Bloomberg News

Judge to Consider Suits Against ‘Innocent’ Madoff Investors

June 10, 2011

(Updates with date case accepted in second paragraph.)

June 10 (Bloomberg) -- A federal judge will consider whether he needs to review lawsuits brought by the trustee liquidating Bernard L. Madoff’s firm to recover funds from investors who didn’t know of Madoff’s fraud when they took their money out.

Helen Chaitman, a lawyer for some Madoff investors, on June 2 asked U.S. District Judge Jed Rakoff in Manhattan to review 108 so-called clawback actions against 313 parties. The suits violate investor protection and securities laws, she said. Rakoff accepted the case June 8, a court filing showed.

Trustee Irving Picard has sued about 5,000 investors whom he conceded were innocent, according to Chaitman. He did so on the “theory” that because they took more money out of Madoff’s firm than they put in, they have a legal obligation to return the difference, Chaitman said.

Picard “caused untold devastation to thousands of innocent investors whose lives were decimated by Madoff’s fraud,” Chaitman said in her June 2 filing. At the same time, “he is holding sufficient money in the fund of customer property to pay all allowed customer claims,” she said.

Amanda Remus, a Picard spokeswoman, declined to comment.

The case is Picard v. Greiff, 11-cv-3775, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Stephen Farr, Glenn Holdcraft.

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.


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