Class Action Suits Begin in Madoff Case

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Class Action Suits Begin in Madoff Case
DECEMBER 12, 2008, 10:21 PM

One of the first lawsuits in the $50 billion fraud case against legendary Wall Street trader Bernard L. Madoff emerged Friday. The suit, which seeks class action status, was filed by an investor in Long Island, N.Y. who claims he lost $3 million in what could turn out to be one of the largest frauds in U.S. history.

The complaint was filed on behalf of investor Irwin Kellner of Port Washington, N.Y. and filed in U.S. District Court for the Eastern District of New York - the district of Mr. Madoff’s primary residence. Mr. Kellner said he first invested about $1.25 million with the firm in 1998 and another $1 million in April 2000. (Read it after the jump.)

The lawsuit claims Mr. Madoff’s firm, Bernard L. Madoff Investment Securities, was falsely represented to investors as “a legitimate enterprise operating as a lawful broker and dealer, when in truth and in fact BMIS was a fraudulent Ponzi scheme, which could remain solvent only by paying out interest and dividend commitments through the distribution of investor principal.”

Investors in Mr. Madoff’s company packed a Manhattan courtroom Friday afternoon for a scheduled hearing hoping to get answers about what happened to their cash. The hearing was canceled and Judge Louis L. Stanton later appointed a receiver to examine the accounts at Madoff and immediately froze all of the company’s and Mr. Madoff’s assets, which include bank accounts at J.P. Morgan Chase and Bank of New York Mellon.

Mr. Madoff’s web site only contains a short note to investors telling them to call the firm’s receiver, Lee S. Richards of the law firm Richards Kibbe & Orbe. The number connects to a voicemail message saying the firm has no information for investors at this time, but asks them to leave their name and account number.