

The Plaintiffs argue that “[t]he facts averred and evidence presented by the Liquidators

make clear that [BNP] intentionally invested in BLMIS feeder funds Sentry and Sigma knowing

that the Funds were designed to subsequently invest that money in New York-based BLMIS.”

Opp’n at 15, ECF No. 263. The Plaintiffs rely on Picard v. Bureau of Labor and Insurance, 480

B.R. 501 (Bank. S.D.N.Y. 2012) (“BLI”) and subsequent cases for the proposition that parties avail

themselves of the benefit of New York law when they invest in feeder funds knowing the ultimate

destination is BLMIS in New York. Opp’n at 15–16. The Plaintiffs highlight that BNP affirmed

it received and read the Sentry Private Placement Memorandum (“PPM”) when it signed the

subscription agreement. Id. at 17–18; Flugman Decl. Ex. 3 at -131, ECF No. 264 (“Subscriber has

received and read a copy of the [PPM]”). Additionally, the Plaintiffs note that the Defendant

“requested and received PPMs in electronic form on at least one occasion.” Opp’n at 18; see

Flugman Decl. Ex. 10 (email from a BNP employee to a Citco Fund Services employee requesting

“the prospectus of [Sentry] for [BNP’s] audit” — a request which the Citco Fund Services

employee responded to by sending over a Private Placement Memorandum dated October 1, 2004

(such memorandum, the “October 2004 Memorandum”)). The Liquidators also argue that these

PPMs made clear that substantially all the assets of Sentry were controlled by the U.S.-based

BLMIS. See id. at 8; see also Flugman Decl. Ex. 12 at -156, -161–62 (October 2024

Memorandum). Next, due to the spoliation of evidence, Plaintiffs ask the Court to infer that

destroyed evidence includes Sentry and Sigma PPMs, diligence, and other “knowledge about the

relationship between the Funds and BLMIS.” Opp’n at 18. Lastly, contrary to Defendant’s

assertions in the Reply, Plaintiffs do not ask the Court to treat the Fairfield Funds and BNP as a

single corporate entity. See Reply at 2, ECF No. 286.

The Defendant argues that these allegations are “jurisdictionally irrelevant.” Mem. L. at

9, ECF No. 169. The Defendant contends that under Walden, “mere knowledge that Sentry would

invest the money it raised in the BVI with BLMIS in New York is insufficient as a matter of law

to support jurisdiction.” Id. at 11 (citing Walden v. Fiore, 571 U.S. 277 (2014)). Further, the

Defendant argues that the Plaintiffs’ foreseeability theory “is nothing more than the type of

threadbare ‘stream of commerce’ theory of personal jurisdiction rejected by the Supreme Court.”

Id. at 13 (citing J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 882, 886 (2011)). Additionally,

the Defendant argues that the case here can be distinguished from the circumstances in BLI —

“[p]laintiffs’ claims in this case do not arise from the BLIMS investments; they arise from the

redemption payments made by the Funds from the BVI to foreign defendants.” Id. at 14; see also

BLI, 480 B.R. 501, 516–19. Moreover, the Defendant argues that “it simply is not credible that

[BNP] would have understood that investing in the BVI-incorporated Funds would subject it to

U.S. jurisdiction with respect to claims arising out of the receipt of moneys from those BVI-based

Funds.” Id.

Here, the Court agrees with the Plaintiffs that BLI provides strong support. In BLI, as here,

the defendant invested “millions of dollars in Fairfield Sentry with the specific purpose of having

funds invested in BLMIS in New York….” BLI, 480 B.R. 501, 517. Contrary to the Defendant’s

assertion, jurisdiction did not turn on the nature of the claim. See id. Rather, in BLI, the court held

it had personal jurisdiction because the defendant knew — due to its diligence and review of PPMs

— that 95% of its funds would enter the New York securities market. See id.

The Court therefore reaches a similar conclusion. The available evidence combined with

adverse inferences drawn pursuant to the Spoilation Order show BNP knew it directed its

investment towards BLMIS in New York. In the subscription agreement, BNP acknowledged

receipt of a PPM. See Flugman Decl. Ex. 3 at -131, ECF No. 264. Indeed, the PPM dated October

1, 2004 indicates that BLMIS held “approximately 95% of [Sentry]’s assets under custody,” and

that Sentry’s fund manager only had discretion to allocate “a portion of the Fund’s assets (never

to exceed, in the aggregate, 5% of the Fund’s Net Asset Value…) to alternative investment

opportunities….” Flugman Decl. Ex. 12 at -156, -161–62. Pursuant to the Spoilation Order, the

Court finds it appropriate to infer that the corresponding PPM received contains information

favorable to establish personal jurisdiction. See Spoliation Order, ECF No. 247. Specifically, the

Court infers that the PPM referenced in the subscription agreement matches other PPMs available

in evidence, showing approximately 95% of the funds would arrive in the U.S. See Flugman Decl.

