Big banks get break in Madoff case

NEW YORK, July 29 (UPI) -- A federal judge in New York has dramatically limited the options for recovering funds in the Bernard Madoff case.

U.S. District Judge Jed Rakoff ruled the court-appointed trustee in the case, Irving Piccard -- who has been tracking down missing funds and filing lawsuits to retrieve them -- could not sue major banks in his effort to recover funds for Madoff's victims, The New York Times reported Friday.

The banks were thought to be complicit in the scheme, considering, as financial experts, they should have detected Madoff's Ponzi scheme through extraordinary financial reports and unlikely rates of return in the scheme that reaped billions of dollars over many years.

Madoff is serving a 150-year prison sentence for running the scheme that he originally claimed he ran by himself. It is estimated victims are owed $65 billion, the Times said.

To date, Piccard has filed more than 1,000 lawsuits on behalf of Madoff victims -- lawsuits that could total a recovery of nearly $100 billion. Judge Rakoff in his ruling eliminated $8.6 billion in potential funds Piccard could retrieve.

The ruling affects other third-party lawsuits and is one of several Rakoff is set to make on similar Piccard filings, the Times said.

The judge said Piccard could not sue "third parties who allegedly violated a duty to Madoff Securities' customers by failing to detect Madoff's fraud."

Piccard has already reached large settlements with several Madoff Securities feeder funds, including a $1 billion settlement with Tremont Partners announced hours before the judge's ruling.