Madoff 'Feeder Fund' Settlement Reached

As explained in the release announcing the settlement, the payments, "combined with the approximately $2.6 billion already in the Customer Fund and the $5 billion settlement with the Picower estate (currently under appeal) brings the Trustee's recoveries to more than $8.6 billion, or nearly 50% of the approximately $17.3 billion in principal that was lost in the Ponzi scheme by customers who filed claims."

The release states that according to the complaint, the Tremont Group and related entities were aware–through warnings in both internal communications and publicly available information–that the Madoff fund might be fraudulent.

"We believe this settlement–coupled with the Trustee's recent settlements with the Fairfield Sentry, Greenwich Sentry and Greenwich Sentry Partners feeder funds–sends a strong message that the financial community cannot deliberately ignore indicia of fraud," said David J. Sheehan, a partner at Baker & Hostetler, the court-appointed counsel for the trustee, in the release.

In the settlement agreement, both sides stated their desire to avoid the risk, expense and delay associated with litigation.  

The release further says that upon the release of the settlement payments from escrow, the Trustee will allow customer claims related to the Rye Select and Tremont funds against the Madoff funds of more than $3 billion, with four of the funds each receiving $500,000 in SIPC advances–a total of $2 million–which will be available for distribution to these feeder fund investors. 

"We have structured this settlement with the view that any future pro-rata distributions to Rye Select and Tremont funds will flow through to the investors and not the funds' management," said Thomas Long, counsel to Baker & Hostetler, in the release.