Ex. 12 at -155, -161; see also id. Ex. 13 at -644, -652. Similarly, BNP’s diligence would indicate

their investment’s ultimate destination was New York. See Spoliation Order; Flugman Decl. Ex.

17 at -386 (requesting prospectuses for Fairfield Funds and stating, “to fulfill our legal obligations

we are required to have some information on the assets we hold in custody.”). Ultimately, BNP’s

use of intermediary Feeder Funds does not make its contacts any less purposeful under these

circumstances. Together, the PPM and diligence support that BNP’s investment in the Funds was

a clear directive to invest in New York-based BLMIS.

In addition to BLI, Walden also provides support for the Plaintiffs. In Walden, the Supreme

Court found that a defendant “formed no jurisdictionally relevant contacts” with the forum state

of Nevada as “[p]etitioner never traveled to, conducted activities within, contacted anyone in, or

sent anything or anyone to Nevada.” Walden, 571 U.S. at 289. The Supreme Court further stated

that it is impermissible to allow the “plaintiff’s contacts with the defendant and forum to drive the

jurisdictional analysis.” Here, the Defendant’s contacts, not the Plaintiffs’ contacts, drive the

jurisdictional analysis. BNP knowingly sent tens of millions of dollars to New York. Am. Compl.

¶ 2, 20, ECF No. 143. These actions go beyond “mere knowledge.”

Defendant next argues that the Liquidators’ evidence of Defendant’s contacts with the

United States amounts to little more than the stream of commerce theory rejected by J. McIntyre

Mach., Ltd. v. Nicastro, where the Court stated that “it is not enough that [a] defendant might have

predicted that its goods will reach the forum,” but rather the defendant must “engage[] in conduct

purposefully directed at [the forum].” Mem. L. at 13 (citing 564 U.S. 873, 882–86 (2011)). Here,

the Defendant did not invest with a manager who had limitless discretion to allocate capital in

global securities markets. Indeed, the situation here is the exact opposite — BNP invested millions

in the Funds that had contractual obligations to allocate the capital in the United States. See

Flugman Decl. Ex. 3 at -131; see also id. Ex. 12 at -155, -161 (October 2004 Memorandum). That

is purposeful direction sufficient to meet the first requirement of specific jurisdiction.

2. Defendant’s Use of Correspondent Accounts

Separately, the Plaintiffs argue that BNP’s “intentional and recurring use of U.S.

correspondent accounts to subscribe for shares in Sentry and receive each of the at-issue Sentry

redemption payments independently supports the exercise of jurisdiction with respect to those

redemption payments.” Opp’n at 26, ECF No. 263. “Correspondent accounts are accounts in

domestic banks held in the name of foreign financial institutions” that are used “to effect dollar

transactions.” Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 56 n.3 (2d Cir.

2012) (quoting Sigmoil Res., N.V. v. Pan Ocean Oil Corp. (Nigeria), 234 A.D.2d 103, 104, 650

N.Y.S.2d 726, 727 (1st Dept 1996)). Citing Licci IV, 732 F.3d at 171, the Plaintiffs assert that

Defendant’s use of a correspondent bank account supports jurisdiction because it was deliberate,

recurring, and related to the harm at issue. Opp’n at 32–34.

First, as to deliberateness, Plaintiffs contend that BNP chose its own U.S. correspondent

account for both subscription and redemption payments. See Flugman Decl. Ex. 3 at -137, -138,

ECF No. 264; Id. Ex. 4. Additionally, according to the Plaintiffs, the Defendant’s choice to use

Sentry’s U.S. correspondent account for subscription payments also supports personal jurisdiction

under Off. Comm. of Unsecured Creditors of Arcapita v. Bahrain Islamic Bank (“Arcapita I”), 549

B.R. 56, 68-69, 70 n.18 (S.D.N.Y. 2016).

Second, as to the recurring element of Licci IV, Plaintiffs show that BNP “processed at

least 30 transactions, amounting to more than $60 million, through its own and Sentry’s U.S.

correspondent accounts.” Opp’n at 32. Of the 30, BNP “received 12 redemption payments from

Sentry totaling $39,662,951.91 over four years through [its U.S. correspondent] account.” Id.; see

Am. Compl. ¶ 55 & Ex. A, ECF No. 143; see also Flugman Decl. Exs. 19, 21, 23 (Redemption

Records). The remaining 18 transactions, totaling $22,505,000, were subscription payments where

BNP used both its own and Sentry’s U.S. correspondent accounts as part of a chain of transactions.

