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Almost $7M More Found in Madoff Funds

Apr 29, 2009 | Parker Waichman LLP Irving Picard, the special trustee investigating Bernard Madoff’s bogus financial schemes has found close to $7 million in six Madoff accounts at Bank of New York Mellon Corporation, reports Newsday, citing bankruptcy court papers. According to the article, the accounts range in size from 5,372 to $6.5 million.

Picard is requesting that the newly found funds be transferred for future disbursement to defrauded investors injured in Madoff’s historic $65-billion Ponzi scheme. The new-found money from the Bank of New York accounts brings the estimated total of funds recovered to somewhere between $950 million and $1 billion, said Newsday, and will be used to repay investors duped by Madoff.

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.

This recent recovery is considered small when compared to other recoveries and the estimated losses; however, said Newsday, an anonymous source close to the investigation said some other “additional discoveries” totaling over $100 million should be announced shortly. The source also said additional lawsuits are being considered and could increase recoveries to about $2 billion by year-end.

Most recently, Boston’s Castor Pollux Securities LLC agreed to buy out the remaining, legitimate Madoff business for a cost of $25.5 million over four years. Castor Pollux won the business in an auction that ended Monday evening, said Newsday. The money from the sale will be used to repay investors in the same way as other asset sales, such as Madoff’s New York Mets season tickets, Newsday explained.

"The auction yielded a higher and better offer for the market-making business," Picard said in a statement. "The additional consideration that we will receive as a result of the auction will benefit Madoff victims," quoted Newsday.  Picard has also brought legal actions against offshore investment funds in the hopes of recouping about $405 million withdrawn by the funds from Madoff accounts just prior to Madoff’s scheme falling apart and making headlines, said Newsday.  Picard also sent a number of so-called "clawback" letters to corporations and individual investors seeking over $735 million in false profits that represent stolen property, explained Newsday.

Last week, the Madoff debacle spawned two more lawsuits. The Wall Street Journal reported in a prior piece that two funds and their fund managers were separately sued over allegations that the managers breached “their fiduciary duties in entrusting client money” with Madoff. Just prior, a federal judge blocked Madoff’s assets from being moved into bankruptcy, reported CNN, saying that the court found probable cause that the “assets should be forfeited to the government.” Earlier this month, investors petitioned a federal judge to rescind an order preventing 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 such distribution. The five investors were seeking nearly $64 million.

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