$212M Settlement Reached with Madoff Feeder Funds

NEW YORK - (Mealey's) The liquidation trustee of Bernard L. Madoff Investment Securities LLC (BLMIS) has reached a $212 million settlement with two BLMIS feeder funds, according to documents filed May 18 in a New York federal bankruptcy court (Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, No. 08-1789, [In re:  Bernard L. Madoff Investment Securities LLC (Irving H. Picard v. Fairfield Sentry Limited, et al.), No. 09-1239], S.D. N.Y. Bkcy.).

BLMIS liquidation trustee Irving H. Picard sued Fairfield Greenwich Group (FGG); FGG-managed feeder funds Fairfield Sentry Ltd., Greenwich Sentry L.P. and Greenwich Sentry Partners L.P (GSP); 14 FGG affiliates, including Fairfield Sigma Ltd. and Fairfield Lambda Ltd.; and other FGG investment managers, other administrative entities, managers and sales personnel in the U.S. Bankruptcy Court for the Southern District of New York.

Picard stated claims under the Bankruptcy Code and the New York Fraudulent Conveyance Act for turnover and accounting, preferential transfers, fraudulent transfers, undiscovered fraudulent transfers and objection to the defendants' Securities Investor Protection Act claim and sought to recover nearly $4.5 billion in proceeds the hedge funds received in connection with their participation in Madoff's Ponzi scheme. 

Under the terms of the settlement, which are subject to court approval, Greenwich Sentry will pay $206,038,654 and GSP will pay $5,985,000 to settle all claims against them.

In addition, Greenwich Sentry and GSP "will assign all of their claims against their general partners, former investment managers, investment advisors (excluding the Service Providers), managing entities, directors, alleged partners, partners, employees and officers, their relative and affiliates . . . to the Trustee, and under the Plans all persons other than the Trustee shall be barred from prosecuting Claims Against Management.  If the Trustee recovers a gross amount of $200 million from the Claims Against Management, the Trustee will then credit towards a portion of the Trustee's Allowed Claim against Greenwich Sentry ten percent (10%) of gross consideration received in excess of $200 million and six tenths of one percent (.6%) toward the Trustee's Allowed Claim against GSP."

According to the settlement, Greenwich Sentry will also "retain the first $50 million in recoveries from Service Provider Claims, and will pay to the Trustee twenty percent (20%) of Net Recoveries from Service Provider Claims in excess of $50 million up to a cap, after which Greenwich Sentry will retain one hundred percent (100%) of the Net Recoveries from Service Provider Claims."

GSP will "retain the first $2.8 million in recoveries from Service Provider Claims, and will pay to the Trustee twenty percent (20%) of Net Recoveries from Service Provider Claims in excess of $2.8 million up to a cap, after which Greenwich Sentry Partners will retain one hundred percent (100%) of the Net Recoveries from Service Provider Claims."

[Editor's Note:  Full coverage will be in the May issue.  In the meantime, the motion for entry of order is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.  Document #88-110523-066B.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]

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