New York University has filed suit against financier J. Ezra Merkin for allegedly turning over his investment responsibilities to accused Ponzi-scheme mastermind Bernard Madoff and losing more than $24 million of the school’s money.
Named in the suit are Merkin and his Gabriel Capital LP fund and Ariel Fund Ltd.
Gabriel Capital is a $1.5 billion hedge fund that has already announced plans to liquidate due to losses related to the alleged Madoff scheme. In a letter to investors, Merkin said the fund lost 39% of its value this year through Nov. 30.
NYU had about $94 million invested in Ariel, which operated as a limited partnership with Merkin and Fortis Bank. Ariel and Fortis are also named as defendants.
“Without making disclosures in the quarterly reports to investors, and 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 alleged in the complaint filed yesterday in New York state court in Manhattan.
Before his arrest on Dec. 11, Madoff allegedly confessed to his sons that his investment firm was “a giant Ponzi scheme” and may have incurred losses of $50 billion, according to an FBI complaint.
He was released on $10 million bail after being charged and is currently on house arrest in his apartment on the Upper East Side of Manhattan.
Merkin’s lawyer Andrew Levander didn’t immediately return a call to FOX Business Network seeking comment. Madoff has been charged by federal prosecutors with one count of securities fraud and faces as much as 10 years in prison if convicted.
Merkin is chairman of GMAC LLC, the finance arm of General Motors Corp. (GM)that is 51% owned by Cerberus Capital Management LLC.
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