Court ruling in case linked to Madoff

IN A case arising from the Bernard Madoff fraud, the High Court has ruled an Irish-registered investment fund has a credible defence to an application by a Spanish company for orders requiring it to pay out more than €3.24 million allegedly due to investors in redemption monies.

Optimal Multiadvisors Ireland plc (OMI) had suspended payment of redemption monies after news broke late last year of the estimated $50 billion (€37 billion) fraud perpetrated by Bernard Madoff.

OMI is a “feeder fund” which invests its assets in shares in a Bahamas registered master fund, Optimal Multiadvisors Ltd, (OMA).

OMA traded through a subsidiary, Optimal Strategic US Equity Ltd, which in turn invested assets of some €411 million with Madoff’s now bankrupt company Bernard L Madoff Investment Securities LLC (BMIS).

Consulnor Gestion SGHC SA, a Spanish registered company, had argued it was entitled to payment of some €3.24 million redemption monies from OMI relating to shares in the Optimal Strategic US Equity Ireland Euro Fund.

However, OMI had told Consulnor, in light of the Madoff bankruptcy, news of which broke on December 11th last, that OMI’s board believed the net asset value of that fund calculated for December 10th was unreliable. OMI’s board said it could not therefore pay redemption monies due and it suspended payments on foot of a resolution of December 12th.

Mr Justice Peter Kelly noted yesterday, for the redemption monies to have been paid, OMA would normally have to receive the funds from BMIS and remit them onwards but no money was received by OMA from BMIS.

The judge said the reason for that was “no mystery” as Madoff had been arrested.

He also noted it now appeared BMIS had not conducted any trades in the last 13 years which, the defendant argued, would mean the assets on which the net asset value was based did not exist.

Mr Justice Kelly said Optimal may have a defence on other grounds raised by it but he did not have to decide that at this stage. Given his findings, he refused the application for summary judgment and directed the case should go to a full hearing.