August 14, 2009 / 6:12 PM / 10 years ago

Mass. regulator will not settle Madoff feeder suit

BOSTON (Reuters) - Massachusetts’ top securities regulator is trying to locate all investors who lost money in Bernard Madoff’s Ponzi scheme and said he has no plans to settle a lawsuit against one of the swindler’s feeder funds.

Accused swindler Bernard Madoff enters the Manhattan federal court house in New York, March 12, 2009. REUTERS/Shannon Stapleton

Secretary of State William Galvin, one of the first state regulators to probe Wall Street’s biggest-ever investment fraud, is sending notices to newspapers and investment advisers to try to locate all Massachusetts residents who invested with Madoff.

The move comes a few weeks after Fairfield Greenwich Group, the hedge fund firm that invested heavily with Madoff, offered to repay fully the losses Massachusetts investors suffered, Thomas Mulligan, a spokesman for the firm said.

Mulligan said the negotiations between the regulator and Fairfield Greenwich are continuing.

Galvin’s office is particularly interested in finding people who invested indirectly with Madoff by putting their money into funds that ultimately handed the cash to his firm, Galvin’s spokesman Brian McNiff said.

“These could be people who had no idea that their money was being invested with Bernie Madoff,” McNiff added.

Galvin’s office has probed the Wall Street fraud that wiped out thousands of private investors plus charities and endowments since shortly after Madoff confessed to the crime in the middle of December.

McNiff said it is impossible to know now how many Massachusetts residents had money with Fairfield Greenwich Group, a main Madoff feeder fund, on December 11, 2008, when Madoff confessed to his scheme and who might come forward.

So far investigators have identified roughly a dozen Massachusetts residents who jointly invested less than $6 million in Madoff through Fairfield Greenwich, Fairfield spokesman Mulligan said.

Madoff, 71, is serving a 150-year prison sentence after pleading guilty to engineering the $65 billion fraud for over two decades.

Galvin’s office also has no plans to settle a suit he filed against Fairfield Greenwich Group in April in which he accused the hedge fund firm of having lied to investors about the swindler’s phony management business.

“When the Secretary brought this action in April his stated goal was full restitution for Massachusetts investors. That is what Fairfield Greenwich has now offered. So we are baffled by his refusal,” Mulligan said.

Galvin has said that he is not confident that Fairfield Greenwich could repay the defrauded investors.

Hearings in the matter are scheduled for next month and about 70 witnesses have been identified.

In the meantime Fairfield also faces other lawsuits in other states where lawyers are trying to recover hundreds of millions of dollars for thousands of investors.

Reporting by Svea Herbst-Bayliss, editing by Gerald E. McCormick and Andre Grenon

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