Legal News

With Spate of Filings, Madoff Trustee Kicks off ?Clawback? Party

By Ashby Jones

Let the clawback party begin.

Irv Picard (pictured, left), the trustee in charge of liquidating the assets of Bernard Madoff’s investment firm, has begun sending subpoenas to brokerage firms that may have facilitated trades in Madoff’s operation. Click here for the WSJ story; here and here for earlier posts on the clawback conundrum.

Some legal experts think the filings could show that Picard is starting the process of retrieving money Madoff’s firm paid out to various firms or investors in the days before his arrest for operating an alleged Ponzi scheme.

The filings, made in federal bankruptcy court in New York late Monday night, included documents showing that Picard had subpoenaed, among others, Timber Hill LLC, a Greenwich, Conn.-based market maker; Knight Capital Group Inc., a capital markets firm in Jersey City, N.J.; and PEAK6 Investments LP, a market-making firm in Chicago. None of the subpoenaed firms could be reached for comment.

None of the companies has previously been identified as a “feeder firm,” or an entity that helped connect investors with Madoff. Instead, the firms sent subpoenas were more likely brokerage operations through which Madoff sold securities in order to meet redemption requests from investors. Representatives for Mr. Picard didn’t return calls for comment.

Since shortly after Madoff’s alleged Ponzi scheme was revealed, some investors say they have feared they would be subjected to so-called clawbacks of money they had recently withdrawn, after losing in some cases millions of dollars. Such clawback provisions are based on the logic that the redemptions were paid using other investors’ money.

Full post as published by Law Blog - WSJ.com on February 17, 2009 (boomark / email).