By Grant McCool
A group of investors who may be asked to return money they withdrew from accused swindler Bernard Madoff's firm lost an attempt on Tuesday to exempt themselves from a July deadline for claims.
A motion was brought on behalf of investors Lucerne Foundation, Collingwood Enterprises and Douglas Rimsky, who said they do not have claims now but could in future if a court-appointed trustee tried to recover their profits.
Bernard L. Madoff Investment Securities is being liquidated by court-appointed trustee Irving Picard under the Securities Investor Protection Act to recover assets of Madoff.
"The Movants (investors) fail to demonstrate that they have suffered or imminently will suffer, any real or substantial injury," U.S. Bankruptcy Court Judge Burton Lifland said in a written opinion. "They merely allege that they are potential defendants to actions which may or may not be commenced."
He said it was up to individual investors to decide whether or not to file a claim by the July 2 deadline set by the trustee under the Act.
Picard is working with the Securities Investor Protection Corp (SIPC), a nonprofit group established in 1970 by Congress to keep a reserve of funds for investors in failed brokerages.
Madoff, a former Wall Street trader and investment manager, was arrested on December 11 last year and charged with securities fraud after authorities said he admitted to running a giant Ponzi scheme with losses of up to $50 billion over many years. A Ponzi scheme is one in which early investors are paid with the money of new clients.
In a separate ruling from the bench on Tuesday, Lifland ruled that a New York businessman's claim to recover $10 million he invested with Madoff's firm days before the financier's arrest will not be treated differently than other customer claims.
In January, New York fuel service company president Martin Rosenman sued trustee Picard for the return of $10 million wired to the Madoff firm and put into a bank account days before his arrest.
The money was sent on behalf of Rosenman Family LLC, which said in the lawsuit that Madoff made a phony transaction using the money.
His lawyer argued that Rosenman's money should not be collected like other customers' claims because it could be traced to the bank.
"It does appear the money was for the purchase of securities and the timing is not that relevant," Lifland said in granting a motion by the trustee to dismiss the complaint. "The timing issue is the sad part of this, but you know what ... there are a lot of sad people out there. I have sympathy for all of those victimized."
Picard told the court on February 4 that he has recovered $946.4 million from the Madoff firm's assets for customers. Picard told the first meeting of Madoff creditors last Friday that 2,350 customer claims had been filed.
The cases: Rosenman Family LLC v Irving Picard, as Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC and JP Morgan Chase Bank 09-01000 U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Securities Investor Protection Corp v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York.
