Picard Makes Deal With Liquidators Of Largest Madoff Feeder Fund

May 10 2011 | 1:16pm ET

Irving Picard, the court-appointed trustee in the Bernie Madoff bankruptcy, has reached a settlement with the liquidators of three offshore funds run by Madoff's biggest feeder fund operator, the Fairfield Greenwich Group.

The agreement will see the two sides drop their multi-billion claims against each other and join forces to pursue the feeder fund’s owners.

Under the terms of the agreement, the Fairfield liquidators—Kenneth Krys and Joanna Lau—have agreed to trim $1 billion from their claims against the Customer Fund (established to distribute recovered monies to BLMIS clients), seeking instead only $230 million. They will also pay $70 million into the Customer Fund—the amount Fairfield had taken out of Madoff’s investment scheme before the whole fraud became public in December 2008.

The Fairfield liquidators have also dropped their objections to the trustee’s claims against the funds—approximately $3 billion against Sentry, $752 million against Sigma, and $53 million against Lambda—and agreed to the entry of judgments for the full amount of these claims, approximately $3.8 billion

The trustee has agreed not to seek collection of the judgments against the Fairfield Funds, which have a “limited ability to pay cash toward any judgment.”

“This agreement establishes critical precedents and creates a pragmatic model to resolve other, equally complex, feeder-fund cases,” said Thomas L. Long, a senior counsel at Baker & Hostetler. “The settlement terms also enhance the trustee’s ongoing efforts against major financial institutions which used the Fairfield Funds as vehicles to create derivative and structured investment products. While some of these financial institutions sidestepped due diligence, others performed due diligence, didn’t like what they saw, and protected their own interests. Ultimately, all of these institutions left their investors fully exposed to the fraud.”

Fairfield Sentry was the single, largest BLMIS feeder fund, with more than 95% of its investors’ cash deposited in BLMIS accounts. Sigma, a Euro-currency fund, and Lambda, a Swiss Franc currency-based fund, were 100% invested in Sentry. The Fairfield Funds were offshore funds based in the British Virgin Islands and were managed by other Fairfield Greenwich Group entities owned primarily by Walter Noel, Jeffrey Tucker and Andres Piedrahita.


In Depth

Why Ponzi Schemes Work: An In-Depth Look At The Allen Stanford Fraud

Dec 21 2014 | 10:30am ET

Texan Allen Stanford first appeared on the radars of financial regulators in 1997...

Lifestyle

Hedgie Funds US Squash Program

Dec 24 2014 | 8:46am ET

Squash, anyone?

Guest Contributor

EidoSearch’s Top Three Market Projections For 2015

Dec 23 2014 | 4:03am ET

It is that time of year again when prognosticators make their big market calls for...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.