Indirect Madoff Investors Ask Court For Payout

Jan 28 2013 | 1:02pm ET

Investors in Bernard Madoff feeder funds implored a federal appeals court on Friday to give them a piece of the growing pie of money recovered from the $65 billion Ponzi scheme.

Lawyers for 14 customers who invested in a feeder fund that, in turn, invested in another feeder fund, asked the U.S. Second Circuit Court of Appeals in New York to add their clients to the list of Madoff creditors. Irving Picard, the court-appointed trustee for the Madoff estate, has refused to do so, sending recovered money only to those who invested directly with Bernard L. Madoff Investment Securities. He has said that secondary investors will have to try to get their fair share through the feeder funds, which are entitled to a share of the Madoff money as direct investors.

Two lower federal courts have already agreed with Picard's reasoning.

But the lawyer for the Spectrum Select investors said that his arguments are semantic; Spectrum "was set up for only one purpose," which was to invest in a Madoff feeder fund, and that in "substance" his clients were Madoff victims.

"The appellants caused their funds to be deposited in the Madoff firm," William Chapman argued. "That's the nature of what you're dealing with here."

Picard's lawyer, David Sheehan, rejected that claim, noting that Spectrum had discretion over how to invest the money and did not send all of it to BLMIS.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Griffin Donates $1M To Rauner's Illinois Gov. Campaign

Sep 22 2014 | 9:29am ET

Hedge fund billionaire Kenneth Griffin definitely has a dog in this fight. The Citadel...

Guest Contributor

Top 5 Predicted Outcomes Of CalPERS' Hedge Fund Divestment

Sep 22 2014 | 8:35am ET

CalPERS’ announcement to divest of hedge funds has created a significant buzz...

 

Videos

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

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

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.