Madoff Indictment Deadline LoomsFeb 11, 2009 | Parker Waichman LLP
Prosecutors on the Bernard Madoff Ponzi scheme case face a deadline today for indicting the alleged swindler. Meanwhile, some Madoff investors have petitioned a bankruptcy court to extend a deadline for filing certain claims.
Madoff was arrested on one count of securities fraud on December 11. Madoff - once a chairman of the Nasdaq stock exchange - was the founder and primary owner of Bernard L. Madoff Investment Securities LLC. The firm was primarily known for its business in market-making, or serving as the middleman between buyers and sellers of shares. However, Madoff also oversaw an investment-advisory business that managed money for high-net-worth individuals, hedge funds and other institutions.
According to the FBI complaint against Madoff, that business was largely a Ponzi scheme. The FBI said Madoff “deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in losses of approximately billions of dollars.”
Prosecutors on the Madoff case must appear in court today in Manhattan to report whether or not he has been indicted. According to a report in Newsday, federal law gives prosecutors 30 days to indict or hold a felony hearing on the charges. But sources told Newsday that it is likely that the case will be adjourned. Adjournments of 30 days in such cases are not unusual.
According to a report on AFP.com, some legal experts said that such an adjournment could be a sign that prosecutors and Madoff's lawyers are negotiating a plea bargain. But so far, prosecutors have been tight-lipped about their plans.
As we reported earlier this week, Madoff's lawyers have agreed to a partial judgment in the civil lawsuit the Securities and Exchange Commission (SEC) filed against him on December 11. According to the SEC, the partial judgment would impose a permanent injunction and continue relief previously obtained by the agency in a preliminary injunction order on December 18. Madoff agreed to the partial judgment without admitting or denying allegations in the SEC lawsuit. The SEC said in its press release that the amount of penalties and disgorgement imposed on Madoff will be decided at a later time.
Meanwhile, investors who got out of Madoff's funds before they imploded have requested that a bankruptcy court extend the July deadline a court-appointed trustee has set for investors who wish to claim losses. Investors who got their money out of Madoff before his December arrest could be sued by the bankruptcy trustee if he believes there was a preferential payment or fraudulent transfer. If an in investor is sued by the trustee, they would be eligible to claim Madoff losses.
But such a lawsuit by the trustee likely won't happen for months, or even years after the July deadline passes. According to a report on Bloomberg.com, if the deadline is not extended people who withdrew money before the collapse of Madoff's fund may be compelled to file documents before the July 2 deadline to preserve their claim. If they do, they may lose the right to a jury trial if the trustee sues seeking return of the money.
The same investors have also asked the court to extend a March 4 deadline for claims that will guarantee Madoff account holders can recoup up to $500,000 under the Securities Investor Protection Act.