New York (HedgeCo.Net) – J. Ezra Merkin, head of Gabriel Capital Corp., has been sued by New York Attorney General Andrew Cuomo, after it was discovered he had placed investor’s money into funds managed by Bernard Madoff without their knowledge or consent.
Cuomo alleges that the former GMAC Financing Chairman allocated about $2.4 billion worth of client capital to the man who bilked $50 billion out of investors through an elaborate Ponzi scheme.
Cuomo claims Merkin invested the money of many prominent individuals and charities through his hedge funds Ariel, Gabriel Capital LP and Ascot Fund Limited. In exchange, Merkin received about $470 million in management and performance fees.
One investor, New York Daily News publisher Mort Zuckerman, suffered $40 million in losses after placing his funds with Merkin.
“There is no way Merkin could make such a representation without learning basic facts about Madoff’s operation, including the fact that Madoff had not made any stock purchases for at least 13 years,” said Zuckerman in his statement, referring to Merkin’s claim that he exercised “periodic reviews” on his investments.
The Merkin case is the latest in a string of suits brought on by the Attorney General. Last month, Cuomo blew the lid off two high-ranking officials who worked in the New York State’s Comptroller Office after discovering they took millions of dollars in kickbacks from private equity firms and hedge funds.
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