Clawbacks Loom As Madoff Trustee Subpoenas Firms

Clawbacks Loom As Madoff Trustee Subpoenas Firms - 2/17/2009

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Clawbacks Loom As Madoff Trustee Subpoenas Firms
Pamela Wilkinson

Securities Law 360. February 17, 2009
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EXCERPT: In what is likely the start of a concerted effort to retrieve funds that Bernard L. Madoff’s investment firm paid out to investors just before he was arrested for orchestrating an alleged Ponzi scheme, the U.S. trustee in the firm’s bankruptcy has subpoenaed a slew of investment and brokerage companies as well as the Chicago Board of Trade. U.S. Trustee Irving H. Picard on Monday filed the papers seeking to subpoena 13 financial entities, including Knight Capitol Group Inc., ICE Clear U.S. Inc., PEAK 6 Investments Inc. and CME Clearing House, in the U.S. Bankruptcy Court for the Southern District of New York. The subpoenas were issued pursuant to Bankruptcy Rule 2004. No further information was available in the case file, and counsel for the trustee did not immediately return a request for comment. The companies were probably brokerage operations through which Madoff sold securities in order to meet redemption requests from investors — not “feeder firms” that connected Madoff with investors, according to the Wall Street Journal. The threat of so-called clawbacks looms large for investors who managed to cash out of Madoff’s now-collapsed investment funds. Some have already sought changes to a claims bar date in a motion filed Feb. 10. The motion was intended to preserve jury trial rights of Madoff clients who took their money out prior to the collapse of what criminal prosecutors call the largest Ponzi scheme ever. The Lucerne Foundation, Collingwood Enterprises and Douglas Rimsky wanted the bar date order to be modified so that future claims arising from potential avoidance actions are excepted from the current bar dates — slated for March and July — and would not need to be filed until 30 days after any judgment from such potential avoidance actions, or clawback suits.

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