Merkin Sued By Feeder Fund Receiver

Sep 21 2010 | 11:01am ET

Things continue going from bad to worse for former Bernard Madoff feeder fund mogul J. Ezra Merkin.

Just weeks after Merkin lost a $12.7 million arbitration case filed by two investors he again finds himself on the wrong side of a lawsuit. This time, it's the court-appointed receiver for a pair of Merkin’s Madoff-linked funds doing the suing, accusing the former GMAC Financial chairman of fraud, negligence and breach of fiduciary duty.

“Merkin was not an investment guru, but, instead, nothing more than a glorified, albeit undisclosed, marketer for Cerberus [Capital Management] and Madoff,” Bart Schwartz, the receiver for Merkin’s Gabriel Capital Corp. and Ariel Fund, alleged in the lawsuit, filed last week.

Schwartz’s lawsuit is similar to one filed by New York Attorney General Andrew Cuomo, claiming that Merkin took in some $500 million in fees by feeding money to what proved to be a $65 billion Ponzi scheme. Merkin’s lawyer criticized the filing of such a similar lawsuit and said he was nearing a deal with Cuomo’s office, which Schwartz said his lawsuit “complements” Cuomo’s.

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