Ezra Merkin Charged With Fraud

by Darren

In a move that shouldn’t surprise many, J. Ezra Merkin, the former chairman of GMAC, famed NYC philanthropist, and hedge fund manager has been charged with fraud for his connection in the Bernard Madoff Ponzi scheme.

New York Attorney General Andrew Cuomo charged Merkin with civil fraud for steering many of his clients to invest with Madoff. According the the charges, Merkin steered $2.4 billion of his client’s funds to Madoff, all the while ignoring “glaring red flags” that should have told him the investments weren’t safe. For his part, Merkin earned $470 million in incentive and management fees.

“Merkin duped individual investors, non-profits, and charities into believing he was responsibly managing their investments, when in actuality he was dumping them into history’s largest Ponzi scheme,” Cuomo stated at a press conference.

Merkin, 55, has denied wrongdoing. He said he was “absolutely shocked” to learn about Madoff’s scheme. His lawyer, Andrew Levander, said he would “vigorously defend” his client against court action.

Merkin is already being sued by New York University and Mort Zuckerman over his role in the scheme.

Ezra Merkin ran both the Gabriel Capital and Ariel Fund, which have been shut down. Both are now said to have operated as “feeder funds” that solicited funds for Madoff in return for large fees. Cuomo alleged that Merkin presented himself to clients as an “investing guru” but was only a “master marketer.” Cuomo’s written statement that accompanied the charges went so far as to say that Merkin realized professional investors were questioning “Madoff’s uncommonly steady returns, there were fundamental questions about Madoff’s money management business that suggested fraud.”

Cuomo stated that Merkin had two articles that questioned Madoff’s investments in his files.

Levander said that Merkin had done his due diligence, and found nothing untoward about Madoff.

“Unfortunately, Mr. Merkin’s due diligence, just like the detailed investigations performed by countless others, including regulators, was thwarted by the intricate, fraudulent scheme perpetrated by Madoff,” he said.