Madoff Securities International Ltd (in Liquidation) vs Raven & others

Posted on 19/03/2014 · Posted in Financial Litigation

In June 2009 Bernard Madoff was sentenced in New York to 150 years in prison and ordered to forfeit US$170 bn. This well documented case involved Madoff’s notorious Ponzi scheme which operated for 2 decades or more through his NY business. His reputation had been built on his proprietary trading and market making business conducted legitimately over 40 years and he had held highly regarded senior positions within the financial establishment, including Chairman of NASDAQ. It was his investment advisory business (rather than the trading and market making division) which turned out to be a Ponzi scheme and which still casts a long shadow over all those associated with it.

No legacy is so rich as honesty.”
William Shakespeare

The present claims of over £75m were brought by the Liquidators of the UK incorporated Madoff Securities International Ltd (MSIL) against its directors former Chief Executive Stephen Raven, Madoff’s son Andrew, brother Peter and also Sonja Kohn, an Austrian national to whom MSIL had paid sums described by her as ‘commission’ although various of her company invoices referred to research, analysis and consulting. They also sought to recover payments made to the Madoff family for various luxury items (a luxury yacht plus fit out and an Aston Martin)as well as interest on $14m loans made by the US parent company to MSIL which were alleged to be unnecessary and connected to money laundering.

In his judgement Mr Justice Popplewell dismissed all claims against each defendant. The Directors had had absolutely no knowledge of the Ponzi scheme and had ‘acted honestly and reasonably in making or permitting such payments of which they were aware’ and with ‘commendable dignity and restraint’. Their lives had been blighted, and their good names tainted, by association with Madoff’s fraud and this claim, started with absolutely no warning, made serious allegations of dishonesty threatening financial ruin and personal humiliation. ‘Their honesty and integrity has been vindicated’.

Further, the Judge made clear that, even if he had found a breach of duty on the part of any of the Defendants, the claim would have failed as the alleged breaches caused no loss and some of the claims were time barred.

Link: Madoff Securities International Limited v Stephen Raven and others [2013] EWHC 3147 (Comm).

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