Liquidator of Madoff Feeders Sues Over $43 Million in Fake Profits The Wall Street Journal By Patrick Fitzgerald Updated Sept. 15, 2011 5:39 p.m. ET The trustee winding down the key feeder funds for Bernard Madoff's Ponzi scheme is suing five private banks and investment firms to recover more than $43 million in fake profits that the firms received in the years before Mr. Madoff's fraud was revealed. Kenneth Krys and Joanna Lau, the British Virgin Islands accountants overseeing the liquidation of several Fairfield Greenwich Group funds, filed the lawsuits Wednesday in U.S. Bankruptcy Court in Manhattan seeking to claw back funds that investors withdrew before the Ponzi scheme's collapse in December 2008. The Fairfield funds--Fairfield Sentry Ltd., Fairfield Sigma Ltd. and Fairfield Lambda Ltd.--were the biggest feeders of money into Mr. Madoff's brokerage business. In all, they fed about $7 billion to Mr. Madoff. The largest suit was filed against Société Générale Bank & Trust SA (Luxembourg), seeking the return of $35.3 million investors withdrew from the Fairfield Sentry fund between late 2005 and the fall of 2008. The Fairfield liquidators are also suing Andorra Banc Agricol Reig SA, Hong Kong's EC.Com, Netherlands-based Stichting Stroeve Global Custody and the Channel Islands-based Credit Suisse Nominees (Guernsey) Ltd. in smaller amounts ranging from $1.2 million to $2.6 million. Representatives of Société Générale and Andorra Banc couldn't immediately comment. Credit Suisse declined to comment. Stichting Stroeve and EC.Com couldn't be reached for comment. Earlier this year, the Fairfield liquidators reached a deal with Irving Picard, the trustee for investors hurt by Mr. Madoff's fraud, in which they resolved claims against each other and agreed to jointly pursue the fund owners, including Connecticut financier Walter Noel. Under the settlement, anywhere from 40% to 85% of the redemption payments clawed back from Fairfield funds' investors are earmarked for the estates' creditors. The deal with Mr. Picard provides the framework to resolve much of the litigation involving the network of other feeder funds that funneled money to Mr. Madoff. It also allows the investors in the Fairfield funds, who were indirectly invested with Mr. Madoff but who can't make claims with Picard, to recover up to $160 million. In return, the Fairfield funds paid $70 million to Mr. Picard and gave up their claims to $1 billion lost by its investors. The Fairfield funds, which are being liquidated in proceedings in the British Virgin Islands, also sought bankruptcy protection in the U.S. under Chapter 15 in June of last year. Under U.S. bankruptcy law, the liquidators can seek to recover funds transferred out of Mr. Madoff's investment business before its collapse to help pay back those investors swindled by Mr. Madoff. To date, Mr. Picard has clawed back more than $10 billion for investors cheated by Mr. Madoff, who is serving a 150-year prison sentence. The Fairfield funds were offshore funds managed by other Fairfield Greenwich Group entities owned primarily by Mr. Noel, Jeffrey Tucker and Andres Piedrahita. Last year, Mr. Picard sued the Fairfield owners and others claiming they ignored warning signs about the Ponzi scheme in order to rake in millions of dollars in fees. A Fairfield Greenwich spokesman declined to comment on Mr. Picard's litigation. https://www.wsj.com/articles/SB10001424053111904060604576572883548411432