Investor Lawyers Blog

SEC Commissioners Paredes and Gallagher ‘Dismayed’ Over Chairman Schapiro’s Announcement Regarding Failed Money Market Mutual Fund Industry Overhaul Proposal

Published on: September 7, 2012 | by Shepherd Smith Edwards & Kantas, LLP

In a recent joint statement, Securities and Exchange Commissioners Troy Paredes and Daniel Gallagher expressed dismay over Chairman Mary Schapiro’s announcement regarding a staff proposal to revamp the money market mutual fund industry that she said would no longer move forward because it would have failed to garner the necessary votes. Gallagher and Paredes expressed concern that her announcement made it seem as if they and Commissioner Luis Aguilar are not worried (and may even be dismissive) about “strengthening money market funds.”

Schapiro recently made it known that she would not be able to get three votes needed to move forward the proposal, which includes reforms to the regulations that preside over money market funds. Under the proposal, funds would have had to either lose their $1 fixed net asset value while floating their NAVs or keep up an under 1% capital buffer. Per her statement, Schapiro said the three commissioners told her that they “will not support a staff proposal to reform the structure of money market funds,” which she believes will protect retail investors and decrease need for taxpayer bailouts in the future. She called on policymakers to look at other ways of dealing with the “systemic risks” involving money market funds. A day after her announcement, the Treasury Department and the SEC were already looking at alternative means to reform the money fund industry.

Paredes and Gallagher want to make it clear that even though they rejected the proposal, this does not mean they are abandoning their duty to regulate money market funds, which fall under the SEC’s jurisdiction for regulation, or that they are unsupportive of making improvements to the way the agency performs oversight. The two of them think the proposal lacks the necessary analysis and data as support and that investors and issuers could have been left with “significant costs” while the system would have possibly become burdened with new risks. They also are concerned that the changes put forward by the proposal would not stop a run on funds. Gallagher and Paredes said that they believe that the SEC “can do better.”

SEC Study Reports that Many Retail Investors Are Financially Illiterate

Published on: September 5, 2012 | by Shepherd Smith Edwards & Kantas, LLP

According to the Study Regarding Financial Literacy Among Investors, which was recently released by the SEC, many US retail investors are confused or don’t know much about making informed financial choices and can be considered financially illiterate. The study, which was created to fulfill the Dodd Frank Act’s section 917, is a representation of information distilled by SEC staff from retail investors, focus groups, public comments, quantitative research, and FLEC, which is comprised of 22 federal entities and was set up under the Fair and Accurate Credit Transactions Act of 2003’s Title V to better financial literacy in this country. The Commission also looked to the Library of Congress to review other studies on this subject.

Reportedly, regardless of whether the information came from, the general findings were the same: that many investors lacked an understanding of the most basic financial ideas, including the difference between bonds and stocks, did not know a lot about investment costs or their effect on investment returns, and were challenged when it came to knowing much about liquidity or credit risks. Women, elderly seniors, African-Americans, Hispanics, and the uneducated seemed to generally have less knowledge about investment than did members of the general population.

Also, many investors appeared to have a difficult time reading their portfolio account descriptions and trade confirmations. Many of them appeared confused about fees. One focus group participant even zeroed in on how, when given too much information, the “more that is disclosed” the less likely investors were to pay attention.

Also, per the study:
• Investors would rather get investment disclosures first before buying an investment service or product or getting involved with a financial intermediary.

• Investors do factor disciplinary history, fees, strategy for investments, and conflicts of interest when considering financial intermediaries.

• They prefer summaries with key data about their investments in investment product disclosures. They like disclosures that are concise, clear, easy to understand, and employ tables, bullet points, graphs, or charts.

• They also like “layered” disclosure, where they are given key information and can then access more details online or via e-mail or mail.

You can find out about other study findings by clicking on the link below.

