The trustee charged with recovering funds for victims of Bernard Madoff’s fraud scheme informed a federal court that he will appeal a ruling that would decimate a lawsuit against financier J. Ezra Merkin.
Trustee Irving Picard asked a New York bankruptcy court on Sept. 5 to finalize a decision severely curtailing his $565 million lawsuit against Merkin, the Orthodox hedge funder who helped fuel Madoff’s business, so that Picard could appeal the decision to the 2nd Circuit Court of Appeals, according to a report by the legal news website Law360. That decision, issued by Judge Stuart Bernstein on Aug. 12, dismissed 9 of the 13 charges filed by Picard against Merkin, on the grounds that Picard could not prove that Merkin, whose hedge funds were heavily invested with Madoff, knew of Madoff’s Ponzi scheme. Bernstein allowed the remaining charges, totaling $315 million, to proceed against Merkin, according to Reuters.
Picard’s move is the latest in a flurry of legal decisions and countermoves that have taken place over the last few weeks regarding the fallout from the Madoff financial fraud. On Aug. 9, the 2nd Circuit appeals court ruled against Picard’s effort to overturn Merkin’s $410 million settlement, as well as Fairfield Greenwich Group’s $80 million settlement, with the New York State Attorney General’s office. Picard had argued that the settlements inhibited his ability to recover funds for Madoff’s victims.
Meanwhile, on Aug. 28, Picard asked in a separate case for the right to replead in a suit against several banks, arguing that a pair of district court rulings earlier in the year had altered the legal standard for such cases.
In addition, on August. 22, Judge Bernstein ruled that investors whose employers had invested retirement funds with Madoff could not recover their money, a ruling that Picard supported.
Picard has recovered a reported $9.8 billion out of an estimated $17.3 billion of principal lost in Madoff’s investment scheme, according to the Wall Street Journal.