Estate of Bernie Madoff’s Friend to Pay Trustee Irving Picard Over $262M

The estate of Stanley Chais has agreed to pay the victims of Bernard Madoff’s Ponzi scam $277M to settle claims accusing Chais, a Beverly Hills manager, of enriching himself through the fraud while costing thousands of investors, including his own clients, money.

Chais was one of Madoff’s oldest friends and one of his earliest investors. When the multi-billion dollar scam failed eight years ago, however, Chais claimed he had been fooled by Madoff, too, and that he knew nothing about the fraud. Yet he and his estate have since been the subject of securities fraud cases related to the Madoff Ponzi scam for years. Chais died in 2010.

Now, his estate has agreed to pay Madoff trustee Irving Picard over $262M, as well as $15M to California’s attorney general to settle a class action case. Picard had accused Chais and his wife Pamela, as well as entities under their control, of allegedly making about $1B from bogus securities transactions conducted by Madoff’s firm. Chais also earned hundreds of millions of dollars as a money manager for sending his customers’ money into Bernard Madoff’s financial firm.

Picard’s lawsuit against Chais contends that the latter withdrew $35M from Madoff’s firm before the Ponzi scam failed. Also, days before Madoff was arrested, he sent Chais $200M.

The SEC sued Chais, claiming that he’d been directing assets to Madoff as far back as the early 1970’s even though there were “clear indications” that his friend was committing fraud. The regulator claims that Chais lied to clients by making them believe that he was the one deciding how to invest their money when he was sending the funds to Madoff invest.

Chais also has been accused of bailing Madoff out on more than one occasion when the Ponzi mastermind needed money and of enabling the scam grow in return for special treatment. Federal prosecutors investigated Chais but he was never charged with criminal wrongdoing.

To date, Picard has recovered over $11.2B—that’s about 54 cents on the dollar—for investors who were bilked by Madoff. He’s done this by going after offshore funds and banks, as well as investors who made money from the fraud when they took out more money than they put invested.

Madoff continues to serve a 150-year prison sentence after pleading guilty to the criminal charges against him.

Shepherd Smith Edwards and Kantas, LTD LLP is a securities fraud law firm.

Madoff SIPA Trustee, California Attorney General, and Private Litigants Reach Recovery Agreement Valued in Excess of $277M with the Estate of Stanley Chais and Other Chais-Related Defendants, BusinessWire, SIPA Trustee/SIPC, October 28, 2016

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