U.S. Bankruptcy Judge Stuart Bernstein in New York has approved a $543 million settlement with the trustee for Bernard Madoff’s firm and JPMorgan Chase. The agreement had been filed on Jan 7, but approved this week. The deal is supposed to resolve a lawsuit by Irving Picard, the trustee of Madoff’s defunct law firm, and two related class-action suits filed by Madoff victims. In their lawsuits, thousands of Madoff victims had accused JPMorgan of being willfully negligent in dealing with the Madoff Ponzi scheme.
While approving the settlement, Bernstein said the deals provide “substantial benefit” to victims and the settlements are “fair, reasonable and in the best interest of the Madoff estate.”
With this settlement with JPMorgan, recoveries made by the Madoff trustee exceeded $10 billion or close to 60 percent of the $17 billion principal lost by investors in Madoff’s Ponzi scheme. Picard had alleged in his lawsuit that JPMorgan had helped Madoff to perpetuate his scheme for years by ignoring clear signs of fraud.
Instead of investing in securities, as advertised, Madoff used to deposit money from new customers into the account and used the money from new customers to pay earlier investors. His scheme collapsed after his confession and arrest in 2008.
JPMorgan has agreed to pay $325 million to the Madoff trustee for settling his lawsuit while the remaining $218 million of the settlement are to resolve the two related class-action suits. The class-action suits were filed with Picard’s assistance after an appeals court barred him from bringing common-law-claims against JPMorgan. Picard had appealed to the U.S. Supreme Court, meanwhile JPMorgan thought settlement was best.
A group of about 200 Madoff victims who were termed as “net winners” as they had received more money from the scam than they had deposited received nothing under the deal. They have threatened to sue JPMorgan separately. They told the bankruptcy court that they were opting out of the JPMorgan settlement. However, Bernstein told the lawyer for the group, “You’re opting out of a class you’re not a member of – sounds like a Groucho Marx joke.”