Judge: Feeder Clients Can't Get Madoff Payouts

Jun 29 2011 | 4:07am ET

The federal judge overseeing the bankruptcy of Bernard L. Madoff Investment Securities has ruled that investors in the many feeder funds that funneled billions into Madoff's Ponzi scheme were not clients of the fraudster.

The ruling by U.S. Bankruptcy Judge Burton Lifland means that feeder fund investors aren't eligible for payments of up to $500,000 from the Securities Investor Protection Corp. Feeder fund investors account for some two-thirds of the more than 16,000 claims filed with court-appointed receiver Irving Picard, who has been denying those claims, a stance backed by both the SIPC and Securities and Exchange Commission.

Lifland ruled that only individuals with accounts in their names with Madoff's firm are eligible for the payout.

"The objecting claimants lack any of the typical traits of a customer relationship with BLMIS since they made no purchases, transacted no business, and had no dealings whatsoever with the broker-dealer," Lifland wrote. "Bestowing customer status on the objecting claimants would stretch that term wholly beyond its limits."

"It is only appropriate," Lifland added, "that the feeder funds, and not the trustee, determine the specific amounts they owe to their own customers."

Also yesterday, Lifland approved a $212 million settlement between the largest of the feeder funds, Fairfield Greenwich Group, and Picard. Under the terms of the deal, Picard dropped $212 million in claims against Fairfield Greenwich funds, which in turn have cut their claims against the Madoff estate by more than $100 million. Picard had agreed last month to a similar deal with the firm's offshore funds.


In Depth

Will Liquid Alts’ Performance Sustain Future Asset Flows?

Aug 25 2014 | 10:34am ET

Liquid alternative investment funds saw the highest percentage of capital inflows...

Lifestyle

Hedgies, Economists and Musicians Mingle At Milkin Mixers In Hamptons

Aug 25 2014 | 6:00am ET

Leave it to Michael Milken to bring some gravitas and sweat to the Hamptons -- along...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

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.