As part of the fallout of Bernie Madoff’s massive Ponzi scheme, the court-appointed trustee has been trying to recoup money from a number of mutual fund and hedge fund companies that made billions off of the Ponzi scheme in order to pay back Madoff’s victims.
One of the largest holding companies to profit from Madoff’s white collar crime was Tremont Group Holdings Inc. (which was purchased by an affiliate of Oppenheimer mutual funds, and is ultimately owned by MassMutual Holding LCC). The trustee filed a lawsuit against Tremont for $2.1 billion. According to court documents, Tremont had been warned that Madoff might be running a Ponzi scheme, but the holding group chose to ignore those warnings, and instead profited from Madoff’s fraud.
According to Bloomberg, Tremont Group Holdings is the second largest of the “feeder funds” involved in the multi-billion dollar Ponzi scheme. Feeder funds are those that conduct almost all of its investments through another fund; for Tremont, this meant they were funneling large amounts of their own clients’ money to Madoff. Unlike a large number of the feeder funds investing in Bernard L. Madoff Investment Securities LLC, though, Tremont actually profited from the scheme. Many of the other feeder fund investors lost money.
With the lawsuit filed and a court date pending, Tremont decided to handle matters outside of court and settled with the trustee for $1 billion.
This $1 billion brings the total amount recouped by the trustee to more than $8.6 billion — almost half of the $17.3 billion lost by Madoff’s victims.
As part of the settlement, Tremont still retains the right to file a claim against Madoff’s estate for $3 billion — which would allow its investors to possible recoup some of their own losses.
Source: Bloomberg.com, “Madoff Trustee Settles With Tremont Funds for $1 Billion,” Linda Sandler, 28 July 2011.