Southern District Judge Victor Marrero ruled last week that a purported class of investors who lost billions in funds managed by Fairfield Greenwich can move forward with claims against the Madoff feeder fund. In their motion to dismiss, various Fairfield defendants—corporate entities and individuals—argued that they were also victims of Ponzi schemer Bernard L. Madoff and lost money of their own. But Judge Marrero, in a 198-page opinion, ruled that the plaintiffs made plausible allegations of Fairfield Greenwich’s fraud. “The court finds that any competing inference of innocent conduct—e.g., that the fraud defendants were bamboozled by Madoff—is not as compelling as the finding of scienter,” Judge Marrero wrote in Anwar v. Fairfield Greenwich, Ltd., 09 civ 0118. “To discount plaintiffs’ allegations at this stage would be to wave away the fraud defendants’ exposure lasting almost two decades to the red flags and other markers of scienter cataloged above. The court finds more cogent the inference that…the fraud defendants’ finer faculties were overcome by the fees they earned and that they turned a blind eye to obvious signs of fraud.”

Stuart Singer of Boies, Schiller & Flexner, whose firm is co-lead class counsel with Wolf Popper and Lovell Stewart Halebian, said Judge Marrero’s decision was “a breath of fresh air in Madoff feeder fund litigation” after some adverse rulings for plaintiffs. “I think the opinion correctly, in a very exhaustive way, sustains the majority of the claims so victims of a Ponzi scheme can seek redress,” Mr. Singer said.

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