Settlement in Madoff’s Ponzi scheme resolves attorney general’s claims

November 13, 2012 12:42 pm Published by Leave your thoughts

The Bank of New York Mellon Corporation has decided to pay $210 million to settle a number
of lawsuits filed by plaintiffs who claim they suffered financial losses in Bernard Madoff's scam. Also, as much as $9 million will be offered by other defendants in the case, according to the Wall Street Journal.

This settlement has solved a number of claims that were filed by investors as well as the U.S. Department of Labor and the attorney general's office. Ivy Asset Management, a subsidiary of the Bank of New York Mellon Corporation, was entangled in the fraud and allegedly violated New York's Martin Act – which gives certain powers to attorney general attempting to fight financial fraud – as well as breached fiduciary duty and business conduct.

"Ivy Asset Management violated its fundamental responsibility as an investment adviser by putting its own pecuniary interests ahead of the interests of its clients," New York Attorney General Eric Schneiderman told reporters. "An investment adviser should apprise its clients of risks, but Ivy deliberately concealed negative facts it uncovered in its due diligence of Madoff in order to keep earning millions of dollars in fees. As a result, its clients suffered massive and avoidable losses."

Reuters reported that, after the Ponzi scheme took place, investors lost as much as $236 million. Ivy Asset Management did not disclose damaging information about Madoff to investors in order to make financial profits in fees.

What businesses need to know about Ponzi schemes

A Ponzi scheme is essentially investment fraud that brings money from new shareholders to existing investors. The U.S. Securities and Exchange Commission (SEC) holds the fraudsters in charge of these scams accountable for their actions. In the last two years alone, the SEC was able to bring enforcement actions against 200 individuals carrying out Ponzi schemes.

An Arizona business attorney can help companies develop new solutions if they find themselves accused of fraud.
 

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