Posts tagged “bernard madoff”

Hedge Funds, Banks Drive Up Prices In Madoff Claims Market

February 15th, 2011

Competition in the secondary market for claims against fraudster Bernard Madoff is driving up prices, says one of the UK’s biggest hedge fund market makers.

“We’ve had these positions on our books for two years, and two years ago you couldn’t get a price,” Neil Campbell, head of alternative investments at brokerage Tullett Prebon told Reuters. “Up to six months ago it’s been one or two cents in the dollar, as optionality, but now it’s become more serious because there’s more competition.”

In the past six months, the price of holdings in Madoff feeder funds like Fairfield Sentry and Kingate has risen to 7 or 8 cents on the dollar from 1 or 2 cents, says the news agency. Buying bankruptcy claims from a direct investor with Madoff can cost 30 or 40 cents.

The market has been encouraged by the successor of Irving Picard, trustee for the Madoff bankruptcy, who has recovered about $10 billion for victims of Madoff’s Ponzi scheme.

According to Campbell, distressed hedge funds, distressed desks at banks and funds of funds specializing in the secondary market are all entering the sector. And on the other side, many funds of funds are trying to dump Madoff holdings to limit damage to their reputations.

“There are a lot of vehicles globally looking at this opportunity,” said Campbell. “A variety of buyers are coming in, due to the success of the trustee, who has been fairly ferocious in getting results, and the (small) amount of claims made, especially in Europe, which has created a very interesting window of opportunity.”


Madoff Victim’s Lawsuit Against Ex-Wife Reinstated

January 7th, 2011

To say there has been a lot of litigation surrounding the Bernard Madoff Ponzi scheme would be laughably mild. Today, there’s a little bit more, with one of the more interesting lawsuits having been reinstated.

Lawyer Steven Simkin and his wife, Laura Blank, divorced in 2006 after more than 30 years of marriage. She got the Manhattan apartment and $6.6 million—and waived alimony payments. He got the house in Scarsdale, N.Y. —and the couple’s account with Bernard L. Madoff Investment Securities.

At the time of their divorce agreement, that account was valued at $5.4 million. But, as became clear little more than two years later, it was worth nothing at all.

But a state appellate court proved a good deal more sympathetic, reinstating the lawsuit, allowing Simkin to plead “unjust enrichment” based on his theory of the “mutual mistake” the former couple made in placing any value on the Madoff investment, listed in 2006 as their biggest asset.

Simkin “never had an account” because “on Madoff’s own admission, there were no accounts within which trades were made,” a divided court ruled.

But two of the five judges dissented, calling the majority opinion “truly ‘divorced’ from reality” and noting that their divorce agreement “does not mention the Madoff account.” Simkin redeemed part of his Madoff investment to pay off his wife and continued to invest with Madoff after the divorce.

Blank’s lawyer has vowed to appeal the “completely erroneous” decision.


The Wrong Madoff Died

December 13th, 2010

Mark Madoff, right, with parents

Mark Madoff’s suicide is blamed on “unrelenting pressure from false accusations and innuendo.” It is a shame that eldest son of the jailed multibillion-dollar fraudster, Bernard Madoff, decided to take his own life at the weekend. It should have been his father.

Madoff, 46, was found hanged in the living room of his New York flat as his two-year-old son slept in a nearby room. He had apparently succumbed to the pressures of being unemployable, socially ostracized and subject to a legal battering that included a lawsuit filed last week naming his young children in an attempt to recover funds lost to his father’s $50 billion Ponzi scheme.

“This is a terrible and unnecessary tragedy,” said Madoff’s lawyer, Martin Flumenbaum. “Mark was an innocent victim of his father’s monstrous crime who succumbed to two years of unrelenting pressure from false accusations and innuendo.”

Madoff, who worked on the trading desk of his father’s firm, and his brother Andrew have been accused in lawsuits of benefiting from the theft of billions of dollars. Irving Picard, the trustee for those who lost money in the Ponzi scheme, has described Bernard Madoff’s sons as treating the fraudulent fund as a “family piggy bank”.

In court papers, Picard said Mark received “astronomical compensation” for his work; it totaled $67 million and allowed him to maintain luxury homes in Manhattan and Connecticut.

“Investment firm funds paid for all aspects of his lavish lifestyle from the purchases of his high-end homes to the mattress and box spring he slept on, the television he watched in his home gym and the outdoor shower in his home,” the lawsuit said.

Picard said that Madoff must have been aware that his father was running a fraudulent enterprise because the returns on investments were not realistic.

“It was – or at the very least, should have been – obvious to Mark that the massive gains reflected in his customer account statements did not reflect actual securities transactions or market conditions,” the lawsuit said. Picard has leveled similar accusations against Andrew Madoff.

Madoff’s sons denied any knowledge of their father’s crimes and they have not been charged with any offences. Mark Madoff took his own life on the second anniversary of his father’s arrest.

The New York Times reported that a person who spoke frequently with Madoff recently said he was in “an increasingly fragile state of mind” as the anniversary approached. The paper said that he had expressed bitterness toward his father and anxiety about the lawsuits against his family.

