Irving Picard, the court-appointed trustee overseeing the liquidation of Bernard Madoff's $50 billion Ponzi Scheme, has sued a hedge fund unit of Citigroup in Bermuda for its role in overseeing several so-called 'feeder funds' that channeled investor funds into Madoff's fraud. Citi Hedge Fund Services Ltd. of Bermuda, tasked with confirming the valuation provided by Madoff of Kingate Global Fund Ltd. and Kingate Euro Fund, instead simply used Madoff's data and assumed it was accurate, Picard alleged.
As a result of the failure to perform due diligence, Picard is demanding the return of nearly $1 billion that the feeder funds were able to redeem from Madoff's scheme before it was revealed in December 2008. The Kingate feeder funds are currently being liquidated in proceedings in the British Virgin islands.
With the lawsuit, Picard appears to be extending the web of legal exposure to not only those who invested directly with Madoff, but also to third-parties who provided services to those funds that invested in Madoff's scheme. Picard has filed over 1,000 lawsuits seeking funds for defrauded investors, recovering nearly $10 billion to date.