Merkin Money Not ‘Property’ of Madoff, Schneiderman Says

New York Attorney General Eric Schneiderman said the $415 million that former Bernard Madoff investor J. Ezra Merkin will pay under a settlement to compensate investors in three hedge funds he managed isn’t “property” of the con man’s estate, as claimed by the trustee liquidating the estate.

Asking U.S. District Judge Jed Rakoff to take the case, the state’s highest law enforcement official said it would be “unprecedented” for a federal court to stop the settlement of claims by a state law enforcement agency against parties who aren’t trying to take money from a bankrupt entity, “on the ground that the settlement might make it difficult for the trustee to collect a judgment he hopes to obtain someday.”

Madoff trustee Irving Picard sued Schneiderman, saying he was making an “end run” around bankruptcy law and the Merkin deal should be stopped because Picard was pursuing similar claims against the former money manager.

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: Charles Carter at ccarter12@bloomberg.net

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