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The Madoff Fraud:Scam of the Century
Trustee in settlement talks Fairfiel Greenwich

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July 22 (Bloomberg) -- The trustee liquidating Bernard Madoff’s business told a judge he’s in settlement talks with three Fairfield Greenwich Group hedge funds accused of taking $3.54 billion in fake profit from the con man’s fraud. Trustee Irving Picard said he’s in similar talks with two funds run by Bermuda-based Kingate Management Ltd., accused of withdrawing $255 million in fake profit from Madoff’s investment advisory business before his Dec. 11 arrest. U.S. Bankruptcy Judge Burton Lifland in New York this week granted Picard’s request to give the Fairfield and Kingate funds extensions until Sept. 21 and July 27, respectively, to respond to the lawsuits. The extensions will let them “continue ongoing settlement discussions,” Picard said in a filing. Picard, a lawyer with Baker & Hostetler LLP, sued Fairfield Sentry, Greenwich Sentry and Greenwich Sentry Partners in May over claims they received “unrealistically high” returns on their investments. He claims Fairfield’s withdrawals over a six- year period are recoverable under U.S. bankruptcy law. The trustee sued British Virgin Islands-based Kingate Global Fund and Kingate Euro Fund in April, accusing the Madoff “feeder funds” of withdrawing $255 million from Madoff’s firm within 90 days of the arrest. The Kingate funds allegedly invested a total of $1.73 billion with New York-based Bernard L. Madoff Investment Securities LLC. ‘Clawback’ Suits Picard is seeking a total of $14.5 billion in damages in about a dozen “clawback” lawsuits accusing Madoff’s biggest investors, including offshore hedge funds and wealthy U.S. philanthropists, of profiting for years from the fraud. Such lawsuits can seek the return of withdrawals as far back as six years, based on allegations that defendants knew about Madoff’s fraud, or at least should have known. The trustee’s efforts to win out-of-court settlements got a boost in May when Banco Santander SA, Spain’s biggest bank, agreed to pay $235 million to settle claims that two of its hedge funds profited by directing billions of dollars to Madoff for more than 10 years. Madoff, 71, pleaded guilty in March and was sentenced on June 29 to 150 years in prison for using money from new clients to pay earlier investors in the biggest U.S. Ponzi scheme. Prosecutors said the money manager told clients they had as much as $65 billion invested with him. The case is Picard v. Kingate Global Fund Ltd., 09-01161, U.S. Bankruptcy Court, Southern District of New York (Manhattan). To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net. Last Updated: July 22, 2009 00:01 EDT
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