Madoff Trustee Sues Fund for Return of Money

Irving Picard, the trustee brought in to liquidate Bernard L. Madoff’s Investment Securities LLC has sued Kingate Management Ltd. for $255 million transferred to the firm just prior to the alleged Ponzi scheme fell apart, reports Bloomberg News. Reuters reported that the transactions occurred last October and November.

Bloomberg News explained that Picard was appointed as trustee under the Securities Investor Protection Act to conduct an investigation into Madoff’s activities and assets. Picard has, to date, recovered about $1 billion, said Bloomberg News.

The complaint, which was just filed in Manhattan’s U.S. Bankruptcy Court, states “transfers of $100 million to Kingate Global Fund Ltd. and $155 million to Kingate Euro Fund Ltd. from Madoff firm accounts in October and November were improper,” said Bloomberg News. “This complaint seeks the return of the Kingate Global transfers and the Kingate Euro transfers…. Both the Kingate Global transfers and the Kingate Euro transfers are and continue to be customer property,” Bloomberg News quoted.

The complaint names Bank of Bermuda Ltd., which, said Bloomberg News, is a unit of HSBC Holding Plc, as a defendant. It seems Bank of Bermuda wired the money from Madoff to Kingate, said Bloomberg News, citing court documents.

On March 12, Madoff pleaded guilty to 11 fraud counts in what is believed to be the largest Ponzi scheme in history. Last November, Madoff told his investors that his fund held more than $65 billion, but in reality, he only had a fraction of that amount. Since his guilty plea, Madoff has been held at the Manhattan Correctional Center and faces a June sentencing and up to 150 years in prison.

In previous Madoff news, said Bloomberg, Picard sued Banque Jacob Safra (Gibraltar) Ltd. and Vizcaya Partners Ltd. in an attempt to recover $150 million, it withdrew from Madoff’s money-management business, said Reuters. Bloomberg said, according to information in the complaint, Kingate Global invested $963.5 million with Madoff from March 1994 to December 11 and Kingate Euro invested $767.4 million with Madoff starting January 1996, via 155 wire transfers to a JPMorgan Chase & Co. account.

Last week, court appointed liquidators in the United Kingdom sued Peter Madoff, Bernard Madoff’s brother, for recovery of a vintage Aston Martin, reported the Wall Street Journal. The car was purchased with monies derived from Madoff’s U.K. business, London-based Madoff Securities International Limited (MSIL). Just prior, a filing was made in New York for a personal involuntary bankruptcy for Bernard Madoff in an attempt to recover personal assets of Madoff and his relatives, said BizJournals. According to The Wall Street Journal, the filing said investors’ claims are based on breach of contract, conversion, and fraud. The filing also states that because of Madoff’s guilty plea in his criminal case, the claims are not disputed.

Earlier this month, investors petitioned a federal judge to rescind an order that prevented a forced bankruptcy. Federal prosecutors and the Securities and Exchange Commission (SEC) indicated they intend to seek forfeiture and disgorgement of Madoff’s assets in both the criminal and civil cases. But, according to the attorney representing the investors behind the bankruptcy petition, it is unclear if they intend to distribute any such funds to Madoff’s customers and what rules would govern any such distribution.

This entry was posted in Stock Fraud. Bookmark the permalink.

© 2005-2018 Parker Waichman LLP ®. All Rights Reserved.