One of the firms hardest hit by the $50 billion Bernard Madoff fraud warned investors in its prospectus that investing with Madoff was risky, saying explicitly that the brokerage “could abscond with those assets,” the Financial Times reports. Kingate Global told investors that they would not check the accuracy of the statements Madoff provided, and that “information supplied by the investment adviser may be inaccurate or even fraudulent.” Despite the disclaimer, Kingate clients poured $2.75 billion into the fund.
What such "feeder" firms told investors about their dealings with Madoff will come under increasing scrutiny as clients attempt to sue to reclaim some of their losses. Some funds bragged of their Madoff ties while others allegedly concealed that they were investing nearly all their funds with him. Some, unlike Kingate, promised transparency and independent verification of trades.