$150 Million Dollar Lawsuit Filed Against Bernard Madoff Investor

The first of the so-called "claw back" lawsuits has been filed in connection with the Bernard Madoff fraud, and many more are expected to be on their way over the coming months.

What is a "claw back" lawsuit?

Well, this is a lawsuit that is filed against an investor that was able to withdraw their principal and any profits in a fund before a fraud was uncovered.

In this case, the trustee responsible for recovering money for "defrauded Bernard Madoff investors" has launched a $150 million dollar lawsuit against Vizcaya Partners Ltd. and their bank, Banque Jacob Safra Ltd.

The Madoff trustee is claiming that Vizcaya Partners Ltd. received the $150 million dollar payment just "six weeks" before Madoff admitted to the massive fraud. The trustee is claiming that this was a "preference" payment, and that the money should be returned and divvied up between ripped-off Madoff investors, including Vizcaya Partners Ltd.

Under current bankruptcy law, trustees may "sue investors for any fictional profits and principal they withdrew in the six years before a fraud was exposed."

I would imagine that there were billions upon billions of dollars withdrawn from the fund over the past six years, and I would also imagine that there are some pretty nervous investors that expect themselves to be subjected to some large lawsuits.

I would expect that Irving Picard, a court-appointed trustee for Bernard L. Madoff Securities LLC, will be very aggressive with these lawsuits, as there has only been about $1 billion dollars in investor funds recovered so far.

To those who claim that the "claw back" lawsuits are "unfair" - is it fair that some investors were able to recover their initial principal PLUS millions of dollars of completely fabricated and fake profits, while most other investors in the fund will receive a fraction of their money back?

This is an unbelievably messy situation that will end up having no winners. Anyone that was "lucky" enough to get out before the fraud was uncovered will likely find themselves at the wrong end of a lawsuit from the Madoff trustee before the year is out.

Source: Madoff Trustee Seeks $150 Million Dollar "Clawback"

Filed under: Stock Market Scandals