Madoff Victims' Advocate Sues Ezra Merkin

Trustee wants $558M back from feeder-fund withdrawals

By Jason Farago,  Newser Staff

Posted May 8, 2009 7:24 AM CDT

(Newser) – The trustee representing investors who lost their savings with Bernie Madoff is suing Ezra Merkin, the feeder-fund manager who withdrew $558 million from Madoff's shop before the collapse of his Ponzi scheme. Irving Picard, who is responsible for winding down Madoff's defunct company, alleges that Merkin should have known from the abnormally high and consistent returns that Madoff's business was fraudulent. It's the second suit Picard has filed in a week, reports the Wall Street Journal.

Last Friday Picard made similar allegations of complicity against Stanley Chais, who ran a feeder fund for Madoff and who withdrew $1 billion over more than a decade. Federal prosecutors are also investigating whether they can bring criminal charges against Merkin, Chais, and other investors who fed cash to Madoff. Merkin's lawyer dismissed the lawsuit as having "no legal basis."

In this March 12, 2009 file photo, Bernard Madoff arrives at Manhattan federal court in New York.   (AP Photo/ Louis Lanzano, file)
J. Ezra Merkin, managing partner of Gabriel Capital Group, is seen during a ceremony in Jerusalem, Israel.   (AP Photo/Eliana Aponte, Pool, File)
In this Jan. 14, 2009 file photo, besieged money manager Bernard Madoff, accused of masterminding a $50 billion Ponzi scheme, arrives at Federal Court in New York.   (AP Photo/Stuart Ramson)
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