A $1 billion settlement between the liquidator of Bernard Madoff’s brokerage and Tremont Group Holdings Inc. survived an investor challenge, helping to free up money for other investors in the Ponzi scheme.
Court challenges had been tying up the majority of the $9 billion that trustee Irving Picard has raised mostly through settlements. This week, a lawyer said his client, Adele Fox, wouldn’t continue to challenge the Jeffry Picower estate’s forfeiture of $5 billion to Madoff’s estate and more than $2 billion to the U.S., and the U.S. Supreme Court refused to hear an appeal over Picard’s payment formula, freeing up a $2.3 billion customer fund.
Prices for claims on the con man’s estate have climbed to as much as 68 cents on the dollar in recent weeks, from the low 60s, as traders gain “a sense that things are being resolved,” said Joseph Sarachek, managing director of claims trading at CRT Capital Group LLC, which buys and sells distressed debt, including the Madoff brokerage’s.
Separately, Peter Madoff’s guilty plea today -- to conspiracy to commit securities fraud while working for his brother -- contributes to that sentiment, Sarachek said.
In the accord with Tremont, the second-largest feeder to the Ponzi scheme, Picard agreed to accept more than $1 billion from Tremont hedge funds, allowing them to claim about $3 billion from the con man’s estate. Investors in Tremont funds had objected, saying they would lose by the funds’ contribution to the settlement. Tremont said the $3 billion in Madoff claims would help investors recover losses.
Dismissing the challenge as Tremont asked, U.S. District Judge George Daniels said the investors couldn’t try to undo the settlement because they weren’t direct customers of Madoff’s brokerage.
“Appellants are not customers or creditors of BLMIS, and are therefore not directly affected by the settlement,” Daniels said in a written order filed June 27 in U.S. District Court in Manhattan. BLMIS is the defunct Bernard L. Madoff Investment Securities LLC.
Those appealing the Tremont agreement included Phoenix Lake Partners LP, Lakeview Investment LP and a charitable trust. Parties settling with Picard included Oppenheimer Acquisition Corp., an affiliate of the Oppenheimer mutual funds that bought Tremont, and Oppenheimer’s parents, MassMutual Holding LLC and Massachusetts Mutual Life Insurance Co.
Picard had sued Tremont and related entities for $2.1 billion, saying they ignored warnings that Madoff might be running a Ponzi scheme and profited from it. Tremont was the second-biggest so-called feeder into Madoff’s multibillion-dollar fraud, after Fairfield Greenwich Group, Picard said.
Picard has paid investors about $333 million in the 3 1/2 years since Madoff’s 2008 arrest while charging $273 million for his firm’s work. Madoff is serving a 150-year prison sentence.
Picard’s lawsuit is Picard v. Tremont Group Holdings Inc., 10-5310, U.S. Bankruptcy Court, Southern District of New York (Manhattan.) The appeal is 11-cv-07330, U.S. District Court, Southern District of New York (Manhattan).