Opp’n at 32; see Flugman Decl. Exs. 4–8 (Subscription Records). Based on precedent regarding

correspondent bank use, Plaintiffs argue the frequency and size of BNP’s correspondent bank

transactions are sufficient for jurisdiction. Opp’n at 32 (citing Averbach v. Cairo Amman Bank,

2020 WL 486860, at *5 (S.D.N.Y. Jan. 21, 2020); Schansman v. Sberbank of Russia PJSC, 2021

WL 4482172, at *5 (S.D.N.Y. Sept. 30, 2021); Arcapita I, 549 B.R. at 70, n.18).

Finally, for the third element of Licci IV — the contacts’ relation to the harm — Plaintiffs

argue that BNP’s “use of U.S. accounts is sufficiently related to the Liquidators’ claims seeking to

recover Sentry redemption payments.” Opp’n at 34. To succeed on their constructive trust claim,

the Plaintiffs must demonstrate that BNP received inflated redemption payments. See id. The

Plaintiffs argue, therefore, that BNP “accomplished the wrongs for which the Liquidators seek

redress using the New York banking system to buy shares and obtain the redemption payments for

those shares the Liquidators seek to claw back…. That is enough to establish jurisdiction over

BNP SSL with respect to the redemption payments at issue.” Id.

BNP counters that “the passive receipt of money transmitted by the Funds themselves does

not support the exercise of personal jurisdiction.” Mem. L. at 14, ECF No. 169. Defendant first

highlights that Sigma never used U.S. accounts and argues that the Court should dismiss claims

arising from Sigma redemptions. Id. Next, Defendant argues that their use of U.S-based bank

accounts was “incidental” and part of a series of common market transaction insufficient to confer

jurisdiction. Id. at 15–16.

BNP seeks to distinguish Plaintiffs’ reading of Arcapita I and Licci IV. Id. at 17–19.

Regarding Arcapita I, the Defendant believes that case is “inapposite because the contracts there

were materially more purposeful than those alleged here.” Id. at 17. As for Licci IV, Defendant

believes “the Second Circuit concluded that wire transfers from a correspondent bank account

could establish personal jurisdiction when the transfers are part of the ‘principal wrong’ alleged.”

Id. Thus, BNP argues, because BNP’s “incidental” use of U.S. accounts is not the principal wrong,

jurisdiction cannot lie. Id. at 18-19.

a. Whether the Defendant’s Use of U.S.-Based Correspondent Accounts

Was Deliberate and Recurring

As a threshold matter, Defendant is correct to exclude Sigma from this analysis. Mem. L.

at 14, ECF No. 169. Indeed, the Liquidators recognize that BNP did not use U.S. accounts for that

Sigma redemption transactions.9 See Opp’n at 27 n.21, ECF No. 263. Accordingly, Plaintiffs’

9 However, the Plaintiffs also argue that “[BNP] is still subject to jurisdiction with respect to [its Sigma shares]

redemptions, as the Liquidators’ [other] jurisdictional theories … do not turn on correspondent account use and

independently support jurisdiction over the Sigma redemptions.” Opp’n at 27, n.21, ECF No. 263. The Court

addresses the Liquidators’ other jurisdictional arguments supra, Part IV.B.1., and infra, Part IV.B.3.

correspondent account theory for jurisdiction only applies to the constructive trust claim for the

$39,622,951.91 redeemed from Sentry. Id. at 32; see Flugman Decl. Exs. 19, 21, 23, ECF No. 264

(Redemption Records).

As to the substance of the analysis, the Second Circuit has held that “the selection and

repeated use of New York's banking system, as an instrument for accomplishing the alleged

wrongs for which the plaintiffs seek redress, constitutes purposeful availment….” Licci IV, 732

F.3d at 171 (cleaned up). The Second Circuit further clarified that, “[s]o long as this in-forum

activity sufficiently reflects the defendant's ‘purposeful availment’ of the privilege of carrying on

its activities here, minimum contacts are established, even if the effects of the defendant's entire

course of conduct are felt elsewhere.” Id. at 173. Thus, a foreign bank’s repeated use of a U.S.

correspondent account to achieve the wrong complained satisfied the minimum contacts

requirement. Id.

Like the defendant in Licci IV, BNP’s use of U.S. correspondent accounts was deliberate.

