A fund manager has been charged with fraud after he allegedly funnelled $2.4 billion to Bernard Madoff's firm without investors' knowledge.
New York attorney general Andrew Cuomo said Ezra Merkin was a self-styled "investment guru" who was in fact just a "master marketer". When investors entrusted their money to him, he passed it off to third-party fund managers like Mr Madoff.
The civil complaint states that for two decades, he made millions in management and performance fees, despite pumping investors' cash into the biggest Ponzi scheme in history. Many of his clients - which included a number of prominent charities - lost hundreds of millions of dollars when the Madoff fraud was uncovered in December.
Mr Cuomo also alleges that Mr Merkin ignored "glaring red flags" relating to Mr Madoff's business. Indeed, two of the fund manager's closest lieutenants warned that Mr Madoff's returns were too good to be true, but Mr Merkin took no action, the court papers state.
Furthermore, Mr Merkin is said to have told concerned investors that little or no assets from his Ascot fund were invested with Mr Madoff, when in fact the entire fund was in the broker's hands.
Mr Madoff pleaded guilty last month to running a $65 billion Ponzi scheme.
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