Latest Madoff Issues: Jewelry 'Gifts' Rile Feds, Judge OKs 3rd-Party Asset Freeze
At the request of New York University, a New York judge has extended a previous order preventing a $1.5 billion hedge fund and a limited investment partnership, as well as the man who operates them, from liquidating assets after losses they reportedly suffered by investing money with Bernard Madoff.
NYU contends in a lawsuit filed just before Christmas that it lost at least $24 million as a result of unauthorized investments by Gabriel Capital LP and/or Ariel Fund Ltd. in the $50 billion Ponzi scheme that Bernard Madoff is accused by federal prosecutors of running under the guise of a hedge fund. The suit says NYU was asked to authorize putting the university’s money with Madoff, but declined to do so, reports Bloomberg. However, unbeknownst to NYU, its money already was in Madoff’s hands at that time, the suit contends.
A further hearing on the preliminary injunction is planned in New York State Supreme Court in Manhattan. The case is one of many that have been filed over the record-breaking losses apparently suffered by Madoff investors; the New York-based Milberg class action firm alone is representing 100 clients in such cases, Crain’s New York Business reports.
Although Madoff reportedly told his sons late last year that he had lost some $50 billion, as discussed in earlier ABAJournal.com posts, Bloomberg says its own calculations—which “may include some double counting”—show that clients invested about $36 billion with Madoff.
Charged last month in a securities fraud case, he is now free on $10 million bail. But prosecutors sought in a federal court hearing yesterday to have Madoff’s bail revoked. They contend that he violated bail conditions precluding him from dissipating assets by sending some $1 million in jewelry as “gifts” to family and friends, reports the New York Times.
“Last week, Mr. Madoff’s sons, Andrew and Mark, received three packages, containing valuable jewelry and watches, as well as inexpensive items like cuff links and mittens, according to a person briefed on the contents of the packages,” the Times reports. The two sons—who worked with their father and sparked the criminal case against him by reporting the hedge fund’s alleged $50 billion loss to prosecutors—then notified their counsel, Paul Weiss Rifkind Wharton & Garrison of the packages, and the firm notified prosecutors.
Magistrate Judge Ronald Ellis didn’t decide the bail issue yesterday, but asked for briefs from both sides to be filed by tomorrow.
The Madoff case has sparked an internal investigation at the Securities and Exchange Commission, which was reportedly warned at least as of 1999 that his hedge fund might be involved in fraudulent activities. Yesterday, the SEC’s inspector general testified before a congressional committee about the probe.