Specifically, the evidence shows that BNP actively selected U.S. accounts to receive the

redemption payments. See Flugman Decl. Ex. 19 (Redemption Requests). These selections

occurred repeatedly — 12 times for a total of nearly $40 million. Am. Compl. ¶ 55 & Ex. A, ECF

No. 143; see Flugman Decl. Exs. 19, 21, 23 (Redemption Records). Those transactions make

BNP’s U.S. correspondent account an instrument because they facilitated the alleged wrongful

redemptions. See id. Moreover, because BNP repeatedly selected a U.S. account to receive

redemption payments, whether BNP felt the transaction’s effects in BVI or Luxembourg is

irrelevant in these circumstances. See Licci IV, 732 F.3d at 173 (“a [foreign defendant]’s repeated

use of [a] correspondent account—and hence New York’s banking system… satisfies the

minimum contacts component of the due process inquiry.”). And that U.S. account was

instrumental to the harm alleged — the wrongful receipt of the redemption payments. BNP’s use

of U.S. correspondent accounts satisfies the minimum contact relatedness requirements under Licci

IV.

BNP’s use of U.S.-based correspondent account was also recurring. Indeed, even setting

aside the subscription payments, the frequency and size of the redemption payments alone are

sufficient to show purposeful availment. In Licci IV, the Second Circuit found “dozens” of U.S.

correspondent account transactions for several million dollars sufficient. See 732 F.3d 161, 171

(2d Cir. 2013). Moreover, in Arcapita I, a single $10 million investment using a U.S.

correspondent bank was sufficient. See 549 B.R. at 61, 70. BNP’s dozen redemption payments

for nearly $40 million fit well within the facts of these two cases. See Am. Compl. ¶ 55 & Ex. A;

see Flugman Decl. Exs. 19, 21, 23 (Redemption Records). They show a pattern of recurring

transactions and are not “random, isolated, or fortuitous.” Keeton v. Hustler Magazine, Inc., 465

U.S. 770, 774 (1984). The Defendant’s attempt to frame these transactions as “incidental” and

“passive” is also inconsistent with the record. BNP took an affirmative action when it sought to

redeem shares in Sentry. As part of this act, it made a choice to provide the account details of its

U.S. correspondent bank for the redemption payments. See Flugman Decl. Exs. 19, 21, 23

(Redemption Records).

Given the non-incidental nature of the redemption transactions, Hill v. HSBC Bank PLC,

207 F. Supp. 3d 333 (S.D.N.Y. 2016) and Hau Yin To v. HSBC Holdings PLC, 2017 WL 816136

(S.D.N.Y. Mar. 1, 2017) can also be distinguished. See Mem. L. at 16; see also Reply at 10, ECF

No. 286. In Hill, the court held the defendant, a fund administrator, did not avail itself of

jurisdiction because its administrative and custodial contacts with New York were “incidental” to

the foreign contract. Hill, 207 F. Supp. 3d at 337, 339–40. Similarly, in Hau Yin To, the defendant

entered into custodial agreements and the court also held the New York communications

insufficient. See Hau Yin To, 2017 WL 816136, at *6. BNP’s contacts, however, differ in

importance and degree. BNP’s use of U.S. correspondent accounts facilitated the central

transaction at issue — the redemption of Sentry shares. Further, a dozen transactions for nearly

$40 million is more substantial than mere communications with New York.

In contrast to Hill and Hau Yin To, Arcapita I supports a finding of purposeful availment.

There, the bankruptcy court found that a foreign bank purposefully availed itself of the forum

because the bank selected U.S. dollars and U.S. correspondent accounts. See Arcapita I, 549 B.R.

at 61, 69. Similarly, BNP chose U.S. dollars and U.S. correspondent accounts when it chose to

purchase shares of dollar-based Sentry. Defendant’s argument that Sentry chose the currency

misses the point because, more importantly, BNP chose Sentry when it could have chosen a viable

foreign option, Sigma. See Mem. L. at 17; see also Reply at 8.

b. Whether the Defendant’s Use of U.S.-Based Correspondent Account

Relate to the Harm Alleged By the Liquidators

Having found that BNP’s use of a U.S.-based correspondent account was deliberate and

recurring, the Court now turns to the third Licci IV factor — relatedness to the harm. To satisfy

this factor, the suit must “arise out of or relate to the defendant’s contacts with the forum.” Ford

Motor Co. v. Montana Eighth Jud. Dist. Ct., 592 U.S. 351, 141 S. Ct. 1017, 1026 (2021) (emphasis

in original). “[P]roof that a plaintiff’s claim came about because of the defendant’s in-state

conduct” is not required. Id. at 1027. Instead, a court need only find “an affiliation between the

forum and the underlying controversy.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564

U.S. 915, 919 (2011); Picard v. BNP Paribas S.A. (In re BLMIS), 594 B.R. 167, 190 (Bankr.

