Speculators that specialize in “distressed assets” are coming out of the woodwork offering 20 to 30 cents on the dollar to investors with Madoff claims, according to Peter Lattman and Diana B. Henriques in their New York Times DealBook article, “Speculators Are Eager to Bet on Madoff Claims.” These firms have recently stepped up efforts to contact Madoff victims whose claims have been approved by bankruptcy trustee Irving H. Picard.
Picard has already collected approximately $2 billion and has recently filed actions against JP Morgan Chase, UBS and HSBC, among others, to recover additional assets, raising hopes among Madoff victims that substantial recoveries are possible. Hedge funds like Fortress Investment Group, Perry Capital, Silver Point Capital, the Baupost Group and Farallon Capital Management are reportedly actively exploring the purchase of these claims.
One hedge fund recently paid 30 cents on the dollar for a $50 million held by one family, according to the article.
Others in the business of buying distressed assets have balked, not wanting to be associated with the Madoff scandal. “The fraud is just so despicable that we felt that, from a moral perspective, it just didn’t make sense for us,” one such person was quoted as saying. “There are plenty of other ways to make money in this business.”
JP Morgan is another active bankruptcy claim trader that is avoiding Madoff claims. As noted, JP Morgan is a defendant in an adversary proceeding by Picard, alleging that it ignored clear signs of the Madoff fraud, and also served as Madoff’s primary banker, according to the article.
No money has been distributed yet, but Picard reportedly expects to make interim distributions to Madoff victims early next year. Some of them believe they will recover more through the bankruptcy than is being offered by the speculators.
Picard has filed more lawsuits seeking to claw back more than $50 billion from banks, feeder funds, early investors and others recipients of ill-gotten gains, according to an InvestmentNews article, “Madoff firm trustee seeks $50B as claw-back window closes.” The window closing is reference to the second anniversary of Madoff’s arrest and an apparent statute of limitation.
These actions include claims for treble damages under the Racketeer Influenced and Corrupt Organizations (RICO) Act that could reach $58.8 billion.
One such claw-back case was filed against “Madoff’s criminal soulmate,” Sonja Kohn, founder of Bank Medici AG. Kohn allegedly used her relationship with Madoff to build the bank, then funneled over $9.1 billion of investor money to Madoff’s firm knowing of the fraud being perpetrated by Madoff. Kohn allegedly funneled the money through feeder firms including Primeo Fund, Thema International, Herald Fund Alpha Prime Fund, Senator Fund and Herald (Lux), then withdrew $536 million from Madoff’s firm just before Madoff confessed, and tried to hide her connection to Madoff.
In addition, Picard has sued Citibank, Merrill Lynch, and five other banks for more than $1 billion, and HSBC Holdings Plc for $9 billion, as well as JP Morgan for $6.4 billion.
One early Madoff client and family members agreed to forfeit $625 million in “profits” from the ponzi scheme. Cases are pending against other investors who profited from the scheme, including the owners of the New York Mets, who are reportedly in settlement discussions with Picard.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 40 occasions. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their investment problems. For further information, please contact us.