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Class Certified in Suit Against Madoff Feeder Funds

Monday, March 4, 2013

The U.S. District Court for the Southern District of New York Feb. 25 certified a class action by investors against the largest group of feeder funds that allegedly funneled money to convicted fraudster Bernard Madoff (Anwar v. Fairfield Greenwich Ltd., S.D.N.Y., 09-00118, 2/25/13).

In 2009, investors filed a putative class suit against Fairfield Greenwich Group, which operated the funds; Citco Group Ltd. and GlobeOp Financial Services, which administered them; and PricewaterhouseCoopers LLP, which served as the funds' auditor. The plaintiffs alleged that Fairfield misrepresented to investors how their money would be handled.

Specifically, the investors charged that Fairfield told them Madoff would invest their money in a “split-strike conversion” strategy that would yield high returns and that Fairfield had performed “extensive due diligence” on Madoff and kept a watchful eye on his operations. As for Citco, GlobeOp, and PwC, the court recounted, the plaintiffs alleged that they “failed to conduct any due diligence” and effectively aided the Faifield funds “in their fraud and breaches of fiduciary duties.”

The court, in an opinion by Judge Victor Marrero, found that the plaintiffs had met their burden to certify the action under Rule 23 of the Federal Rules of Civil Procedure.

However, Marrero excluded from the class plaintiffs from more than two dozen countries, finding that those jurisdictions may not recognize, enforce, and give “preclusive effect” to the court's judgment in the matter.

The order can be seen at /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/fairfield(1).pdf. 

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