S.D.N.Y. 2018) (“Where the defendant’s contacts with the jurisdiction that relate to the cause of

action are more substantial, however, it is not unreasonable to say that the defendant is subject to

personal jurisdiction even though the acts within the state are not the proximate cause of the

plaintiff's injury.”) (internal quotations omitted). This Circuit has “found that a claim arises out of

forum contacts when defendant's allegedly culpable conduct involves at least in part financial

transactions that touch the forum.” U.S. Bank Nat’l Ass’n v. Bank of Am. N.A., 916 F.3d 143, 151

(2d Cir. 2019).

Plaintiffs’ constructive trust claim has three elements: (1) a disposal of the Plaintiffs’ assets

in breach of fiduciary duty; (2) the beneficial receipt of the assets by the Defendant; and (3) that

the Defendant has knowledge it received the assets via a breach of fiduciary duty. In re Fairfield

Sentry Ltd., 2021 WL 771677 (Bankr. S.D.N.Y. Feb. 23, 2021) (quoting El Ajou v. Dollar Land

Holdings Ltd. [1994] 2 All E.R. 685, 700); see also supra, Part III.C.

Plaintiffs make four arguments as to why Defendant’s contacts relate to the constructive

trust claim. First, Plaintiffs argue that Defendant’s initial investment relates to the ultimate

redemption because “[w]ithout the subscriptions [BNP] would have had no shares to redeem and

could not have received the redemption payments to which its subscriptions gave rise.” Opp’n at

22, ECF No. 263. Second, the subscription agreement’s forum-selection and choice of law clauses

“gave rise to the redemption payments at issue.” Id. at 24. Third, BNP’s “presumptive due-

diligence-related activity contributed to its knowledge that the NAVs were inaccurate—a core

element of the Liquidators constructive trust claims.” Id. at 26. Fourth, Plaintiffs argue that

Defendant’s use of correspondent bank accounts relates to their claim because “[BNP]

accomplished the wrongs for which the Liquidators seek redress using the New York banking

system to buy shares and obtain the redemption payments for those shares the Liquidators seek to

claw back.” Id. at 34.

BNP counters that the claim is based on redemptions from Citco and not the subscription

payments. Mem. L. at 10, ECF No. 169. The Defendant distinguishes the present case from U.S.

Bank National Association v. Bank of America N.A., 916 F.3d 143 (2d Cir. 2019) and In re

Fairfield Sentry Ltd., 627 B.R. 546, 568 (S.D.N.Y. Bankr. 2021). Id. at 11. BNP asserts that those

cases found jurisdiction because the defendant’s activities occurred in the U.S. and BNP’s actions

related to the constructive trust claim all occurred outside the U.S. Id.

Here, the Plaintiffs’ correspondent bank argument is more than sufficient to meet this

second prong. Opp’n at 34. A constructive trust claim requires showing receipt of the assets. See

In re Fairfield Sentry Ltd., 2021 WL 771677 (Bankr. S.D.N.Y. Feb. 23, 2021). The use of a U.S.

correspondent bank account shows receipt of assets. That receipt is “at the heart of this cause of

action” because “[t]he receipt of the funds in New York is precisely… the activity that the cause

of action seeks to have voided.” Arcapita I, 549 B.R. at 69. Defendant’s attempt to distinguish

this case fails because this BNP action occurred inside the U.S. and relates to the constructive trust

claim.

Further, the issue of knowledge of the inflated NAV, required for the constructive trust

claim, is inextricably tied to the Defendant’s investments with New York-based BLMIS. The

allegations are directly related to Defendant’s investment activities with BLMIS through the

Fairfield Funds. See Am. Compl. ¶¶ 181–83, ECF No. 143. The Defendant’s contacts with the

United States, in investing in, and receiving redemptions from, the Fairfield Funds, form a

“sufficiently close link” between the defendant, the forum and the litigation concerning

Defendant’s activities in the forum. See MSP Recovery Claims, Series LLC v. Takeda Pharm.

Am., Inc., 2021 WL 4461773, at *3 (S.D.N.Y. Sept. 29, 2021) (quoting Ford Motor Co., 141 S.

Ct. at 1032). Accordingly, the Court finds that BNP’s use of an U.S.-based correspondent account

to facilitate Sentry redemption payments were sufficiently related to the harm alleged by the

Liquidators.

