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SEC and FINRA Sued in Luxemburg re: Madoff Fraud

Posted by Larry Doyle on April 19, 2010 5:04 PM |

In the midst of all the noise surrounding the Goldman Sachs charges of fraud brought by the SEC, another interesting suit was brought. This suit puts the financial regulators, the SEC and FINRA, on the defense. Bloomberg reports, SEC, FINRA Sued in Luxembourg Over Madoff Fund Losses:

The U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority were accused of being liable for losses in a Luxembourg fund tied to New York money manager Bernard Madoff.

The Luxembourg suit, which says the SEC and Finra failed to stop Madoff’s fraud after repeated warnings, seeks an order holding the U.S. regulators liable for losses in Access International Advisors LLC’s defunct LuxAlpha Sicav-American Selection Fund. Irving Picard was also sued for damages, in his role as the trustee tasked with liquidating Madoff’s business.

“The SEC and Finra are liable for their extreme misconduct and failures” to prevent Madoff’s “monumental fraud with disastrous effect on the global investment community, particularly on investors within Luxembourg,” according to the suit filed April 13 by lawyers for Access. “Thanks to their poor functioning they enabled a fraud that lasted many years.”

The SEC has been faulted by U.S. lawmakers for failing to detect that Madoff was operating a $65 billion Ponzi scheme. The SEC said last year it would conduct a “top-to-bottom” review of its regulation. Employees at Finra, the U.S. brokerage industry’s main regulator, failed to fully probe transactions at Madoff’s firm, a report found in October.

SEC spokesman John Heine and Finra spokesman Brendan Intindola declined to comment. Picard’s spokesman Kevin McCue said in an e-mail the trustee won’t comment.

Fernand Entringer, the Luxembourg lawyer for Access, Patrick Littaye, co-founder of Access, and Pierre Delandmeter, a board member of LuxAlpha, said in the court filing the SEC and Finra “should be held accountable” for investor losses.

I am a big proponent of accountability, along with transparency and integrity. In the endless pursuit of these virtues, perhaps Entringer, Littaye, and Delandmeter might look to join forces with Helen Davis Chaitman, Richard Greenfield, and Jonathan Cuneo all of whom are involved in legal disputes with our financial regulators.

Strength in numbers typically does not hurt in creating pressure to generate transparency. Certainly, the desired results are anything but assured . . . but pressure does have a funny way of helping the process along.


  • phil trupp

    This is the first real crack in the sordid Wall Street-Washington nexus. Will it succeed? Hard to say. But we need to get behind this move. Reform the regulators and get rid of the inside patsies. Give enforcement a squad of real cops, with real weapons, and we’ll be able to make laws that stick. We simply can no longer afford, as a nation, to tolerate the breakdown of our culture at the hands of financiers and compliant lawmakers who know the value of nothing except cash.

  • jim

    Now FINRA needs to be investigated for their role in the ARS meltdown – which makes the Madoff fraud look small in comparison!

  • disenchanted

    Not being a lawyer, I wonder if the ruling that FINRA has absolute immunity carries over to this lawsuit. If not, we may be in for a wonderful surprise if the lawyers, in their discovery requests, ask for the books and records of Finra. I am sure they have been following the events in America and are well aware of the issues that need to be addressed to be able to make their case.

  • Larry,

    Once again, you are right on with your comments. In this case you say there is strength in numbers.
    As the Coordinator for the Madoff Victims Coalition, I have seen how a proactive approach to finding justice can truly make a difference to all victims.

    In this case, the SEC and FINRA, as well as SIPC have all dropped the ball and have taken no responsibility for their failures.

    The Coalition is working toward making the agencies accountable for the damages they caused thousands of innocent investors who trusted them to do their jobs.

    If any of your readers would like to support our efforts, please contact me at
    Together, I believe we will prevail.

    Ronnie Sue Ambrosino
    Madoff Victims Coalition

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