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Madoff investors told to return funds

Bloomberg News / April 24, 2009
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NEW YORK - The trustee liquidating Bernard Madoff's defunct money management firm told 223 investors to return up to $735 million or face legal action, said a person familiar with the matter.

"The trustee demands that you immediately return such amounts to the trustee for the benefit of all defrauded creditors" of Bernard L. Madoff Investment Securities LLC, according to a copy of the letter obtained by Bloomberg News.

Trustee Irving Picard mailed the so-called clawback letters to customers who redeemed investments over the past six years, the maximum period for which he can seek recovery under New York law, demanding 100 percent of the money paid out over that time, said Helen Chaitman, a Madoff investor and a lawyer with Phillips Nizer LLP who is advising 350 victims.

Picard's right to demand cash back is being contested by some lawyers, who say state law isn't applicable. Money Madoff sent back to investors was a payment of debt, not a withdrawal, so the trustee can reverse only 90 days of such transactions, according to victims' lawyer Jonathan Landers of Milberg LLP.