New York Attorney General Andrew Cuomo filed civil-fraud charges Monday against a hedge fund manager who funneled $2.4 billion to Wall Street swindler Bernard Madoff without telling clients where their money was going.
The complaint accuses J. Ezra Merkin, the former chairman of GMAC Financial Services, of concealing his links to Madoff and lying to investors about what he was doing with their money, telling most he was personally investing their cash in things like distressed debt.
Over the years, Merkin collected $470 million in fees and performance bonuses from his clients, the suit said. Many of those customers, which included several large charities and colleges, had no idea where their money really was until December, when Madoff was arrested.
"Merkin duped individual investors, nonprofits and charities into believing he was responsibly managing their investments, when in actuality he was dumping them into history's largest Ponzi scheme," Cuomo said in a statement.
The complaint also accused Merkin of mingling his personal funds with the accounts of his management company, Gabriel Capital Group, and using some of the company's funds for personal purchases, including $91m. worth of artwork for his apartment.
In the past, Merkin has said through his attorney that he had no idea Madoff was engaged in a fraud and was personally among the largest victims of his crime.
One of Merkin's funds, Ascot Partners, sunk nearly every penny of its more than $1.7 billion in assets into Madoff's scheme.
Cuomo's suit, filed in a state court in Manhattan, demands that Merkin repay all of the fees he collected from his clients over the years, plus damages.