On July 28, bankruptcy trustee Irving H. Picard filed three new lawsuits in U.S. Bankruptcy Court seeking to recover nearly $250 million that was fraudulently transferred to Bernard Madoff's wife and family members. Picard, who is officially trustee for the liquidation of Bernard L. Madoff Investment Securities LLC in Chapter 7 bankruptcy, has already recovered $1.5 billion for Madoff's victims and creditors.

These lawsuits may signal an historic clawback of funds from companies Madoff family members allegedly bought with money stolen from investors in Bernard L. Madoff Investment Securities LLC. The complaints seek the return of $34.5 million paid into the businesses, along with majority ownership in one of the companies, Primex Holdings LLC.

While it is common in Chapter 7 bankruptcy proceedings for trustees to recover fraudulent pre-bankruptcy transfers, it is unusual for a trustee to go so far back in time. The case is also unusual in that Picard isn't seeking the clawback only from the direct recipient of the fraudulent transfer, but against third-party companies allegedly purchased using the fraudulently transferred funds.

Chapter 7 Trustee Lawsuits Seek Clawback of Money Used to "Fund Lavish Lifestyles"

According to the complaints filed with the U.S. Bankruptcy Court, Madoff "was quite generous with money he stole." He allegedly gave $250 million to his wife, brother, two sons and a niece, who used it to "fund lavish lifestyles." The Madoff family members also used $22 million to invest in personal business ventures including a hedge fund, a biotechnology company, energy companies, and Primex Holdings LLC, a company designed to replicate an auction process.

Bernard Madoff, 72, is currently serving a 150-year prison term for fraud after pleading guilty to orchestrating the biggest Ponzi scheme in history. After his 2008 arrest, $65 billion in nonexistent client accounts were discovered, causing investors in Bernard L. Madoff Investment Securities LLC to lose $20 billion in principal.

Madoff was forced into involuntary Chapter 7 personal bankruptcy in April 2009. That case was ultimately consolidated with his firm's Chapter 7 business bankruptcy.

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