Judge Junks Madoff Feeder Fund Lawsuits

Sep 26 2011 | 3:07pm ET

Bernard Madoff feeder fund manager J. Ezra Merkin has won the dismissal of several lawsuits against him and his hedge funds.

A federal judge in Manhattan ruled that Merkin investor New York Law School and others could not build a case "simply by imputing the suspicions of a few (albeit, wise) people who suspected Madoff's fraud before it was ever discovered." The investors, who lost a total of $18 million in Merkin's three funds, said that those funds, Merkin and auditor BDO Seidman had improperly ceded their management responsibilities to Madoff and should have acted on the red flags surrounding Madoff's $65 billion Ponzi scheme.

U.S. District Judge Deborah Batts also rejected claims that Merkin failed to conduct proper due diligence.

"Madoff clearly leveraged his considerable reputation in order to perpetrate his massive fraud, for many years, without detection by some of the most sophisticated entities in the financial world: the SEC, Wall Street banks, and the like," Batts ruled Friday.

"No misrepresentation was made when the defendants relied on Madoff, as a third-party manager, to follow the investment strategies that aligned with the stated investment strategies of the fund," she wrote. Nor could the law school or other investors rely on the argument that Merkin and the funds should have caught the fraud, "given the opposing considerations of Madoff's immense reputation and deep deception."


In Depth

Israeli Hedge Fund Harnesses Big Data

Jul 28 2014 | 8:10am ET

Apica Green is a multi-million dollar Israeli hedge fund that is based in Tel Aviv...

Lifestyle

David Yarrow On Growing His Hedge Fund And Shooting The Animals And People Of Africa - As A Photographer

Jul 23 2014 | 6:44am ET

While he’s always been a photographer, recent expeditions to Iceland, Ethiopia...

Guest Contributor

Compelling Opportunities In The Alternatives Space

Jul 29 2014 | 9:33am ET

In an environment where many asset classes seem expensive by historical standards...

 

Sponsored Content

    Northern Trust Helps Hedge Funds Navigate Derivatives Regulations

    Jul 8 2014 | 10:48am ET

    The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…

Publisher's Note