Days before Madoff took his own life, Picard also filed a lawsuit against his children and those of his brother as part of action against the directors of a Madoff affiliate in London.

The New York Times said that Mark Madoff was particularly upset at the naming of his children as Picard seeks to recover monies that Bernard Madoff gave to his extended family over many years.


Madoff Trustee Picard Fires at Citigroup

December 10th, 2010

Battle stations! Picard opens fire on Citigroup

Irving Picard is a man engaged in battle. After unleashing over 100 lawsuits to claw back funds from facilitators of Bernard Madoff’s Ponzi scheme, Picard has opened fire on seven more banks, including Citigroup and France’s Natixis.

All of the suits seek the return of transfers from Bernard L. Madoff Investment Securities to various Madoff feeder funds. Of the more than $1 billion the receiver is seeking, the two banks account for $825 million.

“Armed with considerable non-public information about Madoff, Citi either knew or should have known that Madoff’s investment advisory business was a fake, and that funds Citi received from these two Madoff feeder funds came from Madoff’s fraudulent activities,” Picard said. “Evidence of awareness of the fraud is clear.”

Nonsense, Citi retorts. The bank will “vigorously defend against these claims by the trustee, as they are without merit and entirely untrue,” it said in a statement. “Citi did not know about nor in any way assist in the Madoff fraud.”

Picard is seeking $425 million from Citi, mostly as a result of a $300 million credit facility it offered a Rye Investment Management fund. The receiver sued Rye’s parent, Tremont Group, on Tuesday.

Picard’s team also didn’t mince words about Natixis, from which it is seeking at least $400 million.

“Armed with knowledge of many badges of fraud, Natixis and its related entities nevertheless provided substantial momentum furthering Madoff’s Ponzi scheme, especially in Europe,” Mark Kornfeld, a lawyer working for Picard, said. “Over time, this international collaboration became critical to sustaining the fraud.”

Piacard is also seeking more than $320 million from Fortis’ prime brokerage, more than $270 million from ABN Amro, about $45 million from Banco Bilbao Vizcaya, at least $35 million from Nomura Bank International and at least $16 million from Merrill Lynch International.

“Although many of these banks questioned Madoff’s trading strategy and returns, they continued to structure transactions seeking to exploit Madoff’s consistent returns,” another Picard lawyer, Ryan Farley, said.

The seven join a roster of many prominent banks sued by Picard. The reciever is seeking $9 billion from HSBC, $6.4 billion from JPMorgan Chase and $2.5 billion from UBS.

Picard is facing a Saturday deadline to file clawback suits in the case. To date, he has collected some $2.6 billion for victims of the $65 billion Ponzi scheme and has filed lawsuits seeking the return of  about $35 billion.


Madoff Trustee Picard Scores Big Against Swiss Bank

December 8th, 2010

Irving Picard

It was a good day for Irving Picard, the court-appointed trustee for Bernard Madoff’s investment fund. He has been attempting to claw back some of the money stolen by Madoff’s Ponzi scheme, and today won up to $500 million from Swiss bank Union Bancaire Privée (UBP). The settlement agreement is the largest one yet in the Madoff case.

The settlement brings the trustee’s total recoveries to date to $2 billion. Picard says the $500 million settlement represents “a good faith, complete, and total compromise between the parties” given that he would have sued for $1 billion.

“The UBP settlement agreement is the largest feeder fund bank cash settlement to date and the first major international bank settlement, two important milestones for the overall recovery initiative,” said Picard.

A court document filed by Picard as part of the settlement shows he’s been in negotiations with UBP since 2009. UBP had fed Madoff’s bogus investment firm through its Caymans-based M-Invest feeder fund and an external feeder fund firm, Fairfield Greenwich. UBP denies any wrongdoing in the case.

Picard has filed a flurry of lawsuits in the past few weeks in a race against the December 11 deadline for filing (that date marks the two-year anniversary of Madoff’s arrest for the $65 billion Ponzi scheme).

The UBP settlement may send a chill up the spines of Picard’s other targets—including JPMorgan Chase, from which he’s seeking $6.4 billion; and HSBC, from which he’s seeking $9 billion. Both banks stand accused of aiding and abetting Madoff in his fraud.

The Madoff Ponzi scheme is believed to have cost investors more than $20 billion. Madoff himself is serving a 150-year prison sentence after pleading guilty to the fraud.


Madoff Trustee Picard Seeking to Claw Back $6.4B from JPMorgan

December 6th, 2010

Distant relative of trustee Irving Picard

Irving Picard is one busy court-appointed trustee. He has already filed more than 100 lawsuits against investors in Bernard Madoff Ponzi scheme. These investors, including two banks, allegedly received more money than they invested.

But that was all warm-up for Mr. Picard. Last week, he swung for the fences with a $6.4 billion clawback suit against JPMorgan Chase. Picard accused the megabank of “willfully blind to the” $65 billion fraud.

Details of the lawsuit are unclear—it was filed under seal after JPMorgan “designated virtually all of their information confidential,” Picard said. JPMorgan called the lawsuit “irresponsible and over-reaching,” and said it “did not know about or in any way assist in the fraud orchestrated by Bernard Madoff.

