Madoff Investors Asked to Return MoneyApr 24, 2009 | Parker Waichman LLP The court trustee in the ongoing Bernard Madoff case is seeking the return of funds from some of Madoff’s investors as part of a continuing clawback procedure, reports USA Today. Irving Picard, the trustee appointed to recover Madoff’s assets, issued in excess of 200 letters on behalf of defrauded investors.
The letters request some of Madoff’s former clients to return money they withdrew prior to the collapse of Madoff’s Ponzi scam. The move does not come as a surprise, but has angered Madoff’s many victims, said USA Today.
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 New York state, the clawback procedure enables court trustees to seek recovery of funds from withdrawals made as far back as six years, said USA Today, which explained that the thinking behind the law is that those withdrawals are part of the scam and should be sought for proportional distribution back to all of the victims.
According to Ronnie Sue Ambrosino, the Website coordinator for Madoff victims, the clawback requests could potentially inflict more harm on already victimized investors. "It's absolutely horrendous that they're going after people like this…. Where do they think the victims are going to get the money from? It's crazy," said Ambrosino, quoted USA Today. Ambrosino and her husband lost an estimated $1.6 million in Madoff’s Ponzi scam, she estimates, said USA Today, which said that clawbacks have proven successful in other financial fraud cases.
Meanwhile, this week, the Madoff Ponzi scheme debacle resulted in two more lawsuits. The Wall Street Journal reported that two funds and their fund managers have been separately sued over allegations that the managers breached “their fiduciary duties in entrusting client money” with Madoff.
Meridian Capital Partners and its investment manager, Meridian Diversified Fund Management LLC, were sued Monday in Manhattan’s U.S. District Court; on Friday, in U.S. District Court in White Plains, N.Y., fund managers J.P. Jeanneret Associates Inc. and Ivy Asset Management Corp. and Ivy’s parent Bank of New York Mellon Corp. (BK) were sued, reported the Journal.
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.