SIPC argues that the HSBC decision incorrectly held that permitting the Trustee to exercise SIPC’s subrogation rights would upset the priority scheme for the distribution of customer property set forth in SIPA. See SIPC Br. 34-35; HSBC, 2011 WL 3200298, at *6. SIPC’s argument that it is subject to the automatic stay or would have to turn over any damages awarded to the Trustee for distribution to customers in the liquidation rests on the unfounded proposition that such damages constitute “customer property.” This is contradicted by the definition of “customer property,” which does not include damages. See 15 U.S.C. § 78lll(4). Case 1:11-cv-00913-CM Document 67 Filed 09/16/11 Page 47 of 89 -33- C. The Trustee lacks standing as an assignee.

at 3; SOF ¶ 36). Case 1:14-cv-00535-SAS Document 53 Filed 12/30/14 Page 23 of 33 17 definition of “customer” in 15 U.S.C. § 78lll(2) is dispositive in this case, when in fact it is irrelevant. What the Trustee cannot ignore, and indeed concedes, is that LBI was registered as an FCM in addition to being a broker-dealer, and thus the Trustee is required to apply the commodity broker liquidation provisions of the Bankruptcy Code, 11 U.S.C. §§ 761-767 (Trustee’s Br.

. He bases this claim on the fact that SIPA defines “customer property” to include “property unlawfully converted.” Id. (citing 15 U.S.C. § 78lll(4)). But this provision merely defines the universe of “customer property,” and provides that some of that property may be in the hands of others; it does not mean that the Trustee can sue for damage to that universe of property before he obtained a possessory interest.

As of April 29, 2011, SIPC has allowed the claims of 2,414 persons, see BLMIS Liquidation Proceeding, Claims & Recovery Status, http://www.madofftrustee.com/Status.aspx (last visited May 3, 2011), making each of these persons a “customer” of the estate under SIPA. See 15 U.S.C. § 78lll(2). Because the number of customers exceeds SLUSA’s 50-person threshold, the Trustee’s suit is a “covered class action” under the plain terms of the statute.

38 In re Adler Coleman Clearing Corp., 195 B.R. at 270. But see 15 U.S.C. § 78lll(4)(D) (Customer property also includes the debtor’s property, to the extent that “upon compliance with applicable laws, rules, and regulations [such property] would have been set aside for the benefit of customers . . . .”). Case 1:12-mc-00115-JSR Document 252 Filed 07/25/12 Page 21 of 48 13 which customer property may be properly allocated pursuant to SIPA § 78fff-2(c)(1), have been fully satisfied.39 This Court has already held that “claims for damages resulting from a broker’s misrepresentations, fraud or breach of contract are not protected [by SIPA].

Rather, it entails a simple analysis of section 541 of the Bankruptcy Code to determine whether the funds in question were “property of the estate”7 or in the alternative, SIPA § 78lll(4) to determine whether the definition of the term “customer property” applies to the funds at issue. See 11 U.S.C. § 541; 15 U.S.C. § 78lll(4). Neither determination requires significant analysis of non- 6 Article III standing is satisfied when the litigant has “(i) a concrete and particularized ‘injury in fact,’ (ii) that can be fairly traced to the defendants’ conduct, and (iii) that can be redressed by a favorable decision.”

. The Trustee has standing to bring these claims pursuant to section 78fff-1(a) of SIPA and the Bankruptcy Code, including sections 323(b) and 704(a)(1), because, among other reasons: a. Defendant NTC and/or FBO Defendant received “Customer Property” as defined in 15 U.S.C. §78lll(4); b. BLMIS incurred losses as a result of the claims set forth herein; c. BLMIS’ customers were injured as a result of the conduct detailed herein; d. SIPC has not reimbursed, and statutorily cannot fully reimburse, all customers for all of their losses; e. the Trustee will not be able to fully satisfy all claims; f. the Trustee, as bailee of customer property, can sue on behalf of the customer bailors; Case 1:11-cv-08574-JSR Document 1 Filed 11/28/11 Page 10 of 28 8 g. the Trustee is the assignee of claims paid, and to be paid, to customers of BLMIS who have filed claims in the liquidation proceeding (such claim-filing customers, collectively, “Accountholders”).

“Net equity” is “the sum which would have been owed by the debtor to such customer if the debtor had liquidated, by sale or purchase on the filing date, all securities positions of such customer[.]” 15 U.S.C. § 78lll(11) (emphasis added). The “net equity” definition is relevant only after a SIPA case commences.

15 U.S.C. § 78fff-1(a) (emphasis added).10 9 “Customer,” under SIPA, is defined in several ways—including “any person who has deposited cash with the debtor for the purpose of purchasing securities”—that reflect the customer’s perspective and not that of the fraudulent broker. See 15 U.S.C. § 78lll(2). 10 The Trustee’s Complaint asserts preference claims against the Sterling Defendants.

SIPA generally defines customer property as “cash and securities … at any time received, acquired, or held by or for the account of a debtor from or for the securities accounts of a customer, and the proceeds of any such property transferred by the debtor, including property unlawfully converted.” 15 U.S.C. §78lll(4). Under SIPA, “customer property” includes property that is actually recovered by a SIPA trustee, not merely transfers of property that are the targets of recovery or that are potentially recoverable.