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: Filippo Pignatti Morano On The Ultimate Alternative Investment...Classic Cars

Jan 29 2015 | 12:37pm ET

In 2011, Filippo Pignatti Morano launched a fund to invest in classic cars. FINalternatives...

Lifestyle

Looking For A Hedge Fund Manager? Try Davos

Jan 28 2015 | 8:48am ET

Davos, Switzerland seems to have become the hedge fund capital of the world—at...

Guest Contributor

From Switzerland With Love: Some Hard Truths About Central Banks And Risk

Jan 23 2015 | 7:54am ET

In the wake of the Swiss National Bank uncoupling the country’s currency from...

 

Editor's Note