Morgan Stanley, BlackRock Support Einhorn

In the past 12 months or so David Einhorn has been

Madoff Ruling: A Question

Chidem Kurdas

An appeals court upheld the Madoff trustee’s decision that the former clients of the defunct firm have a claim only to the capital they originally invested, not the profits Madoff fraudulently reported on their accounts.  This has precedent from past Ponzi schemes, where investors who took out more than their capital had to return the difference. It’s a reasonable principle not to allow fake profits, though a hardship on people who relied on them, like New York Mets owners Fred Wilpon and Saul Katz. The supposed gains, after all, came from other investors’ money.

But there’s something else going on.

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Madoff Trustee and the 1,001 Lawsuits

Chidem Kurdas

In one particular respect, government-appointed bankruptcy trustees resemble Scheherazade of the 1,001 Arabian Nights. She had a secure tenure with the Sultan as long as she kept spinning the fairy tales.