Picard argues in these lawsuits that sophisticated investors such as California money manager Stanley Chais, New York hedge fund founder Ezra Merkin and Florida philanthropist Jeffry Picower "knew or should have known" Madoff's consistently high returns were implausible.
The trustee has hired lawyers in Gibraltar, the Cayman Islands and elsewhere to help trace the money from Bernard L. Madoff Investment Securities LLC in New York and Madoff Securities International Ltd in London. He has said that legal action against Madoff's relatives in what was a family-run business is a possibility.
Madoff, 71, has pleaded guilty to 11 criminal charges including securities fraud, money laundering and perjury for a scheme in which he used money deposited from new clients to finance the withdrawals of earlier customers.
The scheme fell apart as a wave of clients sought to withdraw their money in 2008 amid the financial crisis.
Madoff is in jail and faces the possibility of life in prison when sentenced on June 29.
The trustee has been on the job since December and spent much of the first few months sorting through paper records kept by the Madoff firm and interviewing employees.
Wielding his far-reaching powers under federal bankruptcy law, he is pursuing the likes of Picower for $5.1 billion, Chais for $1 billion and Merkin for $500 million. Hedge funds Vizcaya Partners, Kingate and Harley International are also in his sights.
Legal experts say, however, that Madoff victims should not count on a quick resolution, in part because some of the allegations touch on a still-emerging area of bankruptcy law dealing with whether some investors knew or should have known that Madoff's investment business was a fraud.
"These concepts haven't been tested too often," said Steven Gatti, a partner at law firm Clifford Chance in Washington. The amounts of money involved in the lawsuits will "make people fight pretty darn hard" to defend themselves, he said.
SOURCES: http://uk.reuters.com/article/stocksNews/idUKN1549313520090518?pageNumber=2&virtualBrandChannel=0