NEW YORK: Deutsche Bank has sued two offshore funds that funnelled money to Bernard Madoff for 14 years, accusing them of reneging on their agreement to sell more than US$1.6 bil of claims in the bankruptcy of the swindler’s firm.
In a complaint filed on Nov 21 night, the bank said Kingate Global Fund and Kingate Euro Fund exhibited “sellers’ remorse” by backing out of their 2011 agreement to sell the claims at 66 cents on the dollar, after the value of the claims had “materially increased.”
According to Deutsche Bank, Kingate wrongfully concluded that the sale was no longer “binding” because too much time had passed and a related agreement had not been signed.
The German bank is seeking to enforce the sale, or else obtain damages, in its lawsuit filed in Manhattan federal court.
Based in the British Virgin Islands, the Kingate funds filed for protection under Chapter 15 of the US bankruptcy code on Sept 5, citing the risk of litigation by Deutsche Bank.
Robert Loigman, a lawyer for the Kingate funds, in an email called Deutsche Bank’s claims “utterly without basis,” saying the bank was trying to benefit improperly from a “lapsed trade” it refused to complete eight years ago.
Troy Gravitt, a Deutsche Bank spokesman, declined to comment.
The Kingate funds were among “feeder funds” that supplied client money to Madoff, which he used to fuel his Ponzi scheme.
They agreed in June to return US$860 mil in a settlement with Irving Picard, the court-appointed trustee liquidating the former Bernard L Madoff Investment Securities LLC.
The funds said the settlement also gave them a US$1.66 bil claim in the Madoff firm’s bankruptcy that should result in an initial US$262 mil distribution to their own creditors.
Picard has said the Kingate funds sent Madoff more than US$1.7 bil.
According to his website, the trustee has recovered US$14.29 bil for former Madoff customers, more than 81% of the US$17.5 bil he has estimated they lost in a decades-long fraud.
Madoff, 81, pleaded guilty in March 2009 and is serving a 150-year prison term. – Reuters