JPMorgan “was at the very center of that fraud, and thoroughly complicit in it,” David Sheehan, a lawyer for Picard, said. Picard is seeking $1 billion in fees and $5.4 billion in damages from the bank, which he called Madoff’s “primary banker.”

Picard filed a second lawsuit, also under seal, against an unidentified company, seeking $3.14 billion.

The two lawsuits follow one filed last week by Picard against UBS, which the trustee said pulled nearly $800 million from Madoff’s funds in the three months before it collapsed and $1.1 billion more in the prior six years. Picard, who is seeking $2 billion, alleges that UBS “lent an aura of legitimacy” to Madoff.

Earlier this week, Picard filed 123 clawback lawsuits. Among the targets was Blue Star Investors, a fund of hedge funds managed by private equity legend Thomas Lee. Picard is seeking nearly $19.7 million in “other people’s money” received by the Lee fund.

The flurry of activity comes as Picard faces a Dec. 11 deadline to file clawback suits. That date, next Saturday, is the two-year anniversary of Madoff’s arrest. To date, Picard has filed lawsuits seeking the return of more than $25 billion; he has actually recovered about $1.5 billion.


Pension Fund Moving Assets from Madoff-Linked Hedge Fund

October 25th, 2010

The Dorset County Pension Fund (DCPF) has $2.23 billion in investments, 2% of which were tied up with Pioneer Alternative Investments, a Madoff-tainted hedge fund. It is now reallocating that money into International Asset Management (IAM), a long-established European fund of hedge funds (FoHF).

The pension fund is doubling the $25.6 million investment it has with IAM, according to Nick Buckland, investment officer at Dorset County Council.

It was only last year that DCPF  had investments with three FoHFs, IAM, Gottex Fund Management and Pioneer Alternative Investments, which each managed a portion of the pension fund’s hedge fund allocation.

“We decided to redeem from Pioneer last year due to the hedge fund’s exposure to Bernard Madoff,” stated Buckland, adding that the fund was now planning to re-invest the redeemed assets. “We are very happy with our remaining two managers, and all the redeemed assets from Pioneer are being reinvested with IAM,” he said.

However, it has taken over a year for the pension fund to receive the assets back from Pioneer, which had 10% of its assets entangled with the Madoff fraud, and the pension has not yet received its entire investment back.

Dorset County has a 6% target allocation to hedge funds, and currently has 5.5% invested. Buckland confirmed that the pension fund is unlikely to increase that target in the foreseeable future and is unable to make direct investments, as the council doesn’t have the resources to do so. “For now, FoHFs work for us,” he said.


Mellon Pitted Against Cuomo In Response to New York Lawsuit

August 26th, 2010

NY AG Andrew Cuomo

In response to a lawsuit filed by the New York Attorney General, the Bank of New York Mellon insisted Monday that it was not involved in withholding information from clients regarding the Bernard Madoff Ponzi scheme.

The bank/prime broker’s Ivy Asset Management and two of its executives refuted charges that they misinformed clients about investments tied to convicted Ponzi scheme operator Bernard Madoff and asked a judge to dismiss the claims made by New York Attorney General Andrew Cuomo.

Ivy, BNY Mellon’s New York-based investment adviser, withheld damaging information about Mr. Madoff so the firm could make millions of dollars in fees, Mr. Cuomo said when he sued Ivy in May. He also sued former Ivy CEO Lawrence Simon and ex-Chief Investment Officer Howard Wohl. The complaint was filed in New York State Supreme Court.

In their answers filed Monday, Messrs. Simon and Wohl as well as Ivy asked for a judgment in their favor, dismissal of all claims and payment of legal fees.

The three parties said they “had no duty to disclose the information that the complaint alleges was not disclosed,” the defendants wrote. They also claim they “acted at all times in good faith and without any fraudulent intent.”

From 1998 to 2008, Ivy was paid more than $40 million to give advice and conduct due diligence for clients with large Madoff investments, Mr. Cuomo claims. He said internal e-mails revealed that even after the company learned Mr. Madoff wasn’t investing client funds as promised, Ivy kept silent to keep from losing the fees. Ivy’s clients lost more than $227 million, Mr. Cuomo said.

In the original complaint, Cuomo cited a 1998 document in which ex-CEO Larry Simon rejected Wohl’s recommendation that, because of what Ivy knew about Madoff, the investment adviser should pull its own funds from the scammer because such a move could jeopardize the Madoff fees:

“Amount we now have with Bernie in Ivy’s partnerships is probably less than $5 million. The bigger issue is the 190 mil or so that our relationships have with him which leads to two problems, we are on the legal hook in almost all of the relationships and the fees generated are estimated based on 17+% returns…[to be] $1.275 Million…. Are we prepared to take all the chips off the table, have assets decrease by over $300 million and our overall fees reduced by $1.6 million or more, and, one wonders if we ever “escape” the legal issue of being the asset allocator and introducer, even if we terminate all Madoff related relationships?”

Mr. Simon has released a series of emails that he insists vindicates his position.


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