Trustee reaches US$687M settlement with feeder fund in Madoff scam
European cash kept Ponzi scheme afloat LEGAL
N EW Y OR K • The Irish investment fund that helped open a floodgate of European cash for Bernard Madoff ’s bogus securities firm in the early 1990s agreed to pay US$687 million to victims of the fraud to resolve a trustee’s lawsuit — the biggest settlement in the case in six years.
The deal was struck with Dublin- based Thema International Fund PLC, part of a web of offshore entities linked to Austrian banker Sonja Kohn and the Benbassat family of Swiss investment professionals. They gave Madoff vital access to cash as his Ponzi scheme began to lose steam, the trustee, New York attorney Irving Picard, has said.
Details of the accord were filed on Wednesday with U.S. Bankruptcy Judge Stuart Bernstein in Manhattan. An approval hearing is scheduled for Oct. 25. The deal will boost total recoveries for victims to about US$12.7 billion, or about US72 cents for every dollar in principal that was wiped out by the fraud.
Picard is still recovering large amounts of money for thousands of victims through lawsuits against funds and customers who profited from the scam. Manhattan- based Bernard L. Madoff Investment Securities LLC’s clients, including dozens of offshore feeder funds, lost US$17.5 billion in principal.
The details of Thema’s case track the story of Madoff ’s expansion into Europe in the early 1990s, as sources of new cash in the U.S. threatened to dry up. Kohn, who met Madoff while working in New York in the 1980s and later founded Vienna-based Bank Medici, regularly directed customers to the con man, according to court papers. In 1992, she introduced Madoff to Mario Benbassat, the Swiss family’s patriarch and found- er of the Geneva-based asset manager Genevalor, Benbassat & Cie, as a possible source of new funds.
“Madoff recognized that the Benbassats could potentially direct a large influx of new money,” the trustee said. “For their part, the Benbassats came to believe that they had a ‘favoured’ position with Madoff.”
Madoff, 79, pleaded guilty in 2009 and was sentenced to 150 years in prison. Five of Madoff ’s top aides were convicted after a trial in 2014. Neither Kohn nor anyone in the Benbassat family were ever accused of crimes.
Bank Medici was shuttered by Swiss regulators after Madoff ’s fraud was exposed. Thema and i ts principals have long denied any wrongdoing, laying the blame on Madoff and the feeder fund’s custodian bank, HSBC Holdings Plc. They sued the London-based bank for US$ 1.1 billion, blaming the lender for failing to scrutinize Madoff ’s operations. The suit was settled in 2013.