Madoff Feeder Hedge Funds Miss Deadline, Trustee Says

Jul 8 2009 | 10:10am ET

Ignoring Irving Picard could prove very costly to a couple of hedge funds.

The court-appointed trustee liquidating convicted Ponzi schemer Bernard Madoff’s empire has asked the judge overseeing the Madoff bankruptcy to enter notices of default against two hedge funds he says have failed to respond to his lawsuits. Picard sued Harley International and Vizcaya Partners in an effort to recoup phony profits he says the feeder funds withdrew prior to Madoff’s arrest in December.

Picard is seeking $1.07 billion from Harley, money he says the firm withdrew over the six years before Madoff’s scam collapsed. Harley is currently being liquidated in the Cayman Islands.

Meanwhile, Picard is seeking a similar default order against Vizcaya, which he says withdrew $150 million from its Madoff accounts in the 90 days before Madoff’s arrest. Picard has also asked authorities in Gibraltar, where British Virgin Islands-based Vizcaya’s bank is located, to hand over the $10.7 million of the hedge fund’s money it has.

If U.S. Bankruptcy Judge Burton Lifland grants Picard’s motion, both feeder funds could be ordered to turn over the money.

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