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A Manhattan real-estate lawyer under criminal investigation by New York City and federal authorities allegedly can’t account for $17 million in client funds, according to liquidators called in to sift through his failed law firm, WSJ Pro Bankruptcy reported. The collapse of real estate firm Kossoff PLLC has destroyed livelihoods, tarnished reputations and left a trail of unpaid creditors behind, said liquidation attorney Neil Berger during a court hearing yesterday. Lawyers are only beginning to sort through the trove of documents associated with the defunct firm, which was pushed into liquidation last month after a wave of civil allegations that its namesake lawyer had absconded with client money. Berger said in a virtual hearing in the U.S. Bankruptcy Court in New York that liquidators are focused on collecting books and records for their investigation of the allegations and the firm’s collapse. The whereabouts of the firm’s top lawyer, Mitchell Kossoff, have been unknown since last month, according to the liquidators, who sought a court order yesterday forbidding anyone from taking or destroying documents from the firm’s offices at 217 Broadway or anywhere else. The Manhattan district attorney’s office and the U.S. attorney’s office in Brooklyn also are investigating Mr. Kossoff, whose lawyer said in the hearing that many of the documents at issue had been seized by prosecutors. Before the firm’s bankruptcy, Mr. Kossoff was accused in lawsuits of disappearing with client funds that were supposed to be sitting in escrow for real estate deals. He hasn’t been charged with a crime. 

Bernie Madoff died yesterday in a prison medical center in North Carolina. For many of the victims of Mr. Madoff’s Ponzi scheme and lawyers still pursuing his ill-gotten assets, the fallout continues to affect their lives, WSJ Pro Bankruptcy reported. More than a decade has passed since Mr. Madoff confessed to his crimes and began serving a 150-year sentence. In time, a court-appointed trustee learned the scheme had taken an estimated $17.5 billion of client money, of which more than $14 billion has been recouped and distributed to account holders at Mr. Madoff’s now-defunct investment firm. The trustee is pursuing more banks, offshore funds, family offices and other investors for allegedly taking stolen cash, in litigation expected to wind through courts for years. As those efforts play out, the financial lives of numerous individuals and nonprofit organizations who turned to Mr. Madoff to safeguard their money remain ruined.

A U.S. judge said on Friday Deutsche Bank AG may sue two offshore funds for allegedly reneging on an agreement to sell the German bank $1.6 billion of claims in the bankruptcy of swindler Bernard Madoff’s namesake firm, Reuters reported. Deutsche Bank had accused the Kingate Global Fund and Kingate Euro Fund, which funneled client money to Madoff before his Ponzi scheme collapsed in 2008, of having “sellers’ remorse” for agreeing to sell the claims at 66 cents on the dollar in 2011, only to see their value later rise substantially. In refusing to dismiss the lawsuit, U.S. District Judge Edgardo Ramos in Manhattan pointed to language that the agreement was “firm, irrevocable and binding,” though a formal contract was never signed and much time had passed. “Here, two sophisticated parties agreed of their own free will to be bound,” Judge Ramos wrote. He said that Deutsche Bank can also pursue a claim that the Kingate funds acted in bad faith by filing for protection under chapter 15 of the Bankruptcy Code in September 2019 to escape possible litigation by the bank.