From assessing commenter feedback, SEC staff have now identified which private and public investor educations efforts are the most useful to the audience they are targeting. Also, OIEA and other FLEC participants intend to work together to develop programs that zero in on specific groups, such as military members, young investors, investment trustees, lump sum payout recipients, and underserved populations. They will create programs that emphasize how key it is to perform investment professional background checks, market Investor.gov as the main federal government resource for information about investing, and make sure people become aware of the costs and fees associated with investing.

Securities Fraud
When an investor comes to a financial professional without a lot of investment knowledge of experience, it is the representative’s responsibility to make sure that the client knows about and understands the risks and costs involved before they invest and doesn’t get into anything that would be unsuitable or risky for their goals or finances. Unfortunately, there are brokers and investment advisers that take advantage of investor and their lack of knowledge in order to make a profit. When securities fraud happens it is the investor that suffers.

Study Regarding Financial Literacy Among Investors (PDF)

SEC Says Retail Investors Are Clueless About Stocks, Minyanville’s Wall Street, August 31, 2012

More Blog Posts:
SEC Acts to Put into Effect Provision of JOBS Act that Allows General Advertising and Solicitation in Securities Offerings, Stockbroker Fraud Blog, September 4, 2012

District Court in Texas Finds that SEC Improperly Deposed Witness in Lawsuit Over Alleged Life Settlement Scam, Stockbroker Fraud Blog, September 1, 2012

Institutional Investor Securities Roundup: FHFA Can Start Discovery in MBS Litigation Against Banks, SEC Sues Puerto Rico Man Over Alleged $7M Scam, and Assets of Two Colorado Men are Temporarily Frozen Over Alleged Promissory Note Ponzi Scheme, Institutional Investor Securities Blog, August 31, 2012 Continue Reading ›

Ex-MF Global CEO John Corzine Says Bankruptcy Trustee’s Bid to Join Investors’ Class Action Securities Litigation is Hurting His Defense

Published on: September 5, 2012 | by Shepherd Smith Edwards & Kantas, LLP

According to Jon Corzine, the ex-CEO of MF Global Holdings Ltd. (MFGLQ), bankruptcy trustee James Giddens’s efforts to be part of some of the investor class action lawsuits against the firm’s former and current executives are negatively impacting his defense. Corzine, who is also Goldman Sachs Group Inc.’s (GS) (GS) former co-chairman, left his position at MF Global last year, mere days after the brokerage giant failed in the wake of losses it sustained on European sovereign debt and its overwhelming inability to account for about $1.6 billion in customer funds. MF Global would go on to file for bankruptcy protection.

Rather than file his own securities lawsuit, Giddens has decided to work with the lawyers of the firm’s customers. He won’t join them as a plaintiff but he will “assign” his legal claims to their attorneys and fully participate in their cases. Giddens considers it totally “appropriate” for his office to join forces with the plaintiffs’ securities fraud lawsuits, and he believes that this cooperation agreement is the “most efficient, expedited and cost-effective” means of getting back additional assets for MF Global clients and creditors.

Meantime, Corzine and other ex- and current MF Global executives are complaining that this arrangement would give Giddens complete and total authority over the documents and books they would be able to get in their defense and that this unfairly limits them. Per the former executives’ lawyers, restricting the objectors’ rights to obtain discovery deprives them of the chance to a proper defense, violates due process principals, and is not in line with the goals and requirements of the federal rules that preside over civil litigation. (Also opposing Giddens’s cooperation agreement with the plaintiffs and their lawyers is ex-FBI director Louis Freeh, who is tasked with wrapping up MF Global Holdings Ltd.’s affairs. He believes that the deal oversteps Giddens’s authority and that the bankruptcy trustee is moving claims that belong to the holding company’s creditors and not the brokerage’s customers.)