3. Defendant’s Business Contacts with the Forum

Plaintiffs allege that BNP’s “additional U.S.-oriented business activity related to the

Liquidators’ claims also supports the exercise of jurisdiction.” Opp’n at 23, ECF No. 263. First,

Plaintiffs argue the subscription agreements’ designation of New York as the dispute resolution

forum support the exercise of jurisdiction. Id. at 24. Additionally, BNP also “used its New York-

based affiliate, the ‘BNP Equity Derivatives’ division to facilitate transactions with the Funds.”

Id. at 24–25. Plaintiffs argue the affiliates’ contact, coupled with other communications, supports

exercising jurisdiction. See id. at 25.

Second, Plaintiffs advocate for additional inferences due to the destruction of evidence. Id.

at 25. Specifically, the Plaintiffs ask this court to infer, pursuant to the Spoilation Order, that BNP

engaged in diligence-related activities similar to defendants in other BLMIS actions. Id. at 26.

Plaintiffs argue that these contacts relate to their claims because diligence would contribute to

Defendant’s “knowledge that the NAVs were inaccurate—a core element of the Liquidators’

constructive trust claims.” Id.

In response, Defendant argues BNP’s business contacts cannot create jurisdiction due to

past rulings: “Courts in this District have already held—in the context of these cases—that the

forum selection clause does not support the exercise of personal jurisdiction in connection with

the Liquidators’ claims to claw back redemption payments.” Reply at 13, ECF No. 286; see

Fairfield Sentry Ltd. (In Liquidation) by & through Krys v. Citibank, N.A. London, No. 19-CV-

3911 (VSB), 2022 WL 4391023, at *12 (S.D.N.Y. Sept. 22, 2022). BNP argues that because the

claims arise from BVI law, the subscription agreement’s forum selection clause is irrelevant and

cannot confer jurisdiction. Reply at 13.

The Defendant also opposes Plaintiffs’ request for the Court to infer evidence of diligence

and other communications. Id. at 15–16. The Defendant asserts that “[t]here is no basis to

conclude that a nominal shareholder like [BNP] would have communicated about the Fairfield

Funds in the same way as differently situated entities that invested their own capital in the Fairfield

Funds.” Id. at 15. Additionally, the Defendant argues that the Plaintiffs have no factual basis to

conclude knowledge of inaccurate NAVs due to the presumption of diligence. Id. at 16. Finally,

as a fallback, Defendant argues that “even if the Court were to presume that any of Plaintiffs’

hypothesized contacts with the U.S. existed, Plaintiffs have failed to show that the contacts

sufficiently relate to their claims to support a finding of jurisdiction.” Id.

Here, the Court concludes the additional business contacts alone do not support

jurisdiction. But these contacts still provide incremental support because the Court evaluates “the

quality and nature of the defendant’s contacts… under a totality of the circumstances test.” Licci

IV, 732 F.3d at 170 (citations omitted).

First, the forum selection clause provides some support for jurisdiction. In Fairfield I,

Judge Bernstein held the forum selection clause did not confer personal jurisdiction. 2018 WL

3756343, at *12. That holding, however, does not make the clause irrelevant. A contract’s choice

of law clause can still carry weight when considering if a defendant has purposefully availed itself

of the benefits of a jurisdiction. Burger King Corp. v Rudzewicz, 471 US 462, 482 (1985)

(explaining a choice of law provision can establish jurisdiction in conjunction with other

evidence). Defendant purchased the shares relevant to this case through contracts with a New

York forum selection clause. See, e.g., Flugman Decl. Ex. 4 at -966, -121, -249, ECF No. 264

(“This [subscription agreement] shall be governed and enforced in accordance with the laws of

New York…”). Although not determinative, the New York forum selection clause shows some

purpose to do business in the U.S.

Second, BNP’s other contacts provide support for jurisdiction. BNP used an affiliate to

facilitate transactions with the Funds (Flugman Decl. Exs. 25-26); directed communications to a

U.S. address in the subscription agreement (Id. Ex. 3 at -136; Id. Ex. 4 at -086); and one of its

“Americas” employees communicated with Fairfield Greenwich Group (Id. Ex. 27). Taken

together, these contacts are ancillary to the primary transactions in this case — the redemption

payments. They more closely resemble the “incidental” contacts in Hau Yin To and Hill. Hau Yin

To, 2017 WL 816136, at *6; Hill, 207 F. Supp. 3d at 339–40. Accordingly, under the totality of

the circumstances, these contacts provide little support.

