An Ivy Asset Management lawsuit claims that the firm failed to disclose its knowledge of Madoff’s trading strategy when it advised clients not to withdraw their money. The suit alleges that Ivy was aware of Madoff’s trading methods when it invested in his funds. The firm failed to disclose these findings and failed to advise clients to withdraw their funds. This lawsuit outlines the alleged failures of Ivy Asset Management and its employees.
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Ivy Asset Management invested in Madoff Securities through its funds
Ivy Asset Management, a hedge fund of funds manager, has been accused of investing in the fraudulent investments of Bernard Madoff. The firm provided advice to J.P. Jeanneret Associates, an investment consulting firm, which was hired by 70 pension plans, most of which were small union plans in upstate New York. Another firm, Beacon & Andover, ran hedge funds of funds that used Madoff’s trading strategies. These firms provided services to many employee benefit plans but remained silent about their involvement in the Madoff scam.
Ultimately, the bankrupt Madoff repaid $210 million to the pension plans and health plans that had invested in him through the funds. In addition, Beacon and Andover Investments and their owners agreed to waive a claim that would have been more than $3.3 million. These agreements, pending approval by the U.S. District Court for the Southern District of New York, are important for investors.
Ivy Asset Management received more than $40 million from investors in Bernard Madoff between 1998 and 2008. The firm performed due diligence for Madoff’s clients. It was later discovered that Madoff’s advertised trading strategy required him to sell massive amounts of options. However, the firm learned that Madoff had not traded enough options to support the strategy. Madoff provided three different explanations for this problem, but all of them were false.
Ivy Asset Management failed to disclose its knowledge of Madoff’s trading strategy
Ivy Asset Management failed to disclose its suspicions of Madoff’s fraudulent trading strategies to its clients because it feared losing their fees from Madoff’s investments. Instead, Ivy falsely told clients that there was no evidence of fraud. Its focus was on Madoff’s assets, and they were unaware that their clients’ money was at risk. As a result, Ivy clients lost over $236 million. Not only did Ivy’s clients lose their money, but hundreds of individual investors and pension funds in New York also lost large amounts of money in the scheme.
The plaintiffs allege that Ivy executives knew about Madoff’s limitations but failed to disclose those to BAMC. The company’s 2007 consulting agreement with Jeanneret contained veiled warnings regarding Madoff’s trading strategy. While these warnings were not enough to prevent Ivy from acting negligently, they did render Beacon Defendants’ representations of due diligence misleading.
Ivy allegedly sent letters to clients in 1999 that falsely stated that it had no reason to believe the Madoff operation was fraudulent. Ivy also failed to disclose the fact that it was unable to properly manage Madoff’s capital. Cuomo is now seeking restitution, damages, penalties, disgorgement of Ivy’s fees, and barring Simon and Wohl from acting as investment advisers in the future.
Ivy Asset Management advised clients not to withdraw their money from Madoff
According to the lawsuit, the Ivy Asset Strategy Fund advised its clients not to withdraw their money from the Madoff fund in 2001. Ivy was paid $40 million between 1998 and 2008 by Madoff’s clients to do due diligence on their investments. The defendants did not disclose that information to their clients because they feared losing the fees they earned. This blunder cost them $227 million of their clients’ money when the Ponzi scheme collapsed. Clients included hundreds of individuals and dozens of New York union pension plans.
The Ivy Asset Strategy Fund misappropriated client money to operate his market-making business. The firm falsely represented to clients that the money was not used for market-making operations and that Madoff had enough experience to manage his capital. In other words, the firm misled its clients into believing they were managing a legitimate income stream from the investment fund. It is unclear if the Ivy Asset Strategy Fund was aware of the alleged fraud.
Investing in Madoff’s portfolios was a risky proposition. There were many unsavory characters in the Madoff scandal, and the SEC is determined to punish those who knowingly acted against their best interests. A conviction may result in a prison sentence of up to 150 years. Despite the large sums of money involved, the investors recovered only a portion of their lost funds.
