Legal News

L?Affaire Madoff: One of the Last In Hopes to be First Out

By Dan Slater

Earlier today, we mentioned that investors who received redemptions from Madoff within 90 days of the firm’s collapse are particularly vulnerable to the dreaded clawback laws — meaning they could be required to cough up the dough. But what about investors who paid in to Madoff within the last 90 days? How about six days before he was charged with running a $50 billion Ponzi scheme?

That’s the situation allegedly faced by Martin Rosenman, president of New York-based Stuyvesant Fuel Service Corp., who claims, in a complaint filed yesterday in bankruptcy court in Manhattan, that Irving Picard, the trustee, has no right to the $10 million that Rosenman invested. Here’s the complaint, and here’s a Bloomberg report.

According to the filing, Rosenman, who hadn’t previously invested with Bernard Madoff Investment Securities LLC, spoke by phone with Madoff on Dec. 3 about investing. “Madoff stated that the fund was closed until Jan. 1, 2009, but that Mr. Rosenman could wire money,” according to the complaint. Rosenman alleged he received a fax from Madoff Securities employee Jodi Crupi on Dec. 5 that told him to transfer funds to a JPMorgan Chase & Co. account, which he did.

On Dec. 9, Rosenman received a confirmation from Madoff Securities telling him he’d sold short $10 million in U.S. Treasury bills, a transaction he “never authorized,” according to the court filing. Bloomberg’s call to Crupi was not immediately returned.

“The confirmation contains a CUSIP number (an identification number) for the transaction,” Rosenman said in his complaint. “Multiple electronic searches for securities under this number have shown that it does not exist. In other words, BMIS never transacted a trade of U.S. Treasury Bills on the Family’s behalf.”

The Rosenman family, represented by Howard Kleinhendler at Wachtel & Masyr, is seeking an order from U.S. Bankruptcy Judge Burton Lifland requiring JPMorgan to turn over the funds.

George Stamboulidis, an attorney at Baker & Hostetler which represents Picard, didn’t immediately return Bloomberg’s call seeking comment.

Full post as published by Law Blog - WSJ.com on January 02, 2009 (boomark / email).