SEC Acts to Put into Effect Provision of JOBS Act that Allows General Advertising and Solicitation in Securities Offerings

Published on: September 4, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Last week, the SEC proposed rules that would get rid of the ban against general advertising and solicitation of certain securities offerings under Rule 144A and Rule 506 of Regulation D of the Securities Act. The rules are mandated under the Jumpstart Our Business Startups Act.

Currently, companies that want to raise money through securities sales have to depend on an exemption from registration or register the offering with the SEC. The majority of the SEC’s exemptions from registration, including Rule 506, don’t allow companies to take part in general solicitation/advertising related to the securities offering.

However, the newly enacted JOBS Act mandates that the Commission take away the general advertising/solicitation prohibitions on securities offerings related to Rule 506. Section 201(a)(1) of the JOBS Act even directs the SEC to amend Rule 506 to allow general solicitation/advertising as long as the buyers of the securities are investors that are accredited. It also says that the rules shall make sure the issuer exercises reasonable steps to confirm that the buyers are accredited investors and that it is up to the Commission to determine what these methods would be.

District Court in Texas Finds that SEC Improperly Deposed Witness in Lawsuit Over Alleged Life Settlement Scam

Published on: September 1, 2012 | by Shepherd Smith Edwards & Kantas, LLP

According to the U.S. District Court for the Western District of Texas, the SEC violated the Federal Rules of Civil Procedure when it deposed a third party witness in its enforcement case dealing with an allegedly fraudulent life settlements accounting scam. The case is SEC v. Life Partners Holdings Inc. While the Commission contended that under its regulatory authority to look into possible securities law violations the deposition was properly obtained, the Judge James Nowlin disagreed, backing up the defendants’ claim that the regulator was trying to get ex-parte discovery.

In the Texas securities lawsuit it filed against Life Partners Holdings and three of its senior executives several months ago, the Commission is accusing the defendants of being allegedly involved in an accounting scam over life settlements involving the selling and buying of fractional interests of life insurance policies in the secondary market. The agency also said that they neglected to tell shareholders that the financial firm was materially underestimating the life expectancy estimates it employed to determine transaction prices.

According to the Court, prior to the Rule 26(f) conference between the two parties and after the SEC lawsuit was filed, the Commission deposed Peter Cangany, who was a Life Partner auditor and a third party. Contending that the deposition was obtained without the court’s leave, before the conference, and without them being notified, the defendants filed a motion for sanctions. Meantime, the SEC came back with the defense that the subpoena it sent to Cangany had been an administrative one seeking more information about possible violations that hadn’t been made in the lawsuit.

Per the court’s recap, what is pertinent here is whether the FRCP governs Cangany’s deposition or it was obtained pursuant to the investigatory authority of the FRCP. It noted that although the SEC doesn’t explicitly point to the reason for the deposition, it “implies” that Cangany was deposed to look into possible violations he made as the auditor of Life Partner. Topics that came up during the deposition included the practices of Life Partners as they relate to revenue recognition, life expectancy, and asset impairment-areas that are the basis of the SEC’s lawsuit against Life Partners.

Although per Rule 26(d)(1), a party cannot pursue recovery before parties have spoken pursuant to Rule 26(f) and in instances where the parties have not stipulated, a defendant looking to obtain a deposition before the conference has to first get the court’s permission first, and also, a party looking to depose a witness must give notice to other party, the court noted that the Commission deposed Cangany before the Rule 26(f) conference, without the stipulation of the other parties, and without getting the court’s leave. The court also said that even though the Commission gave the defendants the transcript and contended that, as a result, they were not prejudiced, this is not the end result. By taking an extra-judicial deposition from a non-party witness to get testimony against the defendants, the court said that the SEC did cause the defendants to be prejudiced. Also, not notifying the defendants that Cangany was to be deposed prevented them from being able to cross-examine him and object to testimony that the agency had elicited.

The court says the SEC cannot use this deposition testimony in its lawsuit against Life Partners. It also has to pay the defendants’ legal fees legal fees for filing the motion for sanctions.

