Friday, 25 July 2014
Last updated 19 hours ago
Jan 12 2009 | 1:41am ET
J. Ezra Merkin is having anything but a very happy new year.
The hedge fund manager and confidant of alleged fraudster-extraordinaire Bernard Madoff ended last year calculating his losses in what authorities say was a $50 billion Ponzi scheme orchestrated by his friend and facing a lawsuit filed by New York University. Now he’s resigned as chairman of General Motors’ finance arm and is facing a raft of new legal headaches.
Merkin’s more or less inevitable resignation as chairman of GMAC Financial came Friday. GMAC was bailed out by the federal government last month, with the Treasury Department taking a $5 billion stake in the company and lending another $1 billion to GM. Merkin has been replaced on an interim basis by Lenard Tessler, managing director of Cerberus Capital Management, which bought 51% of GMAC from GM in 2006.
Meanwhile, investors in Merkin’s hedge funds, all of them feeder funds to Bernard L. Madoff Investment Securities, are set to join NYU’s lead and sue. New York lawyer Jacob Zamansky says he’ll file several more suits against Merkin in the next two weeks.
“Most of these people I am representing had never heard the name Bernie Madoff until the fraud was exposed,” Zamansky told The Guardian. “They thought they were investing with Ezra Merkin. The least they expected him to do was to look under the hood of the vehicles he invested their money in. He clearly did not do that.”
Zamansky said he has about 10 Madoff-burned clients, each of whom are facing losses of more than $10 million.
Merkin closed his $1.5 billion Gabriel Capital fund last month, although a restraining order won by NYU prevents him from liquidating it or his Ariel Fund.
And the Ariel Fund may yet prompt further legal action against Merkin. Ariel Investments, a Chicago-based firm unaffiliated with Merkin, is demanding he change his fund’s name. In a cease-and-desist letter to Merkin’s Ariel Fund, Ariel Investments—which has an Ariel Fund of its own—accuses Merkin’s fund of violating several federal trademarks that give Ariel Investments the exclusive right to use “Ariel” for money-management services.
“This mistaken association between Ariel Investments and alleged participants in a nationally-publicized scandal has caused and continues to cause damage to Ariel Investments,” Ariel Investments wrote, according to Bloomberg News. The firm, run by John Rogers, threatened to “escalate this matter” if Merkin’s Ariel fund doesn’t change within 10 days. The letter was sent on Dec. 30.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…