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A New York Court Rejects Merkin’s Attempt to Avoid Trial in the Madoff Clawback

January 30, 2017, New York – In a clawback war between Madoff Trustee, Irving Picard and a financier, J Ezra Merkin, the Court sided with Picard, holding that Merkin was willfully blind to Bernie Madoff’s Ponzi scheme. Picard, the trustee for the liquidation of Bernard L. Madoff Investment Securities (BLMIS) LLC, sued Merkin and related entities to recover preferential and fraudulent transfers from BLMIS. Merkin sought summary judgment, alleging that he would not have lost $110 million in the scam had he suspected that Madoff was running a Ponzi scheme. Merkin argued that he was duped by the fraudster like numerous other investors.

Rejecting Merkin’s motion, the Bankruptcy Judge Stuart M. Bernstein stated that the evidence presented by Picard was sufficient enough to prove that Merkin was warned as early as 1992 about the possibility of BLMIS being a Ponzi scheme and that the investment returns were too good to be true. The Court concluded that despite the knowledge that Madoff was likely operating a fraudulent enterprise, Merkin did nothing to allay his suspicions. Accordingly, the Court rejected Merkin’s attempt to avoid the trial in the clawback suit involving hundreds of millions of dollars tied to investments in the Bernie Madoff’s Ponzi scheme. The case is Picard v. Merkin et al., case number 1:08-ap-01789, in the U.S. Bankruptcy Court for the Southern District of New York.