Irving Picard, the court-appointed trustee trying to recover money for the victims of massive Ponzi-schemer Bernard Madoff, suffered his second loss in less than a week to Modern Orthodox hedge fund manager J. Ezra Merkin.
Above: J. Ezra Merkin
Trustee Loses Two Battles To Recover Madoff Money From Modern Orthodox YU-Linked Hedge Fund Maven
Shmarya Rosenberg • FailedMessiah.com
Irving Picard, the court-appointed trustee trying to recover money for the victims of massive Ponzi-schemer Bernard Madoff, suffered his second loss in less than a week to Modern Orthodox hedge fund manager J. Ezra Merkin, Reuters reported.
A Manhattan bankruptcy judge dismissed most almost all of Picard’s claims against Merkin, who was sued by Picard for approximately $565 million.
Federal Bankruptcy Court Judge Stuart Bernstein ruled Picard failed to prove that Merkin knew Madoff was running a Ponzi scheme. Merkin’s own investment funds were iften little more than feeder accounts for Madoff, whose scam cost many investors their life savings – including investors who invested only through Merkin and who had no idea Merkin was feeding their money to Madoff.
Merkin is a senior lay leader in New York’s Modern Orthodox community and was for decades a top lay leader on Yeshiva University’s investment committee. YU also lost a tremendous amount of money to Madoff.
The allegations Picard made in his lawsuit "do not imply the level of certainty or absence of substantial doubt associated with actual knowledge," Bernstein ruled Tuesday.
Bernstein’s ruling also allows Merkin’s funds to try to recoup lost money from Madoff’s company’s estate.
However, Bernstein ruled that Picard can pursue a claim for roughly $315 million transferred to Merkin's funds from Madoff's company in the two years preceding Madoff’s company’s bankruptcy. Merkin, Bernstein ruled, willfully blinded himself to Madoff’s fraud and ignored all warning signs.
Picard had shown that Merkin had said in 2005, years before Madoff’s fraud was exposed, that a contemporaneous Ponzi scheme should be renamed a “Madoff scheme.”
Bernstein ruled that remark and other similar remarks by Merkin "seem more like jokes than acknowledgments" of Madoff's actual criminal activities.
Bernstein also ruled that Picard can continue to pursue a claim that would, if successful, block all of Merkin's funds from recovering any Madoff money until other investors and Madoff’s creditors get repaid first.
A Merkin attorney reportedly praised Bernstein’s dismissal of the "vast majority of the trustee's baseless claims as a matter of law," and insisted that the claims that remain are "factually without merit."
A Picard spokesperson said Picard is "prepared to move forward to trial" on the claims Bernstein allowed to stand.
Last Friday, a federal appeals court in New York rejected Picard's claim that Merkin's $410 million settlement with New York Attorney General Eric Schneiderman meant to repay investors in the Gabriel Capital LP, Ariel Fund Ltd, Ascot Fund Ltd and Ascot Partners LP Madoff feeder funds Merkin controls should be voided on the grounds that it interfered with Picard’s ability to recover money from Merkin to pay Madoff's defrauded investors.
Picard has so far recovered $9.83 billion for Madoff investors who lost approximately $17.5 billion of principal in Madoff’s scheme.
The now-76-year-old Madoff is serving a 150-year prison term at a federal prison in North Carolina.