New York Attorney General has charged J. Ezra Merkin with fraud in connection with his fund-raising for Bernie Madoff’s Ponzi Scheme. Merkin had been one of Madoff’s biggest sources of funds, putting investment money from dozens of prominent investors into Madoff’s scheme.
The civil charges filed by Andrew Cuomo’s office today don’t claim that Merkin knew about Madoff’s scheme. Rather, the complaint says that Merkin misled investors, not telling them that the bulk of the $2.4 billion he was entrusted to invest had simply been handed over to Madoff. Merkin allegedly collected over $470 million in fees for his three hedge funds.
Merkin is the second Madoff feeder to be chaged with fraud. Last week the Fairfield Greenwich Group, a hedge fund that placed money with Madoff, was charged by the Massachusetts Secretary of State with fraud.
This morning reports surfaced that Merkin may have run afoul of Cuomo’s office, providing evasive answers under oath and dodging questions from the attorney general. Those reports, which were clearly leaks from inside Cuomo’s office, were early indicators that Merkin wasn’t going to escape unscathed.