Madoff Trustee Loses In $20 Billion Bank Battle

Nov 2 2011 | 10:54am ET

A federal judge has dismissed two of the larger lawsuits filed by the court-appointed trustee in the Bernard Madoff case.

Irving Picard does not have the right to seek some $21 billion from JPMorgan Chase, Madoff's primary banker for decades, and UBS, U.S. District Judge Colleen McMahon ruled. The judge cited an earlier ruling, from July, dismissing a similar, $8.8 billion lawsuit against two other banks, HSBC and UniCredit.

Picard accused the two banks of turning a blind eye to Madoff's $65 billion Ponzi scheme, and argued that his lawsuit was the only practicable way for Madoff's victims to receive recompense from the banks.

McMahon did not disagree with that point, noting that "allowing the trustee to pursue claims that belong properly to individual creditors would accrue to the benefit of all creditors." But, "this theory is not supported by the statute's text and history or by any persuasive case law."

McMahon ruled, as her colleague U.S. District Judge Jed Rakoff did earlier, that when dealing with third parties, Picard represented Madoff, and not Madoff's victims. Only the fraudster's victims—his creditors—can sue third parties.

Picard can continue to pursue his actions against the two banks, but at a much-reduced level. He can only seek to recover the fictional profits withdrawn by the banks over a two-year period prior to Madoff's arrest in December 2008. That means JPMorgan is on the hook for less than $500 million, while UBS could face claims in excess of $1 billion.

Picard said he planned to appeal McMahon's ruling.


In Depth

Q&A: Jeff Eaton Talks Capital Raising, CalPERS And The Secondaries Market

Oct 14 2014 | 10:16am ET

Global placement agent Eaton Partners has raised close to $60 billion for some of...

Lifestyle

MacDonald-Korth Offers Insights Into Paintings Bought, Sold By Hedgies

Oct 7 2014 | 9:00am ET

Definitive and complete ratings require an in-person examination of an artwork,...

Guest Contributor

PAAMCO: European Equity Exposure - Challenging Year, But All is Not Lost

Oct 16 2014 | 4:12am ET

European equity hedge fund managers have had a tough time so far this year. The...

 

Videos

Editor's Note

    Must Attend Hedge Fund Charity Events For October

    Sep 30 2014 | 9:29am ET

    The crisp Autumnal days of October are upon us, and so are a few of the hedge fund industry’s favorite charitable events. If you have never been to Rocktoberfest, well, you are missing out. And for a quieter evening of sipping and socializing, stop by HFC’s Wine Soiree. Read more…

 

Futures Magazine

October 2014 Cover

Deeply flawed risk benchmark

Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...

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.