Tuesday, May 19, 2009

Fairfield (Madoff Feeder) Sued

Madoff's largest feeder sued (via WSJ). Per the article:

The lawsuit, in federal bankruptcy court in Manhattan, alleges the funds, which placed client money with Mr. Madoff, "should have known" he was engaged in fraud. The suit doesn't provide evidence Fairfield or its officers had knowledge of the Madoff fraud but says the firm didn't perform the adequate due diligence it promised its clients.

The suit says Fairfield reaped hundreds of millions of dollars in fees from its clients. The suit alleges Fairfield missed numerous warning signs, including trades listed in its accounts that could never have occurred, and seeks the return of money it withdrew on behalf of its clients since 1995.

I am interested to see how this suit and other similar lawsuits will pan out. In my opinion, many of these feeders must have been either complicit in the fraud or completely negligent in their due diligence.

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