The legal drama surrounding Bernard Madoff's US$68 billion (Dh249.76bn) Ponzi scheme is approaching a climax as the deadline passes for the trustee liquidating his estate to sue for the recovery of money from investors who profited from the fraud.
From today, Irving Picard, the court-appointed trustee who has sought to recover more than $30bn in phony profits from Madoff's swindle, is unable to file any more cases on behalf of victims. Madoff, 72, has confessed to the fraud and is now serving a 150-year prison sentence in the US. His son, Mark Madoff, was found dead in his New York apartment yesterday in an apparent suicide.
Hundreds of cases have already been filed against investors who allegedly got in and out of Madoff hedge funds with hefty profits before the scam was revealed.
Some of those so-called "claw-back" cases filed by Mr Picard and by trustees overseeing the liquidation of "feeder funds" that directed money into the fraud have Gulf connections. One of Mr Picard's latest cases is a $19.6bn claim on Friday against Sonja Kohn, the biggest shareholder of Austria's Bank Medici. Mrs Kohn, one of Madoff's oldest and closest business associates, was a key conduit for money flowing from the Gulf into the fraud, according to people familiar with her activities.
"For more than 20 years, Mrs Kohn masterminded a vast illegal scheme to exploit her privileged relationship with Madoff to feed more than $9.1bn of other people's money into his Ponzi scheme. The illegal scheme enriched Mrs Kohn, her family, and scores of other individuals and entities, including the largest banks in Austria and Italy, at the expense of [Madoff's] estate and on the backs of Madoff's victims," Mr Picard said in court documents.
Mrs Kohn could not be reached for comment.
The implosion of Madoff's scheme two years ago inflicted severe financial trauma on institutions and individuals across the globe, including in the Gulf. Investors entrusted their money with the disgraced financier on the strength of consistently high returns, but it emerged during criminal investigations that those profits were actually paid out of previous investors' contributions. Mr Picard has also sued banks such as HSBC and UBS - for $9bn and $2.5bn, respectively - for failing to sound alarm bells sooner, and lending an "aura of legitimacy" to the Madoff fund.
Union Bancaire Privee (UBP), a Swiss bank that linked up numerous Gulf investors with Madoff, reached a settlement with Mr Picard last week. UBP agreed to pay out almost $500 million to victims of the fraud. The bank's clients in the Gulf had between $80m and $100m of exposures to the fraud, its executives said last year.
"Although UBP strongly denies that it had any liability to the trustee, it has agreed to the settlement in order to protect its clients and definitively close this chapter," said the bank.
