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

Malik: The Science of Deal Sourcing 201

Aug 27 2015 | 5:35pm ET

Deal sourcing is understandably a hot topic among private equity firms because it...

Lifestyle

Rolling Art Advisors Marketing Collectible Car Fund As Uncorrelated Alternative

Aug 27 2015 | 6:47pm ET

A new fund is trying to provide investors with greater access to an emerging asset...

Guest Contributor

FATCA for Hedge Funds: Eight Common Pitfalls

Sep 1 2015 | 10:56am ET

FATCA is now a way of life for those in the financial industry and most professionals...

 

Editor's Note