In the ongoing Ponzi scheme scandal that originated with imprisoned scammer, Bernard Madoff, a new lawsuit has been announced. California Attorney General Jerry Brown initiated a lawsuit earlier this week against prominent Beverly Hills financial advisor Stanley Chais in a lawsuit filed in the Los Angeles County Superior Court, said the LA Times. The lawsuit is looking for no less than $25 million in restitution for Madoff victims.
Disgraced financier, Bernard Madoff is now spending 150 years in prison for orchestrating an historically massive Ponzi scam that is estimated to have cost duped investors an incomprehensible $65 billion.
Following Madoffâ€™s arrest, the Securities and Exchanged Commission (SEC) charged Chaisâ€”who ran three feeder funds that funneled money to Madoffâ€”with securities fraud. That lawsuit, said the LA Times, was filed three months ago and is pending. Recently, the SEC has come under fire for apparently missing warnings that something was terribly amiss with Madoffâ€™s investment advisory business.
Chais told his clients that he was able to achieve unbelievable 25 percent returns by using what Brown described as a â€œcomplex combination of derivatives, stock, currency and futures trading,â€ said the LA Times. According to the lawsuit, Chais instead, provided all of the funds to Madoff, reported the LA Times. “For decades, Stanley Chais posed as an investment wizard. But in truth, he was nothing more than a Madoff middleman,” said Brown at a news conference in Los Angeles, quoted the LA Times.
According to the LA Times, Chais allegedly drew in wealthy Southern California investors such as Eric Roth, who sued Chais for breach of fiduciary duty and negligence. Screenwriter and Oscar winner Roth is best known “The Curious Case of Benjamin Button.” Mark Peel, executive chef and part owner of the Campanile restaurant was also one of Chaisâ€™ clients, said the LA Times.
Deputy Attorney General Alexandra Robert Gordon said Chais brought in clients by word of mouth, explaining that would-be investors needed to know someone to get into a Chais funds, said the LA Times. Gordon also said activities were â€œall very exclusive and somewhat hush-hush,” with questions about the actual workings of the funds downplayed, reported the LA Times. According to Chais, through his attorney, he claims he was unaware of Madoffâ€™s scheme and is a victim himself.
In May we wrote that Irving Picard, the trustee working to recover Madoffâ€™s assets, filed a lawsuit for over $1 billion over allegations Chais and his family knew they were involved in a Ponzi scheme and, worse, profited from the scheme for three decades. Chais and his family, â€œknew or should have knownâ€ Madoff was running a Ponzi scheme,â€ reported USA Today previously, citing legal documents. The case alleges that Chais and his family were â€œprime beneficiariesâ€ in Madoffâ€™s plot for over 30 years and should return the fraudulently-obtained money for future distribution to Madoffâ€™s scammed victims. That action was the first time Picard accused an alleged Madoff victim of benefiting from the Ponzi scam.
Now, Brown is also saying that Chais knew or should have known about Madoffâ€™s extensive, long-running scheme, reported the LA Times; Brown noted that Madoff continued to pay out huge returns that did not always concur with financial market performance. Gordon explained that Madoff was able to maintain the ruse for so long because he would ensure investors were receiving returns with payouts coming from the flow of new investors.