Judge rejects blocking any Madoff bankruptcy

Bloomberg News / April 11, 2009
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NEW YORK - Bernard Madoff may be forced into personal bankruptcy to ensure that all his assets are used to pay the investors he stole from, a federal judge ruled.

US District Judge Louis Stanton in New York yesterday turned aside objections from the Securities and Exchange Commission and the Justice Department, granting a request by victims of Madoff's Ponzi scheme. Stanton reversed his Dec. 18 ruling that prevented the investors from filing a request to force Madoff into bankruptcy.

"The concern that appointment of a bankruptcy trustee will increase administrative costs or delay recovery by victims is speculative and outweighed by the benefits to Mr. Madoff's victims," the judge said in a four-page opinion.

A bankruptcy filing may enable creditors to reach Madoff assets that aren't proceeds of his fraud, Stanton said. The judge added that such a filing may be helpful to investors who unwittingly bought into Madoff's Ponzi scheme through so-called feeder funds.

The investors have yet to ask that Madoff be forced into bankruptcy. Yesterday's ruling means only that they may do so.