The trustee overseeing the liquidation of disgraced financier Bernard Madoff’s assets sued another investment fund on Tuesday, claiming it owes Madoff’s victims more than $1 billion it withdrew from his firm.
The complaint in Manhattan bankruptcy court alleges Harley International Ltd. knew or should have known that the fortune came out of the pockets of victims of Madoff’s giant Ponzi scheme. Of the $1 billion total, the private, overseas hedge fund withdrew $425 million during the three months before his arrest last year.
Trustee Irving Picard said the hedge funds’ investments with Bernard L. Madoff Investment Securities resulted in returns that were “too good to be true.” He cited account statements showing purported stock trades at prices that, when compared to market prices, were clearly fictional.
“This pattern in defendant’s account should have caused a sophisticated hedge fund like defendant Harley and its managers to independently verify the trades with the public exchanges and demand more transparency into the operations of (Madoff’s firm),” the complaint said.
Attempts to contact Harley International were not immediately successful. The complaint says the fund was organized on Cayman Island, but has an Isle of Man address.
Madoff, 70, pleaded guilty in March to charges that his secretive investment advisory operation was a multibillion-dollar scam. The former Nasdaq chairman faces up to 150 years in prison.
The trustee has filed similar complaints against other big money managers in recent weeks in a bid to return funds to thousands of clients burned by Madoff. Defendants include J. Ezra Merkin in New York and Stanley Chais in Los Angeles, both longtime associates of Madoff.