The Financial Post reports in its Tuesday edition that victims of Bernard Madoff will get another chance at recovering $343-million from Citigroup after a federal appeals court overturned a ruling dismissing a claim against the bank (all figures U.S.).
A Bloomberg dispatch to the Post says that the U.S. Court of Appeals in New York on Monday reinstated a suit against Citi by Irving Picard, the trustee charged with recovering money for Mr. Madoff's victims, over funds transferred to the bank. Mr. Picard claimed Citi failed to act on red flags, but a bankruptcy court dismissed the suit, finding the trustee had not shown the bank acted with "wilful blindness" to possible fraud.
The appeals court said "wilful blindness" was the wrong standard to apply and the burden of proof should not have been on Mr. Picard. The ruling revived similar claims for $213-million from Legacy Capital Ltd., a British Virgin Islands corporation that invested solely with Mr. Madoff, and a $6.6-million claim against Khronos LLC, which provided accounting services to Legacy. The trustee claims Citi uncovered but failed to act on evidence Mr. Madoff was not making the investments he claimed and reported returns that were too good to be true.
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