Read the Complaint (PDF)

Court Raps SEC for Discovery Violation In Suit Over Alleged Life Settlements Scam, Bloomberg BNA, August 21, 2012

More Blog Posts:
Texas Securities Fraud: SEC Charges Life Partners Holdings Inc. in Life Settlement Scam, Stockbroker Fraud Blog, January 4, 2012

Texas Appeals Court Says Letter of Intent for Sale of Fiduciary Financial Services of Southwest Stock to Corilant Financial is Not an Enforceable Contract, Stockbroker Fraud Blog, August 17, 2012

Lawsuit Challenging BP Cancellation of 2010 First Quarter Dividend After Deepwater Debacle is Dismissed in Texas Court, Stockbroker Fraud Blog, August 10, 2012

Citigroup to Pay $590M to Settle Shareholder Class Action CDO Lawsuit Over Subprime Mortgage Debt, Institutional Investor Securities Fraud, August 30, 2012 Continue Reading ›

Institutional Investor Securities Roundup: FHFA Can Start Discovery in MBS Litigation Against Banks, SEC Sues Puerto Rico Man Over Alleged $7M Scam, and Assets of Two Colorado Men are Temporarily Frozen Over Alleged Promissory Note Ponzi Scheme

Published on: August 31, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. District Court for the District of Connecticut has decided that the Federal Housing Finance Agency can begin the discovery process in its lawsuit over $190 million in mortgage-backed securities that were sold to Freddie Mac (FMCC) and Fannie Mae (FNM.MU) through several hundred securitizations. FHFA is suing financial firms and banks, contending that they did not properly represent the risks involved in the loans backing these MBS. This ruling rejects an attempt by Royal Bank of Scotland (RBS) to stall discovery.

To stop the discovery process from beginning, Royal Bank of Scotland contended that the Private Securities Litigation Reform Act (PSLRA) mandates a stay of discovery until a motion to dismiss is resolved. The bank said that under PSLRA, FHFA’s lawsuit is a private cause of action because the agency is maintaining the action for private firms. Royal Bank of Scotland also argued that under the Securities Act or PSLRA, there is “no ‘public’ investor suit.” Judge Alvin W. Thompson, however, did not agree and granted permission to FHFA to begin discovery while noting that the agency is suing as a conservator and therefore the concerns that Congress had in choosing to enact PSLRA don’t exist in this case.

In an unrelated securities fraud case, the SEC is suing Ricardo Banally Rajas of Puerto Rico and his firm Shadai Yire over their alleged involvement in a $7M Ponzi scam that targeted about 200 unsophisticated investors, both from the mainland and the island, between August 2005 and February 2009. Rajas is accused of hiring sales agents that worked on commission while making a number of misrepresentations to get investors to join up. Also, the Commission says that Rajas would recruit through individual conversations and group presentations, promising to pay investors 15-50% yearly return rates while claiming that this was a risk-free investment in Shadai Yire subsidiary M & R International Group, Corp., which would then invest in commodities contracts. Unfortunately, Rajas did not invest these clients’ money, instead using the funds to pay off investors with newer investors’ cash. He also allegedly misappropriated at least $700K to support for his lifestyle. The SEC wants disgorgement, injunctions, and fines.

Investors Can Proceed with Nevada Securities Lawsuit Over Reverse Stock Split That Made Company CEO the Only Shareholder

Published on: August 30, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. District Court for the Eastern District of New York has ruled that plaintiffs can go ahead with their Nevada breach of fiduciary duty claims involving a reverse stock split that left Major Automotive Companies Inc.’s chief executive officer as the concern’s only shareholder. The case is Gardner v. Major Automotive Companies Inc.

The plaintiffs, Dorsey R. Gardner 2002 Trust trustees John Francis O’Brien and Dorsey Gardner, are accusing Bruce Bendell of abusing is fiduciary duty so he could get and approve a share price that was unfairly low. The trust had owned stock in Major during the relevant period in question.

