May 26, 2015
Private Fund Disputes Alert
Author(s): Jonathan Sablone
A judge for the U.S. Bankruptcy Court for the Southern District of New York has approved a settlement agreement worth a total of $11.1 million between Irving Picard as the court-appointed trustee in the consolidated liquidation of Bernard L. Madoff Investment Securities LLC and the Madoff estate, and three defendant groups. According to Picard, the defendants had received over $58 million in fictitious profits in the Madoff Ponzi scheme.
Judge Stuart Bernstein of the U.S. Bankruptcy Court for the Southern District of New York has approved a settlement agreement worth a total of $11.1 million between Irving Picard as the court-appointed trustee in the consolidated liquidation of Bernard L. Madoff Investment Securities LLC and the Madoff estate, and three defendant groups. According to Picard, the defendants had received over $58 million in fictitious profits in the Madoff Ponzi scheme.
The settlement agreements resulted after approximately four months of negotiation with the defendants, which include entities and individuals associated with the Pascucci, Danzi, and Freeman families. The trustee filed suit against the three groups in 2010.
According to the complaint against the Pascucci defendants, of the nearly $205 million they received from Bernard L. Madoff Investment Securities LLC (BLMIS), almost $49 million represented fictitious profits. The Danzi defendants allegedly received $7.3 million from BLMIS, with $6.8 million representing fictitious profits. The Freeman defendants allegedly received $3.8 million from BLMIS, $2.7 million of which the trustee claimed were fictitious profits.
Picard, a hero to some of the victims of the Madoff Ponzi scheme, sought to exercise his “avoiding powers” in the three lawsuits, seeking the defendants’ disgorgement of those fictitious profits. Under the Bankruptcy Code, avoiding powers may be used by a trustee to reverse transfers of monies that occurred within the so-called “look-back period” prior to the commencement of the proceedings. According to the Trustee’s motion to the court to approve the settlement agreement, the $11.1 million sum involves two categories of transfers: $6.5 million represents 100% of the transfers made within the two-year look-back period, while $4.6 represents transfers made more than two years prior to the filing date.
Under the terms of the settlement agreement, the defendants will pay the $11.1 million in three installments of $3.7 million each over the course of about two years.
Picard has filed over a thousand lawsuits against parties alleged to have unfairly profited in Madoff’s infamous Ponzi scheme, has recovered over $10.6 billion to date, and paid out approximately $7 billion to Madoff’s victims. Madoff victim cases continue to wind their way through the judicial system. Over $3.5 billion is presently said to be in a customer reserve fund pending determination of unresolved matters. This includes over $120 million for deferred payments and unallocated funds.
Investors are advised to stay abreast of the most recent developments and carefully consider settlement strategies and value.
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