Madoff liquidation trustee sues hedge funds for $3.2B

The trustee for the liquidation of Bernard L. Madoff Investment Securities LLC has filed suit against several hedge funds seeking $3.2 billion that allegedly was withdrawn by the defendants prior to the scandal that resulted in a guilty conviction for the swindler.
Irving Picard, the trustee, filed the suit in the U.S. Bankruptcy Court of the Southern District of New York against Fairfield Sentry Ltd. of Tortola, British Virgin Islands, and Greenwich Sentry LP and Greenwich Sentry Partners LP, both of Wilmington, Del. — all affiliates of Fairfield Greenwich Group of New York.
In the suit, he alleges that “despite assurances to the defendants’ investors, defendants and their managers did little, if any, due diligence of [the firm] and instead ignored multiple red flags, because with the defendants’ continued investment in BLMIS, the investment manager of the defendant funds reaped massive fees, in excess of hundreds of millions of dollars, purportedly for investment performance which has proven to be nothing but fiction.”
The funds began investing with Mr. Madoff’s firm in 1995, according to the complaint.
The suit seeks to recover money that allegedly was withdrawn by the hedge funds from accounts at the firm over a six-year period prior to his arrest in December.
“The transfers were, in part, false and fraudulent payments of nonexistent profits supposedly earned in the accounts,” according to the complaint.
In March, Mr. Madoff pleaded guilty to orchestrating a $65 billion Ponzi scheme.
Fairfield Greenwich spokesman Seth Faison wrote in an e-mail “that Fairfield Greenwich funds lost far more from the Madoff fraud than they ever redeemed. There is no merit to this lawsuit, and it will be defended vigorously.”