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Thu, Jan 01, 2009 - Page 10 News List

Judge approves funds for liquidation of Madoff firm


A US Bankruptcy Court judge on Tuesday approved the transfer of US$28.1 million to cover expenses tied to the liquidation of Bernard Madoff’s investment firm.

Madoff is accused of running an elaborate pyramid scam that duped investors ranging from individuals to charities to large banks out of potentially US$50 billion.

Irving Picard, the trustee presiding over the liquidation of Madoff’s investment firm, said he needed the US$28.1 million to cover employee salaries and other costs, court documents said.

Bank of New York Mellon Corp had agreed to transfer the funds, but Bankruptcy Judge Burton Lifland first had to approve the transfer.

Richard Bernard, a lawyer with Baker Hostetler who was representing Picard at the hearing, said the transferred funds will not affect any recovery for investors.

The funds are being transferred from one account that had already been frozen. Lawyers continue to investigate if Madoff had any other accounts that have not yet been frozen, Bernard said.

BNY Mellon already transferred about US$883,000 to cover costs tied to the liquidation.

Picard will oversee the liquidation of assets from Madoff’s investment firm as the Securities Investor Protection Corp (SIPC) attempts to help investors recoup their money.

SIPC was created by Congress in 1970 to protect investors when a brokerage firm fails and cash and securities are missing from accounts.

Funds can be used to satisfy the remaining claims of each customer up to a maximum of US$500,000. The figure includes a maximum of US$100,000 on claims for cash.

On Monday, a judge presiding over civil claims against Madoff said he may be willing to consider extending relief to those who invested in Madoff’s business through third parties. To consider allowing investors who invested through third parties to file claims with SIPC, US District Judge Louis Stanton said he needed a formal application and briefing from SIPC, the Securities and Exchange Commission, a trustee for Madoff’s business and representatives of investors.

Madoff, 70, a former NASDAQ stock market chairman, has become one of the most vilified people in the US since news broke on Dec. 11 that he had allegedly been running a giant pyramid scheme, paying returns to certain investors out of the principal received from others.

So far, investors have said that they have lost more than US$30 billion.

Reports indicate that Madoff was running the alleged scam for decades.

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