Sunday, 1 May 2016
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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.