Madoff Trustee Fetches $370 Million as Offshore Funds Settle

(Bloomberg) -- Two groups of offshore funds that invested in Bernard Madoff’s fraudulent securities firm agreed to pay a combined $370 million to resolve lawsuits by the court-appointed trustee raising cash for victims.

Lagoon Investment Ltd. and related funds will hand over about $240 million while Thema Fund Ltd. and its affiliates will pay about $130 million, trustee Irving Picard said in a statement Tuesday. Details of the settlements were filed in U.S. Bankruptcy Court in Manhattan, where the suits were filed in 2010.

The deals were struck just one day after the estates of Madoff’s dead sons, Andrew and Mark, agreed to pay a total of $23 million to settle lawsuits by the trustee accusing them of profiting from the scam for years. The trustee has so far raised more than $11.6 billion for victims through hundreds of lawsuits against funds and customers who profited from the scam.

Stephen Harbeck, chief executive officer of the industry-financed Securities Investor Protection Corp., which hired Picard, called the settlements "significant accomplishments" given the difficulty of recovering funds from offshore accounts, according to the statement.

British Virgin Islands

Lagoon, which is based in the British Virgin Islands, and Thema, with headquarters in Bermuda, were among many feeder funds that directed cash to Madoff’s New York-based investment-advisory business, often without their customers’ knowledge.

Thousands of Madoff customers lost $17.5 billion in principal when his Ponzi scheme collapsed in December 2008. Thema alone lost about $1 billion.

Under the accord, Thema and Lagoon will turn over all the money they withdrew from their accounts in the six-year period prior to Madoff’s arrest. The settlement clears the way for the funds to get approved claims in the bankruptcy case, meaning they’ll get a share in Picard’s recoveries and distribute the money to their own customers.

A hearing on the deal is scheduled for July 26.

Thema and Lagoon were among a dozen funds that used HSBC Holdings Plc as custodian. Picard in 2010 sued the London-based bank for $9 billion for allegedly aiding Madoff’s fraud through the network of feeder funds. The trustee lost that suit as well as his cases against other banks with similar connections to Madoff on the grounds that trustees can only collect money owed to the estate, not sums owed to creditors.

Madoff, 79, pleaded guilty in 2009 and was sentenced to 150 years in prison. At the time his Ponzi scheme fell apart, customer statements reflected more than $40 billion in imaginary profit from fake investments. Five of Madoff’s top aides were convicted after a trial in 2014.