The Brown Daily Herald – Several colleges and universities are sustaining large financial losses in the aftermath of Bernard Madoff’s $50 billion hedge fund scam.

Madoff defrauded investors by using money collected from new investors to pay off existing ones – an illegal strategy known as a Ponzi scheme after the man who developed it. The entire scheme collapsed when Madoff was unable to find new investors to continue paying his clients, the New York Times reported Dec. 12.

Yeshiva, Tufts and New York Universities and Bard College had all invested with Madoff before his scheme was revealed late last year. NYU was hit hardest, losing $24 million dollars. Tufts lost $20 million, Yeshiva $14.5 million and Bard $3 million, according to the schools’ respective media relations offices.

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New York (HedgeCo.Net) – New York University scored a victory yesterday, when they won a court order that sought an extension on a temporary ban that would halt J. Ezra Merkin from making any more transfers with the school’s funds.  Merkin had millions of dollars of the University’s funds tied up in investments with Bernard Madoff.

Merkin, the man behind the Gabriel Capital LP fund and the Ariel Fund Ltd., is prohibited from withdrawing, transferring or liquidating assets, after a ruling from Supreme Court Justice Richard Lowe in a Manhattan courtroom yesterday.

According to the original complaint filed by NYU in late December, Merkin “was explicitly told” to stay away from Madoff related investments.  Merkin then allegedly invested with Madoff regardless of the orders, losing an estimated $24 million of the University’s funds with the Ponzi-schemer.

"In the face of an extraordinary number of red flags, Merkin, for years, simply turned over a substantial portion of Ariel’s funds to Madoff for management,” NYU alleges.

The University, who had $94 billion total invested with Merkin, fears that it may lose the entirety of its investment.

“Mr. Merkin has always acted in good faith and did not deceive NYU or any other investors,” said Andrew Levander, Merkin’s lawyer.

Gabriel Capital, which manages about $1.5 billion but posted losses of 39 percent in 2008, was planning to liquidate amidst the aftermath of the Madoff debacle, along with Ariel, but must have permission from the courts to do so first.   

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

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