A U.S. appeals court said that Citigroup Inc. must face a lawsuit over Bernie Madoff’s Ponzi scheme that seeks to recover $343 million the bank allegedly received after it became aware the funds might have suspicious origins, WSJ Pro Bankruptcy reported. The appellate ruling resurrected a lawsuit by Irving Picard, the trustee tasked with recovering money for Ponzi scheme victims, alleging that Citi accepted money from Mr. Madoff’s phantom investment firm despite knowing facts suggesting it was engaged in fraudulent activity. Picard’s case against Citi was dismissed by the bankruptcy court overseeing his liquidation of Bernard L. Madoff Investment Securities LLC and by the federal district court in New York, which found that the trustee was required to prove that Citi lacked good faith by being “willfully blind” to “red flags” of fraudulent activity. The Second Circuit Court of Appeals ruled Monday that this wasn’t the correct standard, and that Picard only had to demonstrate that Citi lacked good faith because it was aware of suspicious facts that would have led a reasonable person to investigate further. In addition to Citi, Picard also won a ruling from the appeals court allowing it to proceed with similar lawsuits against two other financial institutions that did business with Madoff, Legacy Capital Ltd. and Khronos LLC. Read more.
According to further analysis of the decision by ABI Editor-at-Large Bill Rochelle in today's Rochelle's Daily Wire, the Second Circuit's ruling represents a major victory for the trustee and victims of the Bernard Madoff Ponzi scheme. Together, the rulings revive about 90 lawsuits against global financial institutions, hedge funds and other participants in the global financial markets. The decision allows Irving Picard, the Madoff trustee, to pursue the recovery of an additional $3.75 billion in stolen customer property, the trustee said in a statement. The resurrected lawsuits will bring defrauded customers “as close as possible to recovering 100% of their losses,” the trustee said. Click here to read the full RDW analysis.
