Deep Pockets in Madoff Scam

As the fallout from the alleged $50 billion Bernard Madoff fraud continues, investors may wonder where they can look to reclaim allegedly stolen funds. The answer may depend on how those investors became involved with Madoff.

In situations where an alleged defrauded investor dealt only with Madoff and his companies, that investor may only be able to bring an action against Madoff and those companies. If there was a fraud, the investors who dealt directly with Madoff can proceed against him directly or wait for a presumed pay out by the court appointed receiver. Ultimately, this would provide the investor with only pennies on the dollar.

Individuals who invested through third parties or relied on third parties for advice may be in a somewhat more advantageous position. Again, assuming that a fraud occurred, investors in this group could bring actions against the third parties upon whom they relied. Thus, these persons could allege that the third party advisers or investment vehicles violated their respective duties to these investors by not taking appropriate care and performing adequate due diligence before involving their clients in the alleged scam.

In the latter situation, it is important for the prospective litigant to analyze the written representations of the third party advisor(s) to determine whether they honored the promises made to handle the investments with appropriate care. If they did not, these parties could be “deep pocket” targets for victims of the alleged fraud.

For an interesting article about a hedge fund that, for a number of years, has involved clients in the Madoff investment see The New York Times article.

About Richard Serafini

Welcome to my blog. I am an attorney and practice in the area of corporate trial work. Areas of particular emphasis are white collar defense, securities litigation, health care litigation, internal investigations, RICO, and financial litigation. I will be posting interesting developments in my areas of interest. I hope that you find this blog helpful and informative.