Investors in Gabriel Capital LP, a so-called feeder fund that funneled money to imprisoned swindler Bernard Madoff, were awarded $12.74 million by a panel of three arbitrators, court records show.
The award to two New Jersey investment funds was disclosed in a filing Thursday with the New York State Supreme Court in Manhattan.
The funds asked the court to confirm the award against Gabriel, which was overseen by hedge fund manager Ezra Merkin.
Andrew Levander, who represents Merkin, referred a request for comment on the award to another lawyer, Guy Petrillo, who did not immediately return a call.
The investors, Sandalwood Debt Fund A LP and Sandalwood Debt Fund B LP, are based in Roseland, N.J., and according to regulatory filings require minimum investments of $1 million. Their lawyer, Laurence Orloff, declined to comment.
Like many Madoff victims, the Sandalwood funds invested in feeder funds such as Gabriel, which transferred money to Madoff to manage.
In April 2009, New York Atty. Gen. Andrew Cuomo filed a civil fraud lawsuit accusing Merkin of steering $2.4 billion of investor money to Madoff without their knowledge.
Cuomo did not accuse Merkin of knowing about Madoff’s estimated $65 billion Ponzi scheme but contended that Merkin ignored red flags, while earning lucrative fees from clients.
The Sandalwood funds accused Gabriel of fraud, breach of fiduciary duty and negligent misrepresentation for failing to reveal it was sending money to Madoff.
When Madoff’s Ponzi scheme came to light, Gabriel’s investment was written down to zero, court papers show.
The arbitration panel did not explain its reasoning for the award, which includes interest and $112,000 to cover fees.
Merkin also faces a class-action suit by former clients who also sued BDO USA LLP and affiliates, which audited his funds. Mort Zuckerman, the real estate investor, has sued Merkin over about $40 million of Madoff-related losses.
Madoff, 72, pleaded guilty to running his Ponzi scheme in March 2009. He is serving a 150-year sentence in a North Carolina federal prison.
The case is In re: Arbitration between Sandalwood Debt Fund A LP and Sandalwood Debt Fund B LP v. Merkin, New York State Supreme Court, New York County, No. 651441/2010.
