Madoff Bankruptcy Update

Irving Picard, the trustee of the Bernard Madoff bankruptcy estate, file a lawsuit against JP Morgan Chase & Co. The lawsuit against JPMorgan Chase & Co. entitled Picard vs. JPMorgan Chase & Co., 11-cv-913, in the U.S. District Court, Southern District of New York, was dismissed on November 1, 2011.

According to “JPMorgan Wins Dismissal of $19 Billion in Madoff Claims,” Businessweek, November 3, 2011, U.S. District Judge Colleen McMahon ruled Picard lacked standing to bring the lawsuit. The lawsuit asserted $19 billion in claims. Standing is what allows an individual or entity to sue. It requires an injury and a controversy. Picard claimed JPMorgan helped in the Madoff fraud, and as a consequence is liable to several Madoff investors.

Judge McMahon’s ruling applied to the $2 billion in allegations Picard similarly brought against UBS AG in the lawsuit entitled Picard vs. UBS AG, 11-cv-913, filed in the U.S. District Court for the Southern District of New York.

Meanwhile, the Madoff Ponzi scheme has resulted in a guilty plea and Securities Exchange Commission compliant against David Kugel. Criminal and civil charges were brought against Kugel, a longtime employee of Bernard L. Madoff Investment Securities LLC. Allegedly, participated in the fraud at the advisory business, according to SEC v. Kugel (S.D.N.Y. Filed Nov. 21, 2011).

According to the SEC’s complaint, Kugel started working for Madoff’s brokerage operations in early 1970 as an arbitrage trader in the proprietary trading operation. Later, he worked at the firm as a trading compliance analyst ensuring computer systems facilitated compliance with regulations affecting proprietary trading operations and market-making.

Around the early 1970s, Madoff let Kugel know about the advisory business. Kugel was asked to provide backdated or historic convertible arbitrage trades for inclusion on investor account statements. Afterwards, the staff of the advisory business periodically got historical trade data from Kugel. Sometimes, the data replicated trades he had completed. Other times, the data was drawn from historic information obtained from resources such as The Wall Street Journal. The claimed transactions were included in investor account statements.

The SEC’s complaint alleged violations of Exchange Act Sections 10(b) and 15(c), Securities Act Section 17(a) and Advisers Act Sections 206(1), (2) and 204. Kugel pleaded guilty to criminal charges and agreed to settle the SEC’s action, consenting to entry of a permanent injunction and forfeiture of monetary gains.

Engage an experienced New York bankruptcy attorney who keeps up with the news and changes in bankruptcy laws and regulations for counseling on bankruptcy proceedings.