Madoff Trustee Files Five More Clawback Lawsuits Against Feeder Fund Investors Seeking Nearly $100 Million

The court-appointed trustee of Bernard Madoff's gigantic Ponzi scheme continued his quest to recover funds from investors in Madoff's largest feeder fund, filing five more lawsuits seeking over $95 million for defrauded investors. Irving Picard, the court-appointed trustee, filed the suits in the wake of a settlement with Fairfield Sentry, Madoff's largest 'feeder fund,' that allows him to "claw back" profits from investors who placed funds with Madoff through Fairfield. The latest lawsuits come on the heels of seven lawsuits filed last week seeking the return of at least $173 million.  Picard has now filed suits seeking nearly $470 million from Fairfield customers.

According to the complaints, a total of $3 billion was transferred from Madoff to Fairfield during the six-year period preceding BLMIS' bankruptcy filing.  Picard seeks to avoid the transfers - known as subsequent transfers - to each defendant from Fairfield Sentry under the powers granted under Sections 550 and 551 of the Bankruptcy Code.  The latest wave of lawsuits include the following defendants and amount sought:

• National Bank of Kuwait - $18,724,399 
• DEZ Financial Management Ltd. - $14,776,114
• Maple Key Market Neutral Cayman Islands LP - $14,509,369
• Unifortune Asset Management Sgr Spa and Unifortune Conservative Fund - $26,772,978
• Delta National Bank and Trust Company - $20,634,958 

Filing the lawsuits on behalf of Picard are Baker & Hostetler attorneys David J. Sheehan, Mark A. Kornfeld, Deborah A. Kaplan, Michelle R. Kaplan and Torello H. Calvani.

Each of the complaints may be found here.

Judge Denies Receiver Fee Request in WexTrust Case

A New York federal judge has rejected the latest fee request by the court-appointed receiver and his law firm for work in the ongoing WexTrust Capital receivership.  WexTrust was charged in 2008 with operating a Ponzi scheme that defrauded hundreds of investors out of millions of dollars.  Fee requests submitted by the court-appointed receiver, Timothy Coleman, and several firms he has retained for various legal work involved with the receivership, have increasingly come under scrutiny, and in several instances, rejected.  Several of these fee requests were analyzed in an order issued Wednesday by Judge Denny Chin of the United States Court of Appeals for the Second Circuit.

Judge Chin, who coincidentally was the same judge who sentenced infamous Ponzi schemer Bernard Madoff to 150 years in federal prison, has shown a willingness in the WexTrust receivership to closely scrutinize proposed fees paid to professionals in comparison to victim distributions.  In the beginning of the case, after Coleman's firm Dewey & LeBoeuf submitted a bill for $2.2 million for twenty days of work, Judge Chin issued an order asking the firm to exlplain its billing practices, and noted what Judge Chin characterized as high rates for a securities receivership proceeding.  The rates in question included $285 per hour for summer associates and paralegal billing rates of $175 to $275 per hour.  

In Judge Chin's Wednesday order, Coleman sought the approval of a settlement between the estate and WexTrust's former law firm, Much Shelist Denenberg Ament & Rubenstein, P.C. ("Much Shelist") concerning malpractice claims, along with Coleman's tenth request for legal fees relating to his role as receiver.  Noting that the proposed settlement required no payment from Much Shelist and would bar future claims by the Receiver or victims, Judge Chin found that the settlement was not in the best interest of the receivership estate, and declined to approve the settlement.  Next addressing the request for legal fees by Dewey & LeBoeuf, Judge Chin took issue with the fact that the firm had received $9,423,212 in fees - nearly twice the amount paid out to victims thus far.  Noting that the SEC had recommended that the fee application be deferred until the end of the case, Judge Chin denied the firm's request.

The fee issues in the WexTrust receivership come several months after investors in the alleged Stanford Ponzi scheme claimed that the expenses of the receiver, Ralph Janvey, amounted to nearly all of the assets recovered thus far for the benefit of victims.  The claim later led to an SEC investigation that included Janvey's fees incurred to date.  

Prominent Indiana Money Manager Accused of Ponzi Scheme

The Indiana Securities Division has accused a prominent Indiana money manager of operating a Ponzi scheme and has obtained the appointment of a receiver over at least $5 million in assets controlled by the accused.  A temporary asset freeze has been obtained on Keenan Hauke and his firm, Samex Capital Advisors, while authorities investigate claims raised by a former business partner of Hauke who went to authorities after noticing extensive irregularities with the firm.  

A complaint filed against Hauke and several Samex entities alleges that Hauke "misled investors by failing to inform them that the funds they were investing would be converted to his personal use." Investors were led to believe that by purchasing interests in Hauke's hedge fund, these funds would be invested in publicly tradable securities.  Instead, Hauke is alleged to have misappropriated investor funds from Samex to his personal bank account.  

Hauke has been a visible face in news and television.  Along with contributing a regular column to the Indianapolis Business Journal, he has also appeared on Fox Business News and CNBC.  An investigation is ongoing.

A victim website has surfaced at www.samexsurvivors.com

Rothstein Associate Receives Five Years in Prison

A South Florida judge handed down a five-year prison sentence to a man authorities say aided Scott Rothsein's massive $1.2 billion Ponzi scheme by posing as a banker, journalist, and fake plaintiff in a lawsuit.  Stephen Caputi, 53, received the sentence after previously pleading guilty to one charge of conspiracy to commit wire fraud. Caputi is the third person to be sentenced to prison for his role in Rothstein's fraud. 

According to authorities, Caputi played several roles in efforts to help convince Rothstein investors that their funds were safe.  This included posing as a TD Bank executive and providing investors with false account statements portraying steadily growing holdings.  Caputi also pretended to be a journalist with the Wall Street Journal and a plaintiff in a fake lawsuit.  Rothstein and Caputi were also business partners in a Pembroke Pines nightclub, Cafe Iguanas.

Rothstein is currently serving a 50-year prison sentence for orchestrating the scheme.

Mother and Daughter Accused of Ponzi Scheme

California authorities accused a California mother and daughter of operating a Ponzi scheme that defrauded family and friends out of hundreds of thousands of dollars.  Cristina Madrigal Reyes, 61, and Natalia Guerra Madrigal, 36, both of Salinas, California, were each charged with four felonies alleging they conspired to cheat or defraud, to embezzle, to steal and commit money laundering.  Prosecutors also sought sentencing range enhancements based on the amount of money allegedly stolen.  If convicted of the charges, each faces a maximum of ten years in state prison.  It remains possible that the pair could also face federal charges.

Reyes and Madrigal operated C.N. Broker Services in Salinas, which purported to provide investment opportunities in real estate lending pools.  Authorities allege that from January 2005 to September 2007, investors were promised above-average market returns from loans on real estate that were secured by liens.  According to the complaint, the pair represented themselves as licensed realtors to potential investors, when in fact neither was a licensed realtor.  Instead of making real-estate investments, the pair allegedly made payments to family members, spent money at several casinos, and used new funds to make interest payments to existing investors.  When the scheme began to unravel in August 2007, Madrigal first told investors that her mother had been kidnapped, and then that many of the real estate borrowers had been sent into bankruptcy due to adverse market conditions.

Madrigal and Reyes were each appointed an attorney from the Public Defender's office.  They were released on their own recognizance while their attorneys review documents seized from the operation.