Madoff Trustee Strikes $860 Million Deal With Kingate Funds
Madoff Trustee Reaches $860 Million Accord With Kingate Funds
(Bloomberg) -- The trustee liquidating Bernard Madoff’s defunct investment-advisory business said he had reached an $860 million settlement with a pair of offshore funds that shunted money to the con man’s company for years.
Irving Picard reached the accord with the liquidators for Kingate Global Fund Ltd. and Kingate Euro Fund Ltd., he said in a statement Wednesday. The arrangement essentially forces the funds to use their recoveries from the Madoff bankruptcy case to finance the settlement.
The $860 million covers 93% of the withdrawals made by the Kingate funds from their accounts at Madoff’s New York-based firm, Picard said. The trustee has used such litigation to recover more than $13 billion for thousands of victims who invested directly with Madoff.
The Kingate funds were founded in the British Virgin Islands in 1994 by two Italian investment advisers operating out of London. Picard sued the funds a decade ago, not long after Madoff’s $20 billion Ponzi scheme collapsed. Among Madoff’s biggest offshore “feeder” funds, they had invested about $1.7 billion with Madoff for their clients and lost about $750 million when the scam unraveled.
Despite their steep losses, Picard sought the return of all their withdrawals from Madoff’s firm during the six-year period before the con man’s arrest in December 2008. The trustee argued that the funds and their founders, Federico Ceretti and Carlo Grosso, failed to conduct due diligence and ignored “red flags” pointing to the fraud, all the while earning millions of dollars in fees from their own customers.
The men and their company, FIM Advisers LLC, denied wrongdoing.
Jodi Aileen Kleinick, a New York-based lawyer for Ceretti, Grosso and FIM, didn’t immediately return a call seeking comment.
Under the deal, the Kingate funds will get approved customer claims in the bankruptcy case totaling $1.6 billion, which includes their lost principal and an increase allowed under U.S. law based on the amount of their settlement payment to Picard.
They will get a catch-up payment on the claims totaling $1.1 billion from the trustee, since they missed out on earlier distributions to victims as a result of the litigation, according to a copy of the agreement filed in court.
Under the agreement, however, they’ll have to pay out whatever they recover from Picard to their investors.
A U.S. bankruptcy judge in New York will consider the deal at a hearing set for Aug. 8, the trustee said.
To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net
To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Peter Jeffrey
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