Third, inferences of evidence pursuant to the Spoilation Order present a more difficult

issue. The Spoilation Order allows the Court to draw an adverse inference that “any spoliated

evidence would have been favorable” to the Plaintiffs. ECF No. 247. The challenge, however, is

determining what the spoliated evidence is. Certainly, BNP received PPMs because the

subscription agreements reference them. See Flugman Decl. Ex. 3 at -131. For those deleted

PPMs, the Court draws a negative inference. However, beyond that, and the other business

contacts cited above, the Court will not presume new evidence or infer business practices due to

other defendants’ activities from different cases. Reply at 15. Moreover, like the other

communications, these inferred contacts would have minimal impact on the personal jurisdiction

analysis. The Court declines to make any further inferences pursuant to the Spoilation Order at

this time.

C. WHETHER ASSERTION OF PERSONAL JURISDICTION IS

REASONABLE

If a defendant has sufficient minimum contacts, the Court must then ask, “whether the

assertion of personal jurisdiction comports with ‘traditional notions of fair play and substantial

justice’—that is, whether it is reasonable under the circumstances of the particular case.” Bank

Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 129 (2d Cir. 2002) (quoting

Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 568 (2d Cir. 1996)); see also Burger

King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985). Where the plaintiff “makes the threshold

showing of the minimum contacts required for [exercising personal jurisdiction], a defendant must

present a compelling case that the presence of some other considerations would render jurisdiction

unreasonable.” MSP Recovery Claims, Series LLC, 2021 WL 4461773, at *3 (quoting Bank

Brussels Lambert, 305 F.3d at 129). Factors the Court will consider include the burden on the

defendant, the interests of the forum in adjudicating the case, the plaintiff’s interest in obtaining

convenient and effective relief, the interstate judicial system’s interest in obtaining the most

efficient resolution of controversies, and the shared interest of the states in furthering fundamental

substantive social policies. 305 F.3d at 129.

The Defendant believes exercising jurisdiction is unreasonable. First, it believes that

Plaintiffs must make a strong showing of reasonableness to supplement Plaintiffs’ reliance on

“incidental” contacts. Mem. L. at 20, ECF No. 169; Reply at 16, ECF No. 286. From there, BNP

first argues the U.S. interest is “minimal at best” because the “dispute is between exclusively

foreign parties arising solely under foreign law pursuant to a foreign contract governing a purely

foreign transaction.” Mem. L. at 21. Moreover, BNP argues that finding jurisdiction in this case

would make New York a forum for any foreign commercial dispute. Id. at 4, 16. Finally, the

Defendant also argues that the proceeding is non-core, ancillary, and only tenable due to Chapter

15 recognition. Id. at 23 (citing In re Fairfield Sentry Ltd., 458 B.R. 665, 682 (S.D.N.Y. 2011)

(Preska, C.J.)).

Defendant’s reliance on In re Fairfield Sentry Ltd., 458 B.R. 665, is misplaced. In that

case, the District Court determined whether the proceeding was core or non-core; it did not

determine whether adjudication or jurisdiction in the United States was reasonable. See id. at 675.

Further, the Court has already found that it has subject matter jurisdiction over these proceedings.

See Fairfield I, 2018 WL 3756343, at *8 (Bankr. S.D.N.Y. Aug. 6, 2018). Chapter 15 allows for

recognition of Sentry’s foreign main proceeding. 11 U.S.C. § 1501(a) ("The purpose of this

chapter is to incorporate the Model Law on Cross-Border Insolvency so as to provide effective

mechanisms for dealing with cases of cross-border insolvency . . ..”); id. § 1504 (“A case under

this chapter is commenced by the filing of a petition for recognition of a foreign proceeding under

section 1515.”). Defendant correctly states that cases brought under Chapter 15 are ancillary to

foreign proceedings. Fairfield I, 2018 WL 3756343, at *2. The ancillary character of such cases,

however, does not necessarily mean that the United States has minimal interest in the dispute.

Indeed, courts have recognized that the United States has a strong interest in ensuring the integrity

of its financial systems, and the Court has repeatedly emphasized such interest in other adversary

actions related to the BLMIS Ponzi scheme. See Licci IV, 732 F.3d at 174 (“[T]he United States[]

and New York [have an] interest in monitoring banks and banking activity to ensure that its system

is not used as an instrument in support of terrorism, money laundering, or other nefarious ends.”);

see also Fairfield Sentry Ltd. (In Liquidation), et al. v. HSBC Securities Services (Luxembourg)

S.A., et al. (In re Fairfield Sentry Ltd.), 658 B.R. 257, 277 (Bankr. S.D.N.Y. 2024); Fairfield Sentry

Ltd. (In Liquidation), et al. v. UBS Europe SE, Luxembourg Branch, et al. (In re Fairfield Sentry

Ltd.), 657 B.R. 1, 23 (Bankr. S.D.N.Y. 2024).

