Madoff Scandal: South Florida will long feel ripple effect . . . – Still Feeling IT!

Madoff scandal: South Florida will long feel ripple effect

 When I wrote this editoral four and a half years ago, I thought the Madoff case would be a problem for South Floridians.  Today, I was hired by a new client for a new Madoff related problem.  Here is the entire article as published the day after Madoff’s arrest.
December 21, 2008|By Eric N. Assouline

Bernard Madoff’s arrest for orchestrating the largest Ponzi scheme in history will have an extensive ripple effect on South Florida for years to come. From both sides of the fraud, individuals and entities in South Florida should expect to hear from federal investigators, attorneys, and the media.

From one side, you have the victims of the scandal, that lost all or part of the money they “invested” in the Madoff Investment Securities, LLC group of hedge funds. Naturally, these individuals and entities, many of which shared “investment advice” in Madoff’s stomping ground of Palm Beach County, will be looking to recover their losses.

In order to achieve this objective, in addition to relying on the SEC’s enforcement action in New York, many South Florida investors will be hiring attorneys to investigate and possibly sue any professionals, such as investment brokers, attorneys, and accountants, that either knew of on-goings of Madoff’s company or should have known. These targets are often lucrative sources of recovery because they carry insurance for this exact type of negligence.

On the other side are those investors that were lucky enough to exit the hedge fund with their money and a profit. These investors are characterized as “profiteers” and are targets of recovery for the portion of the returns they received that exceed their investment.

Unfortunately, these “false profits” that were paid to profiteers may be the subject of recovery by the court appointed receiver in order to redistribute these funds to investors that lost the principal on their investment.

The receiver is also likely to try to recover donations and contributions to charities and foundations. By their nature, these types transfers bolstered Madoff’s standing in the community as a wealthy benefactor and only further imbued investors with confidence to invest in his hedge funds. The problem for the recipients of these transfers is that if they were made with Madoff’s intent to defraud creditors (like the investors that have now lost money) and, like the false profits, they may be recoverable by the receiver as fraudulent transfers.

As his tapestry of lies is unwoven, the end result is unknown. But one thing is for sure, this Ponzi scheme will be on the minds of many South Floridians for years to come.  Amen.

Eric N. Assouline, Esq. is a litigation partner with the business law firm of Assouline & Berlowe, P.A. in its Ft. Lauderdale office.

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