Seven big global banks from the United States, Europe and Japan have been sued by the trustee seeking to recover assets from the massive Bernard Madoff fraud case.
The trustee, Irving Picard, is seeking more than one $1 billion from the banks, claiming they knew or should have known of the fraud in accepting money through various Madoff funds.
The seven latest banks added to the litigation are US-based Citibank and Merrill Lynch (now part of Bank of America); the broken-up former Belgian bank Fortis; Natixis of France; Dutch-based ABN Amro; Spain’s Banco Bilbao Vizcaya Argentaria (BBVA); and Japan’s Nomura.
The separate complaints filed in New York allege that the banks enabled the Madoff Ponzi scheme “by opening a spigot of new money into the Madoff feeder fund network.”
Because they were promised hefty returns, “the financial institutions hedged their exposure to the derivative investors by purchasing shares of the feeder funds.”
The suit against Citibank, which is part of Citigroup, seeks 425 million dollars.
“Armed with considerable non-public information about Madoff, Citi either knew or should have known that Madoff’s investment advisory business was a fake, and that the funds Citi received from these two Madoff feeder funds came from Madoff’s fraudulent activities,” said Mr Picard.
Mr Picard noted that warning signs to Citi included an email from and a meeting with an early Madoff whistleblower stating that the Madoff investments were a Ponzi scheme.
Similar allegations were made against Natixis, with the trustee seeking 400 million dollars.
“Armed with knowledge of many badges of fraud, Natixis and its related entities nevertheless provided substantial momentum furthering Madoff’s Ponzi scheme, especially in Europe,” said Mark Kornfeld, a lawyer for the trustee.
The suites seek to recover addition funds from Fortis ($230 million); ABN Amro ($270 million); BBVA ($45 million); Nomura ($35 million); and Merrill Lynch ($16 million).
In a separate announcement, Mr Picard said he was seeking $100 million from Sandra Manzke, members of her family, and the Maxam Capital Management which she created.
Picard also filed a complaint in London seeking to recover at least $80 million from the British unit of the Madoff funds, Madoff Securities International Ltd.
Mr Madoff, who touted himself as one of New York’s most successful money managers, was arrested in early December 2008 for running a pyramid scheme. He was sentenced in June 2009 to 150 years in prison.
Mr Madoff’s victims, including charities, major banks, Hollywood moguls and savvy financial players, handed him tens of billions of dollars over more than two decades.
The amount of money stolen remains elusive: Mr Madoff originally claimed to have been managing $65 billion, but in October the court-appointed liquidator said the real bottom line was $21.2 billion.