Cuomo files suit against Madoff associate

New York Attorney General Andrew Cuomo has filed suit against a financier for allegedly failing to properly protect $2.4 billion funneled to Bernard Madoff.

Filed under state charity and security statutes, Cuomo claimed that J. Ezra Merkin defrauded investors by falsely claiming he actively managed their funds, which were, instead, summarily turned over to Madoff, The New York Times reported Monday.

In March, Madoff pleaded guilty to 11 felony counts involving a Ponzi scheme that reportedly lost investors as much as $65 billion. A Ponzi scheme uses money investors to pay returns to earlier investors without any investment activity.

In their attempts to find who was responsible for allowing the fraud to continue for years, prosecutors and victims are looking at managers of feeder funds who may have ignored warning signs that Madoff was breaking the law.

In a court filing, Cuomo’s office claims Merkin’s deceit, recklessness and breaches of fiduciary duty have resulted in the loss of approximately $2.4 billion.

Merkin’s attorney Andrew Levander could not be reached for comment on the latest development, but has said Merkin would cooperate with any New York State investigation, the Times said.

The suit claims Merkin’s personal losses in the Ponzi scheme were far less than the $470 million in fees he collected funneling money to Madoff’s firm.