Citco Group Ltd. has agreed to pay $125 million to resolve a lawsuit related to the Bernard Madoff Ponzi Scheme. The plaintiffs in the case are investors of Fairfield Greenwich Ltd.
Investors in Fairfield’s funds sued Citco Group and others after Madoff was arrested in 2008 for running a multibillion-dollar Ponzi scam. Citco was a defendant because it was retained by Fairfield to monitor assets, as well as Madoff’s trading activities. The plaintiffs argued that Citco owed them a duty of care.
By settling, Citco is not denying or admitting to wrongdoing. It said that it consented to resolve the case to avoid further litigation.
The $125 million investor settlement is one of the largest with an administrator or custodian of a Madoff feeder fund. Fairfield placed about $7 billion with Bernard L. Madoff Investment Securities LLC.
Two years ago, a district court approved an $80M settlement between Fairfield’s investors and its founders and affiliates. A settlement has yet to be arrived at between Fairfield investors and auditor PricewaterhouseCoopers.
About $17.3 billion in principal was lost in the Madoff Ponzi scam. Madoff pleaded guilty to running the fraud and is serving 150 years behind bars. Many investors are still looking to recover their losses.
In other Madoff Ponzi Scam-related news, a bankruptcy judge said that a lawsuit looking to get back $825 million from two feeder funds could proceed intact for the most part. Judge Stuart M. Bernstein in Manhattan primarily rejected Kingate Global Fund Ltd. and Kingate Euro Fund Ltd.’s attempt to throw out the case that was brought by Madoff trustee Irving Picard.
The complaint is looking to get back investor money that the two funds pooled and sent to Madoff before the Ponzi scam failed in 2008. Bernstein said that Picard “plausibly alleges” that the managers of the funds knew that Madoff’s investment strategy wasn’t what it was touted to be and that they served as a buffer between the Ponzi mastermind and investors who had become suspicious. The judge, however, did block Picard’s efforts to dismiss the funds’ claims against Madoff’s investment firm. The Kingate funds lost about $800 million of what they invested with Madoff.
A deal was initially reached between the Funds and Picard to settle the case. However, according to The Wall Street Journal, the agreement crumbled in 2013 after the DOJ refused to include feeder funds with those considered eligible to receive money from a $2.35 billion fund meant to compensate Madoff victims for their losses.
To date, Picard has recovered close to $10.9 billion of what Madoff lost. He has given back about $7 billion to investors.
Earlier this month, ex-Bernard L. Madoff Investment Securities controller Irwin Lipkin was sentenced to six months behind bars. The 77-year-old pleaded guilty in 2012 to conspiracy to commit securities fraud and to falsifying records for Madoff as part of the Ponzi scam.
As controller, Lipkin helped keep up the security firm’s financial books and records. Court documents accused of him of following Madoff’s instructions by fudging profit and loss figures. The false filings allowed Madoff to continue with his Ponzi scam, which bilked thousands of investors, including retail investors and high net worth individual investors. In addition to wealthy private citizens, rich celebrities and other famous people were also harmed.
When he retired in 1998 Lipkin trained his successor to keep tweaking the numbers and asked another Madoff employee to falsify trades in his accounts. Aside from his prison term he must serve three years supervised release, 18 months home confinement, and forfeit $17 billion as well as some property. That figure is equivalent to all the investor money that was paid into Madoff’s securities firm since Lipkin became part of the scam from the 1970’s into 2008.
Madoff feeder fund administrator Citco Group reaches $125mln settlement, Reuters, August 13, 2015
Irwin Lipkin Sentenced to Six Months in Prison in Madoff Case, The Wall Street Journal, August 5, 2015