Federal Court Says that Madoff Trustee Can’t Use RICO against Feeder Funds
The U.S. District Court for the Southern District of New York dismissed the Madoff Trustee’s claims against several feeder fund sponsors alleging that their actions violated the Racketeer Influenced and Corrupt Organizations Act (RICO). The Court opined that the Trustee lacked standing because the Trustee could not establish sufficient causation between the Madoff fraud and the feeder fund sponsors’ actions, explaining that even the Trustee acknowledged that Madoff operated independently. Moreover, aggrieved feeder fund investors could sue the feeder fund sponsors directly. RICO, which was intended to combat organized crime, prohibits joint criminal enterprises. A finding of liability under RICO carries significant penalties.