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Madoff Bankruptcy Blocked

Apr 21, 2009 | Parker Waichman LLP

A federal judge just blocked the assets of Bernard Madoff from being moved into bankruptcy, reports CNN. It seems the court found probable cause that the “assets should be forfeited to the government,” said CNN.

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. The five investors were seeking nearly $64 million.

In a prior move, another federal judge allowed investors to proceed with the filing, saying that the proceedings were the investors best recourse for monetary recovery, said CNN. In addition to the SEC blocking the proceedings, the trustee handling Madoff’s liquidation and the U.S. Attorney’s office sought blockage, noted CNN.

Most recently, Irving Picard, the trustee brought in to liquidate Bernard L. Madoff’s Investment Securities LLC sued Kingate Management Ltd. for some $255 million transferred to the firm prior to the alleged Ponzi scheme’s demise, reported Bloomberg News in an earlier report. 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.

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.

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.


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