Hedge-fund founder Ezra Merkin “knew or should have known” that Bernard Madoff was a fraud, the trustee liquidating the firm said yesterday in a lawsuit seeking $500 million from Merkin and his funds.
The lawsuit in US Bankruptcy Court in New York, the second against a major Madoff “feeder” investment manager, said that Merkin and his Gabriel Capital Corp. received tens of millions of dollars in fees from dealings with Madoff. A similar action against Stanley Chais of California was filed last Friday.
Madoff pleaded guilty in March to running the biggest investment fraud in Wall Street history, which took in about $65 billion worldwide over two decades. Madoff, 71, is in jail while he awaits sentencing in June and is likely to spend the rest of his life in prison.
Also yesterday, Microsoft Corp. and its wholly owned affiliate, Microsoft Licensing GP, joined the Manhattan Bankruptcy Court case against Madoff, one of the pioneers in the field of computerized stock trading.
Microsoft lawyer Joseph Shickich Jr. declined to discuss the computer giant’s claims against the swindler.