A new lawsuit has been filed in connection with the ongoing and massive Bernard Madoff Ponzi Scheme scandal, which has made history as being the largest such fraud scheme of its kind.
Irving Picard, the trustee working to recover Madoff’s assets, filed a lawsuit last week for over $1 billion, this time over allegations that a prominent money manager—and his family—knew they were involved in a Ponzi scheme and, worse, profited from the scheme for three decades, said USA Today. Stanley Chais and his family, “knew or should have known” Madoff was running a Ponzi scheme,†reported USA Today, citing legal documents. The case alleges that Chais and his family were what USA Today described as “prime beneficiaries†in Madoff’s plot for over 30 years and that they should return the fraudulently-obtained money for future distribution to Madoff’s scammed victims.
Picard is seeking the money from Chais and a number of family trusts in the lawsuit, saying, via a statement issued on his behalf, that the funds are “what was, in fact, other investors’ money,” quoted USA Today. This action is the first time Picard has accused an alleged Madoff victim of benefiting from the Ponzi scam.
Most recently, Picard 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 in a prior report. The letters were sent to investors who withdrew in excess of original investments with Madoff.
Madoff pleaded guilty to 11 fraud counts on March 12. The former chairman of the NASDAQ stock exchange ran an investment advisory business for decades that was, in fact, a Ponzi scheme. 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.
The complaint, said USA Today, also said trading accounts for investment funds managed by Chais received “unrealistically high and consistent” annual returns of 20-to-24 percent, only showing a mere three months of losses in 12 years. Meanwhile, said USA Today, citing the complaint, Chais’ personal and business accounts showed yearly returns that were often in excess of an unbelievable 300 percent and with a combined average annual return of almost 40 percent. According to the complaint, “Either an utter lack of volatility over twelve years or implausibly high rates of return over the same period suggests misconduct…. That the same investment manager purported to accomplish both at the same time should have removed all doubt,” quoted USA Today.
Federal law states that money withdrawn by clients within three months prior to a company’s bankruptcy filing when that company is involved in a fraudulent financial scheme, is subject to automatic return on behalf of victims; however, payments made just prior to the filing—avoidance transfers—often end up tying up legal proceedings. Chais asserts his innocence and claims to have been injured by the Madoff scheme, but as has been named in no less than three other investor lawsuits over claims he did not disclose he was investing their funds with Madoff and that he did not conduct proper due diligence, said USA Today.
So far, Picard has recovered about $1 billion, considered to be only a small percentage of investor accounts listed in the disgraced financier’s business records.
Very recently, Boston’s Castor Pollux Securities LLC agreed to buy out the remaining, legitimate Madoff business for $25.5 million over four years. Castor Pollux won the business in an auction and 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 earlier.
