Bloomberg News

Madoff Feeder Funds Still Awaiting Distribution Approval

February 01, 2012

(Updates with comments from report starting in third paragraph.)

Feb. 1 (Bloomberg) -- Ezra Merkin’s bankrupt Ariel and Gabriel funds, so-called feeder funds for Bernard Madoff’s defunct money management firm, are still awaiting court approval for distribution, a liquidator said.

Bart M. Schwartz, the liquidator, said in a report filed in New York state Supreme Court in Manhattan yesterday that Ariel has about $206 million in cash and Gabriel about $213 million. The two funds have a combined net asset value of about $1.2 billion.

Schwartz said in the report that he is prepared to complete first and second interim distributions to Gabriel investors and a second interim distribution to Ariel investors if they are approved by the court.

“We project further liquidation activity in the relatively near-term that should further increase the liquidity of both funds,” Schwartz said in the report, which was filed as part of a lawsuit by former New York Attorney General Andrew Cuomo against Merkin in 2009.

Merkin was sued by Cuomo in 2009 for allegedly steering $2.4 billion to Madoff in exchange for almost $500 million in fees. Madoff is serving 150 years in prison after pleading guilty in 2009 to running the biggest Ponzi scheme ever.

September 2010 Lawsuit

Schwartz also sued Merkin in New York state court in September 2010, accusing the investment adviser of breach of fiduciary duty, gross negligence and fraud.

Investors including prominent charities entrusted their funds to Merkin. Institutions that have alleged they lost money in Merkin’s investments with Madoff include New York University, Yeshiva University and New York Law School.

U.S. District Judge Deborah Batts in Manhattan in September dismissed lawsuits filed by Merkin investors, ruling that they can’t show that Merkin lied about money invested in Madoff’s fund.

The cases are Cuomo v. Merkin, 450879/2009; and Schwartz v. Merkin, 651516/2010, New York State Supreme Court (Manhattan.)

--Editors: Glenn Holdcraft, John Pickering

To contact the reporters on this story: Chris Dolmetsch in New York at; Linda Sandler in New York at

To contact the editors responsible for this story: Michael Hytha at; John Pickering at

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