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Sunday, June 23, 2024 | Back issues
Courthouse News Service Courthouse News Service

Judge Rules Against Madoff Marketing Arm

(CN) - The company accused of being Bernard Madoff Securities' "in-house marketing arm" and three of its former officials lost their bid in Manhattan Federal Court to have a lawsuit moved out of bankruptcy court and consolidated with an SEC case.

U.S. District Judge Louis L. Stanton rejected Cohmad Securities' motion urging him to dismiss the suit or withdraw the reference to bankruptcy court.

Cohmad Securities, co-founder Maurice "Sonny" Cohn, Marcia Cohn and Robert Jaffe are the latest targets of court-appointed trustee Irving Picard, who's responsible for liquidating Madoff's firm. Madoff was convicted of running a multibillion-dollar Ponzi scheme.

Picard has been aggressively bringing "clawback claims" on behalf of jilted investors.

He and the SEC filed separate actions against Cohmad in June, alleging the company, which was co-founded by Madoff, of raising billions of dollars for his Ponzi scheme "under a shroud of secrecy."

Picard named more than 30 defendants in bankruptcy court, including other Cohmad employees, their family members and affiliated entities. The SEC sued the Cohns, Jaffe and Cohmad.

The trustee seeks more than $100 million in commissions and finders fees, and more than $105 million in funds withdrawn from accounts with Madoff, despite investors' alleged knowledge of the fraud.

The SEC said Cohmad was an integral part of the Ponzi scheme.

"For more than two decades, the defendants enabled Madoff's fraud by helping to conceal that Madoff was, in fact, aggressively marketing his investment product even while he was projecting a false aura of exclusivity and privilege," the regulator's lawsuit states.

Despite its façade of a separately registered broker-dealer, Cohmad and its employees "derived virtually all of their revenues from introducing investors to Madoff," the SEC claimed.

Cohmad was housed in the same office space as Bernard Madoff Securities, and both Bernie Madoff and his brother, Peter, were part owners of the purported marketing firm.

Picard previously filed a lawsuit seeking $198 million from the Madoff family. Defendants were Peter Madoff; Bernie's sons, Andrew and Mark Madoff; and his niece, Shana Madoff.

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