Picard Reclaims $35.4M From Merkin's Madoff Feeder Funds

Jun 2 2015 | 2:08pm ET

The trustee overseeing the complex Madoff bankruptcy case has inked a deal for $35.4 million to be paid to victims of the fraud from two funds once run by Wall Street hedge fund manager J. Ezra Merkin.

Documents filed with the U.S. Bankruptcy Court in Manhattan last week show payments will be made by the Ariel Fund Ltd and Gabriel Capital LP, both feeder funds for Bernard L. Madoff Investment Securities, through their receiver Bart Schwartz.

As part of the settlement, which still requires Bankruptcy Court approval, trustee Irving Picard will consider approximately $367.9 million of the funds' claims against the Madoff’s former company valid. According to court documents, the two feeder funds could be entitled to $179.5 million of "catch-up" distributions.

The two feeder funds do not admit wrongdoing in the proposed settlement, nor will it settle a number of remaining so-called “clawback” actions against Merkin and several of his affiliated companies. According to Reuters, Picard is still seeking an additional $280 million from Merkin, his Gabriel Capital Corporation, and two additional feeder funds, Ascot Fund and Ascot Partners.

Friday's settlement would add to the roughly $10.7 billion that Picard has recovered for Madoff customers, according to the Reuters article. The trustee estimates that Madoff clients lost about $17.5 billion of principal in the largest Ponzi scheme in U.S. history

Merkin's agreed to a $410 million settlement in June 2012 that resolved New York allegations that he secretly steered client money to Madoff. Interestingly, Picard has objected to that settlement, claiming it interfered with his exclusive, court-appointed ability to recover funds for victims of the fraud. 

Starting as early as 2009, Picard has accused Merkin of continuing to send money to Madoff despite knowing about the scheme. In August 2014, U.S. Bankruptcy Judge Stuart Bernstein rejected that allegation, but allowed Picard to argue Merkin “willfully blinded himself to the fraud and ignored red flags,” according to Reuters. 

Accordingly, Picard was authorized to attempt the recovery of approximately $315 million, including the $35.4 million included in Friday's potential settlement that was transferred to Merkin's funds in the two years prior to the Madoff firm's December 2008 bankruptcy.


In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...

 

FINalternatives Trending

Home Page | Futures
Home Page | Futures

Hard Assets Trending

Home Page | Futures

Futures Trending

Home Page | Futures