Next, the Defendant argues that jurisdiction would create substantial burdens for BNP

because its participation could potentially generate liability under Luxembourg’s bank secrecy

laws. Mem. L. at 22. In support of this argument, BNP cites to the Court’s Bench Ruling granting

in part and denying in part a motion seeking relief as to the order staying the action and seeking

expedited initial disclosures from certain beneficial holders. See id.; see also Bench Ruling, Adv.

Pro. No. 10-03496, ECF No. 799 (the “July 2012 Bench Ruling”). The defendants before this

Court in 2012 were able to describe “the strong and undeniable interest of many nations in

enforcing their banking secrecy laws” and “significant bank customer confidentiality laws of no

fewer than 30 countries, attested to by numerous declarations of foreign law experts and letters

submitted by foreign governments” that could have been implicated or broken by complying with

the Court’s prior order. See July 2012 Bench Ruling at 2. As a result, the Court stated in the July

2012 Bench Ruling that it was “hard-pressed to find any compelling United States’ interest in

mandating discovery here at this juncture of the pending litigation.” Id. at 2–3 (emphasis added).

However, the July 2012 Bench Ruling does not support BNP’s position that potential foreign

liabilities render the Court’s exercise of personal jurisdiction unreasonable. Courts in this Circuit

have recognized that the threat of potential foreign liability is an issue more “appropriately

considered in a separate comity analysis,” and not in the context of assessing the reasonableness

of personal jurisdiction. See Nike, Inc. v. Wu, 349 F. Supp. 3d 310, 333 (S.D.N.Y. 2018). Indeed,

both the Court’s July 2012 Bench Ruling and the District Court’s Nike, Inc. v. Wu opinion

considered foreign liability threat as part of an international comity analysis, not for personal

jurisdiction purposes. See id. at 335, 340; see also July 2012 Bench Ruling at 1–2. Further, thus

far, the parties have agreed on an effective redaction protocol. Presumably the parties can agree

on an effective discovery procedure in compliance with all relevant laws, including Luxembourg’s

bank secrecy laws, or the Court can establish one.

The Defendant has demonstrated that this Court’s exercise of jurisdiction over it may

impose a minimal burden in terms of requiring it to travel to the forum. However, “[e]ven if

forcing the defendant to litigate in a forum relatively distant from its home base were found to be

a burden, the argument would provide defendant only weak support, if any, because the

conveniences of modern communication and transportation ease what would have been a serious

burden only a few decades ago.” Chloé v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 173

(2d Cir. 2010); see also In re Platinum & Palladium Antitrust Litig., 61 F.4th 242, 273 (2d Cir.

2023). Indeed, BNP has participated in this litigation for over five years and is represented by

U.S. counsel. See, e.g., Notice of Appearance, ECF No. 96; Mot. to Dismiss Adversary

Proceeding, ECF No. 102.

Finally, Defendant argues that Plaintiffs “have proffered no reason why the United States

is a more reasonable forum than their home jurisdiction of the BVI or [BNP]’s home jurisdiction

of Luxembourg.” Mem. L. at 5. BNP suggests that the Liquidators may be engaged in forum-

shopping through “strategic maneuvering” after losing in their initial BVI Claims. Id. at 22–23.

Defendant has alleged that other forums may be able to hear the claims. But the Defendant

has not demonstrated how this forum would fail to provide effective relief. See MSP Recovery

Claims, Series LLC, 2021 WL 4461773, at *3. Here, the Defendant presumes but fails to establish

that the Plaintiffs have no legitimate interest in obtaining relief in the United States — especially

considering that this dispute stems from a Chapter 15 proceeding that has intimate connections to

the New York-based BLMIS Ponzi scheme. Moreover, contrary to BNP’s argument that finding

jurisdiction here will make New York the forum for every foreign transaction, the record supports

that conferring jurisdiction over BNP fits squarely within existing caselaw. See Mem. L. at 16–

17. The Defendant has not established that the Court’s exercise of personal jurisdiction over it

would be unreasonable. The Court thus finds that exercising jurisdiction over the Defendant is

reasonable and comports with “traditional notions of fair play and substantial justice . . ..” See

Int'l Shoe, 326 U.S. at 316.

V. CONCLUSION

For the foregoing reasons, the Court DENIES the Defendant’s Motion to Dismiss the

Amended Complaint. The Liquidators shall submit a proposed order consistent with the findings

in this decision in accordance with Local Bankruptcy Rule 9074-1.

IT IS SO ORDERED.

Dated: May 12, 2025

New York, New York

/S/ John P. Mastando III____________________

THE HONORABLE JOHN P. MASTANDO III

UNITED STATES BANKRUPTCY JUDGE