Lawyer Seeks Class-Action Against SEC Over Madoff

Nov 15 2010 | 10:08am ET

A lawyer who represented Steven Cohen’s ex-wife in her explosive racketeering lawsuit against the SAC Capital Advisors founder is targeting an even bigger fish, by changing just one letter.

Gaytri Kachroo is suing the Securities and Exchange Commission over its handling—or lack of handling—of the Bernard Madoff Ponzi scheme, seeking class-action status on behalf of the arch-fraudster’s victims. The suit alleges that the SEC mishandled its many dealings with Madoff and ignored credible warnings, including from Kachroo client and lead whistleblower Harry Markopolos, who first sought to bring the regulator’s attention to Madoff a decade ago.

Kachroo told CNBC she is seeking billions from the government in what she called the first class-action lawsuit against the SEC.

The suit has been filed on behalf of investors who lost more than $500,000 in the Madoff scam or who indirectly invested in the Ponzi scheme. Neither of those two groups are beneficiaries of the efforts of court-appointed receiver Irving Picard. Kachroo is urging such victims to file complaints with the SEC by Dec. 10 to be included in the class.

“We’re leaving the lines of communication open with the SEC and the Obama administration to establish a Madoff task force to get the feeder funds, banks—those that channeled money to Madoff—to put money into a fund for investors,” she said.

Madoff pleaded guilty to defrauding investors of tens of billions of dollars in a decades-long, $65 billion Ponzi scheme. He is currently serving a 150-year sentence.

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