Madoff

Deminor is more than ever active in representing the interests of investors who invested in so-called "Madoff feeder funds". Litigation has been initiated in Luxembourg, the Netherlands and in Monaco against various opponents, primarily banks and auditors whom we consider as liable for the losses suffered by the funds and their investors.

 

Deminor's group is composed of more than 2,500 investors, having collectively lost around 400 million EUR on their investments in various Madoff feeder funds. As such, the Deminor group has probably become the biggest syndicate of investors in Madoff feeder funds, not only in Europe but also on a worldwide level.

 

More than two and a half years after the Madoff scandal was revealed, investors are still trying to understand what part of their investment can potentially be recovered. The situation has become extremely complex, with ongoing litigation at various levels, i.e. the U.S. Trustee acting on behalf of the Madoff estate, the liquidators of the Madoff feeder funds and the investors themselves. To make matters worse, the U.S. Trustee has sued the feeder funds in order to get as much money back into the Madoff estate.

 

Apart from the Santander early settlement, no other fund service providers have made any attempts to settle the case with investors. Despite the existence of overwhelming evidence that banks such as UBS, HSBC and Citco, and auditing firms such as Ernst & Young and PriceWaterhouse Coopers have failed to adequately supervise BMIS (Bernard Madoff Investment Securities LLC) and, in some cases, have even chosen to hide important risks from investors, they have not made so far any attempt to present a compensation plan to investors.

 

On the contrary, as we are witnessing in nearly all court proceedings, the banks and auditors are using any possible means to delay a debate on the merits of the case. It is their right to be convinced that they have not committed any wrongdoing, but the best way to get an answer from an independent court on "who is liable" is to get the debate on the merits ongoing. The procedural tactics that they are using are time consuming and imposing unnecessary costs on all parties involved (including the courts and the defendants themselves). Some of these tactics are unreasonable and, especially in Luxembourg, we are surprised to see that the courts are passively admitting them.

 

Legal uncertainty is not going to help anyone in this case. If the banks and auditors think that investors will in the end give up their legal fight, tired by the endless procedural games played by the opponents, they are simply wrong.

 

There is an opportunity to be grasped by the banks and auditors. The U.S. Trustee's recovery efforts and the distressed market on Madoff customer claims that has progressively taken shape allow for market based compensation mechanisms akin to what certain banks have done in the wake of the Lehman Brothers bankruptcy. Yes, there will be a cost for the banks and auditors, but on the basis of their own due diligence that should not be a surprise to them. On the other hand, there will always be a fast mover advantage for those banks and auditing firms that are willing to take the lead on this. So far, they are willing to let Banco Santander take the prize.

 

For more information about Madoff, please send us an email to madoff@deminor.com