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The trustee seeking money for Bernard Madoff's victims on Friday said they will receive $140 million from a feeder fund that ignored "glaring" red flags that the swindler was running a Ponzi scheme, Reuters reported on Friday. Plaza Investments International Ltd. will make the payment to end a lawsuit brought by Irving Picard, the trustee liquidating the former Bernard L. Madoff Investment Securities LLC. The accord would boost to nearly $10.9 billion the sum that Picard has recovered for Madoff customers, who he estimates lost $17.5 billion of principal. According to settlement papers filed with the U.S. bankruptcy court in Manhattan, Picard will deem valid about $405 million of Plaza's claims against Madoff's former firm.

A federal judge on Tuesday ruled largely in favor of the trustee seeking potentially hundreds of millions of dollars for Bernard Madoff's victims in 233 lawsuits that sought to recoup alleged fictitious profits generated by the Ponzi schemer's firm, Reuters reported yesterday. Bankruptcy Judge Stuart Bernstein said that trustee Irving Picard could try to claw back money that former customers who he calls "net winners" withdrew from Bernard L. Madoff Investment Securities LLC in the two years prior to that firm's December 2008 bankruptcy. Judge Bernstein rejected the argument that clawbacks should be limited because only a few Madoff employees knew of the fraud. "Once it is determined that a Ponzi scheme exists, all transfers made in furtherance of that Ponzi scheme are presumed to have been made with fraudulent intent," he wrote in his opinion. But the judge said Picard did not show he was presently entitled to recoup money from various "subsequent transferee" defendants who received sums originally withdrawn from Madoff's firm.

The trustee seeking money for Bernard Madoff's victims will receive $35.4 million in a settlement with two funds once run by Wall Street hedge fund manager J. Ezra Merkin, Reuters reported yesterday. According to settlement papers filed on Friday in bankruptcy court, the payment will be made by the Ariel Fund Ltd. and Gabriel Capital LP feeder funds, through their receiver Bart Schwartz. In exchange, the trustee Irving Picard will deem valid about $367.9 million of the funds' claims against the former Bernard L. Madoff Investment Securities LLC. Ariel and Gabriel Capital will be entitled to $179.5 million of "catch-up" distributions. The accord requires court approval, and the funds did not admit wrongdoing. Picard is still seeking an additional $280 million from Merkin, his Gabriel Capital Corp, and his Ascot Fund Ltd. and Ascot Partners LP feeder funds.

A Florida court on Friday sided with the Consumer Financial Protection Bureau and the state over claims that a law firm charged illegal fees to consumers seeking foreclosure relief, National Mortgage Servicing News reported today. The Southern District Court of Florida found Hoffman Law Group, a firm in North Palm Beach, Fla., and its affiliates liable for $11.7 million in illegal upfront fees. The lawsuit said that the firm charged consumers for foreclosure mitigation services that often went nowhere. In addition to the liability, the firm was ordered to pay a $10 million civil money penalty to the CFPB, and a $6 million penalty to the state. However, much of the penalty appears to be uncollectable. A receiver appointed by the court to take charge of the company will pay $655,737, which is the remainder of the Hoffman Law Group and its affiliates' assets. The state and the CFPB last year had obtained a temporary restraining order and asset freeze against the companies.

David G. Friehling, auditor for Bernard L. Madoff, won plaudits from federal prosecutors, and because of that he will not serve any time in prison for his role in the financial fraud, the New York Times reported today. A federal judge yesterday sentenced Friehling to a year of home detention and another year of supervised release. Judge Laura Taylor Swain of Federal District Court in Manhattan noted that Friehling had cooperated extensively with federal prosecutors, including testifying for several days during a lengthy trial last year that resulted in the convictions of five former employees of Madoff’s securities firm.

The trustee recovering funds for investors cheated by Bernard Madoff is urging a judge not to dismiss his suit against an accounting firm that had close ties to Madoff, saying that its principals were a "crucial part of the machinery" that kept the Ponzi scheme going, Dow Jones Daily Bankruptcy Review reported today. Lawyers for trustee Irving Picard said in a court filing on Thursday that former Madoff principal Frank Avellino and partner Michael S. Bienes ran the first feeder funds that pooled investor cash and funneled the money to Madoff. Picard's 13-count amended complaint, filed in November, seeks a total of about $900 million from Mr. Avellino, Bienes, and their wives and other relatives and related entities. Most of the charges are for the transfers of money Picard says the parties received. Picard said that Avellino started investing with Madoff as far back as 1962. In the Thursday filing urging against dismissal of the complaint, Picard's lawyers said, "Avellino and Bienes were not innocent victims of Madoff's fraud. Instead, they had actual knowledge of the fraud and actively assisted Madoff in concealing it from government regulators who were closing in on the truth."

Lynn Tilton, who’s already defending SEC claims of overcharging customers by almost $200 million in fees, now faces fraud allegations by her clients, Bloomberg News reported yesterday. Two investors in funds managed by Tilton’s Patriarch Partners LLC said in a lawsuit filed on Friday that it’s “obvious” that the “vast majority of the information” they received from the firm was “false and misleading.” Hannover Funding LLC and Norddeutsche Landesbank Girozentrale are seeking at least $44 million in their lawsuit in state Supreme Court in Manhattan. The suit against the self-professed billionaire follows the Securities and Exchange Commission’s March 30 complaint against Tilton, claiming that she overcharged investors on fees collected on $2.5 billion of collateralized loan obligations.

Two law firms and their lead attorney on Wednesday lost a default judgment in New York County Supreme Court after allegedly participating in a fraudulent mortgage rescue scheme, Collections & Credit Risk reported today. Litvin Law Firm; Litvin, Torrens & Associates PLLC; and the firms’ principal attorney Gennady Litvin were ordered to stop illegal business practices, including preying upon consumers by claiming to offer a full legal services plan that would help them avoid foreclosure. The court also ordered Litvin Law Firm and Gennady Litvin, which have recently filed for bankruptcy, and Litvin, Torrens & Associates to provide a full accounting so that New York Attorney General Eric Schneiderman’s office can determine an appropriate amount for restitution for victims, who commonly paid hundreds of dollars in monthly fees for services that were never provided. Last year, Schneiderman’s office filed a lawsuit against the firms and Gennady Litvin for allegedly offering fraudulent legal services and other foreclosure assistance to consumers in New York and other states.