Securities Law Blog

In the first wave of so-called Madoff “clawback” lawsuits, the trustee liquidating Bernard L. Madoff Investment Securities LLC sued Stanley Chais and other defendants over claims they received more than $1 billion as “insiders” in the Ponzi scheme.

Similar lawsuits will be filed in coming weeks and months, said the trustee, Irving Picard, in an e-mailed statement. Chais is a philanthropist and investment adviser based in Los Angeles. The suit named Chais, his companies including Brighton Co., and trusts in family members’ names.

“Stanley Chais was a beneficiary of this Ponzi scheme for at least thirty years,” Picard said in the Complaint. Since December 1995, Chais and the other defendants “collectively profited from this scheme through the withdrawal of more than one billion dollars, and knew or should have known that they were reaping the benefits of manipulated purported returns, false documents and fictitious profits.”

Picard, a lawyer with Baker & Hostetler LLP in New York, has recovered about $1 billion for investors in Madoff’s money- management business, known by its initials as BLMIS.

“This is the first of several actions that will be brought against entities that either acted as insiders with Bernard Madoff and BLMIS or that benefited from Madoff’s scheme to the severe detriment of other customers of BLMIS,” an attorney for Picard, said in the statement.

The case is Picard v. Chais, 09-01172, and the bankruptcy case is Bernard L. Madoff, 09-11893, U.S. Bankruptcy Court, Southern District of New York (Manhattan).