Member access

4-Traders Homepage  >  News  >  Business Leaders  >  All news

Business Leaders

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesHot NewsMost Read NewsRecomm.Business LeadersVideosCalendar 
HomeAll newsMost read newsBusiness Leaders Biography 
Bernard Madoff
Country of residence : USA
Birthday : 04/29/1938

Madoff indirect investors lose U.S. court appeal

02/22/2013 | 01:00pm US/Eastern
Recommend:
0

(Reuters) - People who lost money by investing in funds that funneled their money to Bernard Madoff's Ponzi scheme are not entitled to recover for their losses, in the manner that direct victims of the massive fraud can recover, a federal appeals court ruled on Friday.

The decision by the 2nd U.S. Circuit Court of Appeals in New York is a victory for Irving Picard, the trustee liquidating Bernard L Madoff Investment Securities LLC and seeking money for its former customers.

Picard, a partner at Baker & Hostetler, persuaded the court that "indirect" investors who lost money in the fraud were not Madoff customers who could recover from the bankruptcy estate.

Madoff, 74, is serving a 150-year prison sentence, and Picard had estimated that customers lost $17.3 billion of principal in the fraud.

The appeal was brought by 17 investors who had invested in limited partnerships known as Spectrum Select. These in turn sent their money to two Rye Select hedge funds overseen by Tremont Group Holdings Inc.

Tremont was one of the largest Madoff "feeders," and settled with Picard for $1.025 billion in July 2011.

Prior to the appeal, two lower court judges had found that the 17 indirect investors could not recover from the estate because they had not been Madoff customers, unlike the feeder funds that dealt directly with him.

That distinction matters because it is customers, not indirect investors, who may draw up to $500,000 each from a fund overseen by the Securities Investor Protection Corp, to the extent they cannot recover losses from a bankruptcy estate.

SIPC is a nonprofit created by Congress and funded by the brokerage industry.

CRITICAL REQUIREMENT NOT SATISFIED

Writing for a three-judge 2nd Circuit panel, Circuit Judge Reena Raggi said there were several reasons that the indirect investors did not qualify as Madoff customers.

She said they had no direct relationship or accounts with his firm, were not identified in the firm's books and records, had no property interest in the assets sent there by the feeder funds, and lacked control over the feeder funds' investments.

"We have identified the critical aspect of the 'customer' definition to be the entrustment of cash or securities to the broker-dealer for the purpose of trading securities," Raggi wrote. "Appellants fail to satisfy this critical requirement."

William Chapman, who argued the indirect investors' appeal, did not immediately respond to a request for comment.

A spokeswoman for Picard did not immediately respond to a similar request.

The decision does not affect the ability of indirect investors to sue the feeder funds, or share in any recovery by those funds from the SIPC fund.

Friday's decision is the second this week by the 2nd Circuit in a Madoff-related appeal.

On Wednesday, the court refused to let former investors pursue claims against Madoff's brother Peter, as well as Madoff's son Andrew and the estate of his late son Mark, over the family members' roles in the fraud.

The court said allowing such claims would impede Picard's effort to maximize payouts from the estate.

Among the investors who had challenged the trustee was a charitable foundation for New Jersey Senator Frank Lautenberg.

Separately, Picard on February 13 asked U.S. Bankruptcy Judge Burton Lifland in Manhattan for permission to distribute another $505 million to customers, boosting the total to $5.44 billion.

The case is Kruse et al v. Securities Investor Protection Corp et al, 2nd U.S. Circuit Court of Appeals, Nos. 12-410, 12-437, 12-483 and 12-529.

(Reporting by Jonathan Stempel in New York; Editing by Phil Berlowitz)

By Jonathan Stempel

Recommend :
0
React to this article
Latest news about Bernard Madoff 
Former Madoff aides seek to have convictions tossed
1 day ago - NEW YORK (Reuters) - Five former Bernard Madoff aides have asked a federal judge to throw out their convictions, three weeks after a jury found them guilty of fraud and conspiracy for helping Madoff conceal his multibillion-dollar Ponzi schem...
New York judge dismisses lawsuit against Madoff feeder fund
04/02 - NEW YORK (Reuters) - A New York state judge has dismissed a lawsuit brought by an investor in a fund managed by Tremont Group Holdings, one of the largest feeders of funds into Bernard Madoff's Ponzi scheme.
After five months, jurors for Madoff aides find decision easy
03/24 - NEW YORK (Reuters) - When it came down to it, the evidence was simply too overwhelming.
Former Madoff associates found guilty of fraud
03/24 - NEW YORK (Reuters) - Five former aides to investment manager Bernard Madoff were convicted on Monday of charges that they helped their boss conceal his multibillion-dollar Ponzi scheme for years.
Advertisement
Popular Business Leaders 
Sheldon Adelson Paul Allen Mukesh Ambani Bernard Arnault Luc Besson Vincent Bolloré Martin Bouygues Richard Branson Warren Buffett Steve Case Benjamin De Rothschild Paul Desmarais Bill Gates Philip Green Carl Icahn Steve Jobs Li Ka-shing Eric Knight Arnaud Lagardère Lakshmi Mittal Rupert Murdoch François-henri Pinault Jim Rogers Naguib Sawiris Stephen Schwarzman Carlos Slim George Soros Donald Trump Jerry Yang Romain Zaleski
A-Z Business Leaders
Most Read News 
Icahn backs down from demand that eBay spin off PayPal
7 days ago - SAN FRANCISCO/NEW YORK (Reuters) - Carl Icahn backed off calls for eBay Inc to spin out its fast-growing PayPal payments u...
Brazil's Batista faces insider trading probes
6 days ago - RIO DE JANEIRO (Reuters) - Eike Batista, who was Brazil's richest man for most of the past decade, is under investigation ...
Industry - THE DANGOTE EFFECT
7 days ago - The Dangote Group founded by billionaire, Aliko Dangote in 1978, has contributed to the ongoing renaissance in Nigeria, ...
Dollar Gets Boost From March Wholesale Prices
6 days ago - By Saumya Vaishampayan, MarketWatch NEW YORK -- The dollar gained against major rivals Friday after U.S. pro...
Piramal Enterprises Sells Back 11% Stake In Vodafone India
7 days ago - Mumbai-headquartered Piramal Enterprises Ltd said in a statement Thursday that it had agreed to sell its entire 11% stake ...
More news
Dynamic quotes  
ON
| OFF