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Marrero on July 9 rejected PwC's argument that the MF Global administrator "stands in the shoes" of the company under the "in pari delicto" legal doctrine and cannot recover because Corzine and other officials were also at fault.

But Rakoff said the trustee could not prevail by invoking an exception to "in pari delicto" by claiming that the women were corporate insiders who breached their fiduciary duties.

Citing the doctrine of "in pari delicto," meaning "in equal fault," the appeals court concluded that Picard could not assert claims on behalf of Madoff's firm to recover for fraud that the firm itself caused.

Irving Picard, the trustee, also debunked the argument that the suit should have been dismissed under the in pari delicto rule.

"It may be that the trustee can re-characterize their claim to get around the in pari delicto defense," said Davis.