US judge stops suit against Madoff liquidator

| 14/10/2011

(Bloomberg): A lawsuit against the liquidator of Bernard Madoff’s firm in the Cayman Islands was stopped by a US. bankruptcy judge who said Maxam Absolute Return Fund Ltd.’s action was “a clear attack on this court’s exclusive jurisdiction and a blatant attempt to hijack the key issues to another court,” according to a court filing. Trustee Irving Picard sued Maxam for about $100 million of money taken out of the Ponzi scheme. Maxam Absolute Return Fund Ltd. was found in violation of the so-called automatic bankruptcy stay for commencing a lawsuit in the Cayman Islands to declare that the fund has no obligation to return $25 million to the trustee for Bernard L. Madoff Investment Securities LLC.

The dispute traces its roots to December, when the Madoff trustee sued the Maxam fund as the subsequent recipient of $25 million taken out of the Madoff firm within 90 days of bankruptcy. In July, on almost the same day it answered the complaint in bankruptcy court, Maxam filed suit in the Cayman Islands seeking a declaration that there is no liability to return the $25 million, Lifland said in his opinion.

Lifland ruled that the suit in the Cayman Islands was “void ab initio,” meaning it was a nullity from the very beginning and nothing that happened in the case gave the Maxam fund any rights that could be enforced in the U.S. The bankruptcy judge directed Maxam to withdraw and dismiss the suit in the Cayman Islands by today.

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Category: Finance

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