Lawsuits are quickly piling up in the Madoff case. The firm of Klayman & Toskes has commenced an investigation on behalf of burned clients, and a class-action suit has been filed as well. If Madoff’s firm had enough to pay back the plaintiffs, then this wouldn’t have been an issue, so a suit against him seems circular. The real game is to figure out what third parties have Madoff cash:
WSJ: As the alleged scheme is untangled by investigators, investors who cashed out of Madoff’s investment business in the past months or even years may have to return money. Firms that marketed Mr. Madoff’s investments may also find themselves in hot water for playing a role in the fraud by not doing enough due diligence on his business.
The fate of the firm’s stock trading group, for which the company was mostly widely known, was uncertain.
The Depository Trust & Clearing Corp., which oversees the clearing and settlement of stock trades, said trades with Madoff on Dec. 11. that DTCC has recognised and reported back on would be “guaranteed.” At about 5 p.m. Friday, it said it would cease to guarantee Madoff trades and that it would notify market participants later on the status of other pending Madoff trades.
Investors who cashed out may not have done anything wrong, but it’s hard to imagine desperate investors not trying to get at them.