Madoff Victims File to Put Him Into Bankruptcy

Madoff Victims File to Put Him Into Bankruptcy

By Linda Sandler

April 1 (Bloomberg) -- Victims of Bernard Madoff’s $65 billion Ponzi scheme filed a petition to put the fraudster in personal bankruptcy to ensure that all his assets are used to pay them, the victims’ lawyer said.

“It’s an important step to ensure that all Madoff assets are brought before the bankruptcy court to be used for victims of this massive fraud,” said Jonathan Landers, a lawyer with Milberg LLP, which represents more than 70 victims, in a phone interview.

Madoff, 70, who pleaded guilty March 12 to defrauding investors by using money from new ones to pay off old ones in a Ponzi scheme and is now in jail, isn’t in bankruptcy though his firm, Bernard L. Madoff Investment Securities LLC, is being liquidated by the Securities Investor Protection Corp.

Federal prosecutors have identified more than $100 million in real estate, cash, bonds, art, autos, boats and other property owned by Madoff and his wife, Ruth, which they said in March they intend to seize. The couple’s Palm Beach residence, a yacht and a smaller boat were seized today by the U.S. Marshals Service, the Miami Herald reported.

Ruth Madoff successfully applied for a homestead exemption under Florida law to declare the Palm Beach home as a primary residence and shield it from creditors.

Three creditors petitioned to put Madoff into bankruptcy, according to a copy of the document provided by Milberg: Blumenthal & Associates, with a claim of $30.2 million, Martin Rappaport, claiming $20.8 million, and a trust bearing his name, which claimed $8.3 million.

A judge must approve their request before the victims may formally seek to force Madoff into bankruptcy.

Madoff’s lawyer, Ira Sorkin, couldn’t immediately be reached by phone or e-mail.

The SIPC case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net.

Last Updated: April 1, 2009 20:27 EDT
DeliciousDiggFacebookLinkedInNews