New York (HedgeCo.Net) – Gabriel Capital and founder Ezra Merkin have been sued for their exposure to Ponzi-schemer Bernard Madoff by a disdained investor.

Scott Berrie, who has $500,000 tied up in one of Gabriel’s funds, claims that Gabriel lied to investors when they marketed that they hold a “diverse portfolio of securities,” which “falsely implied that the general partner was actively pursuing the partnership’s strategy in a prudent manner by using numerous and diverse investments.” 

Berrie also alleges that Merkin, who heads up GMC financing arm GMAC LLC, neglected at least 27 percent of its investments, the chunk of which was invested with Madoff. 

Berrie filed a class-action lawsuit yesterday in a federal court in Manhattan.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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Seeking Alpha – "In my view they didn’t do what they set out to do … which was to hedge. I saw a few hedge funds that did much worse than my long-only fund, which is rather ironic," [Veritas Asset Management manager Ezra Sun] said.

The losses have disappointed many investors who had expected positive returns in all market conditions, and hefty withdrawals of somewhere between a fifth and a third of the industry are widely expected at the end of the year. There was the risk people could perceive hedge funds as a "rip-off" because they had been charging high rates on the implicit promise they could deliver absolute returns, but did not deliver when global markets collapsed.

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