Bernard Madoff trustee, Irving Picard, has sued three Fairfield Greenwich Group hedge fundsâ€”Fairfield Sentry Ltd., Greenwich Sentry LP, and Greenwich Sentry Partners LPâ€”in a clawback suit that seeks the return of $3.54 billion to repay victims of Madoffâ€™s historic Ponzi scheme, said Bloomberg News.
Madoff pleaded guilty to 11 fraud counts on March 12. The former chairman of the NASDAQ stock exchange ran an investment advisory business (Bernard L. Madoff Investment Securities LLC, or BLMIS), for decades that was, in reality, a Ponzi scheme. Last November, Madoff told his investors that his fund held more than $64 billion, but in reality, it only held a mere fraction of that amount.
Because Madoffâ€™s Ponzi scheme went on for decades, it is suspected that he was far from the only person in his circle who knew of the swindle. Itâ€™s been known that several people close to Madoffâ€”including key employees, as well as his wife, sons, and brotherâ€”were among those close to him caught up in the probe.
The Fairfield funds invested approximately $4.5 billion since 1995 with Madoffâ€™s firm via 242 wire transfers, according to Picardâ€™s complaint, said Bloomberg News, which also stated that starting in 1996 â€œthe defendant funds received from BLMIS unrealistically high and consistent annual returns. Defendants knew or should have known that BLMIS was engaged in fraud based on these facts,â€ it quoted. Of the $3.2 billion the hedge funds withdrew, $1.2 billion were withdrawn three months before the fraud was discovered, which makes it recoverable under U.S. bankruptcy law, said Picard, reported Bloomberg News.
Picard has filed a number of clawback lawsuits seeking over $10 billion from investors who, according to the trustee, should have been aware that they were involved in a fraudulent scheme; has recovered about $1 billion in â€œMadoff-related assetsâ€; and is looking for another â€œ$735 million from Madoff customers outside of court,â€ reported Bloomberg News. Bloomberg News also said nearly 8,850 claims have been filed and are linked to over 3,500 customer accounts, citing Picard.
Picard also said, reported Bloomberg News, he plans on approving approximately $100 million in investor claims before the end of the month and on winning â€œsignificantâ€ clawback lawsuit settlements over the next several weeks.
Picard has sued lawyer and philanthropist Jeffry Picower, hedge fund Harley International (Cayman) Ltd., New York financier J. Ezra Merkin, philanthropist Stanley Chais, Kingate Management Ltd., Banque Jacob Safra (Gibraltar) Ltd., and British Virgin Islands-based Vizcaya Partners Ltd., Bloomberg News recapped
As we reported yesterday, U.S. prosecutors on the Bernard Madoff Ponzi scheme case have also set their sights on some Madoff investors. According to a Wall Street Journal piece, eight such investors are in the spotlight, including Picower and Chais, as well as Madoffâ€™s close friend, Carl Shapiro.
Prosecutors are also said to be taking a look at Frank Avellino, a Florida accountant who ran an investment fund that channeled client money to Madoff; Noel Levine, a real-estate investor who had an office next to Madoffâ€™s fraudulent business; and Robert Jaffe, a Palm Beach investor and Shapiroâ€™s son-in-law.
Prosecutors are trying to determine if any of these investors were aware of Madoff’s scheme, or if they benefited from it. So far, no investor has been charged with criminal wrongdoing, the Journal said.