Charges against Jaffe are dismissed

Securities regulators had filed charges against Jaffe in June, alleging that he and the brokerage he worked for, Cohmad Securities Corp., “knowingly or recklessly’’ participated in Madoff’s multibillion-dollar Ponzi scheme. Regulators said that over the years Jaffe had steered $1 billion in client funds to Madoff, earning about $150 million in commissions.

But US District Judge Louis L. Stanton in New York ruled that the SEC failed to prove its case.

“There is nothing inherently fraudulent about referring customers to an investment adviser for fees,’’ Stanton wrote in his decision, adding that regulators had to “show that defendants knew of, or recklessly disregarded, Madoff’s fraud.’’

The judge was not persuaded that Jaffe, the son-in-law of Boston philanthropist and longtime Madoff client Carl J. Shapiro, knew of the swindle simply because he did business with Madoff. Stanton noted that the SEC’s own complaint supported the notion that “Madoff fooled the defendants as he did individual investors, financial institutions, and regulators.’’

Jaffe’s lawyer, Stanley S. Arkin, called the decision a repudiation of a witch hunt that followed the scandal. “Anybody who had any association with Madoff was automatically suspect,’’ he said. “Here was a judge who said, ‘No, just because you were dealing with Madoff doesn’t make you a crook.’ ’’

Madoff is in prison, serving a 150-year sentence for stealing as much as $65 billion from thousands of investors and institutions. His victims ranged from retirees who mortgaged their homes to invest with Madoff to the rich and famous. Clients included Larry King, actors John Malkovich and Zsa Zsa Gabor, as well as New York University, the International Olympic Committee, and the Maimonides School in Brookline.

Jaffe’s life has been thrown into turmoil in the 13 months since the Madoff scandal unfolded. He had been accustomed to a very social and public life, on the fairways of Pine Brook Country Club in his hometown of Weston and at the Palm Beach Country Club in Florida. He was a familiar face, too, at glitzy charity galas in Palm Beach. A well-to-do broker who rubbed elbows with wealthy investors, he sold people on the mystique of Madoff’s perpetually strong investment returns - returns that proved to be fabricated.

Jaffe ran a small office in the Back Bay for Cohmad, a Madoff-controlled firm named after Madoff and for the Cohn family that ran it.

In yesterday’s decision, Cohmad and the Cohns also were cleared of fraud charges. The SEC has 30 days to decide whether to refile its case; a spokesman said the agency was reviewing the judge’s order.

Jaffe still faces a similar lawsuit filed by Irving Picard, the bankruptcy trustee appointed to recover assets for Madoff’s victims. Picard aims to seize the millions of dollars in commissions that Jaffe and Cohmad earned for referring people to Madoff. Picard has alleged that Cohmad “had little other business or purpose, apart from steering customers’’ to the swindler.

Picard, in an e-mail response to a Globe inquiry, said the outcome in the SEC case would not deter him from his lawsuit.

Jaffe and the Shapiro family have repeatedly said, through spokesmen, that they also were victims of Madoff’s fraud, and lost large portions of their money to a man they once considered a close friend. Shapiro has acknowledged losing at least $400 million personally, and about $145 million of the Carl & Ruth Shapiro Family Foundation’s money. It has funded Boston hospitals, universities, arts institutions, and social services.

But Picard, the bankruptcy trustee, said Carl Shapiro reaped $1 billion in false profits from Madoff over 40 years. Shapiro, who is now nearly 97, was recently deposed in Florida by the trustee’s staff. Shapiro’s lawyers are negotiating with the trustee.

Beth Healy can be reached at bhealy@globe.com.