Until 2006, when a going private deal was approved, Major’s stock was publicly traded, and CEO, acting CFO, and chairman Bendell owned 50.3% of the company’s outstanding common stock. According to the court, in December 2010, Major sent out a notice that there would be a special stockholders meeting to consider a 1 for 3 million reverse stock split that would make him the only shareholder. Meantime, the other shareholders would get $0.44 per pre-split share.

The district court dismissed the trustees claims that Major and Bendell issued false statements about the transaction’s fairness in the proxy system, which would have been a violation of the 1934 Securities Exchange Act’s Section 14(a). It noted that the section is only applicable to registered securities. The court also rejected the plaintiffs’ contention that claims should be allowed under that section because at the time their shares were bought Major’s common stock was held and the defendants should therefore be held liable as if the stock was never deregistered. The court said its own research and the plaintiff’s brief did not bring up any law that supported this interpretation of section 14 (a).

However, the district court did say that the Nevada breach of duty claim can go forward, noting that the allegations given as grounds for the lawsuit are “are more than adequate.” The court said that even though Bendell had “plain personal interest” in the transaction, the company failed to create a committee made up of disinterested members to assess the fairness factor. It also pointed out that the proxy statement did not disclose that Bendell was not only the chairman of the board but also its only member/dominated it, especially as it was the board that “unanimously determined” that the transaction was a fair one and in the best interests of not just the company but also its stockholders. The court also said that even though the plaintiffs did not invoke their rights under Nevada’s dissenters’ rights statute, this isn’t grounds for throwing out the case. It determined that the claim is viable because plaintiffs aren’t just challenging the share price but also the way Bendell exercised his fiduciary obligations.

Read the Memorandum and Order (PDF)

Securities Exchange Act of 1934, Legal Information Institute

More Blog Posts:
Merrill Lynch Agrees to Pay $40M Proposed Deferred Compensation Class Action Settlement to Ex-Brokers, Stockbroker Fraud Blog, August 27, 2012

Texas Appeals Court Says Letter of Intent for Sale of Fiduciary Financial Services of Southwest Stock to Corilant Financial is Not an Enforceable Contract, Stockbroker Fraud Blog, August 17, 2012

Ex-Fannie Mae Executives Have to Defend Against SEC Lawsuit Over Their Alleged Involvement in Understating Mortgage Company’s Exposure Risk, Institutional Investor Securities Blog, August 25, 2012 Continue Reading ›

Citigroup to Pay $590M to Settle Shareholder Class Action CDO Lawsuit Over Subprime Mortgage Debt

Published on: August 30, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Citigroup (C) has agreed to pay $590 million settle a shareholder class action collateralized debt obligation lawsuit filed by plaintiffs claiming it misled them about the bank’s subprime mortgage debt exposure right before the 2008 economic collapse By settling, Citigroup is not admitting to denying any wrongdoing. A federal judge has approved the proposed agreement.

Plaintiffs of this CDO lawsuit include pension funds in Illinois, Ohio, and Colorado led by ex-employees and directors of Automated Trading Desk. They obtained Citigroup shares when the bank bought the electronic trading firm in July 2007. The shareholders are accusing bank and some of its former senior executives of not disclosing that Citigroup’s CDOs were linked to mortgage securities until the bank took a million dollar write down on them that year. Citigroup would later go on to write down the CDOs by another tens of billions of dollars.

The plaintiffs claim that Citigroup used improper accounting practices so no one would find out that its holdings were losing their value, and instead, used “unsupportable marks” that were inflated so its “scheme” could continue. They say that the bank told them it had sold billions of dollars in collateralized debt obligations but did not tell them it guaranteed the securities against losses. The shareholders claim that to conceal the risks, Citi placed the guarantees in separate accounts.

Prior to the economic collapse of 2008, Citi had underwritten about $70 billion in CDOs. It, along with other Wall Street firms, had been busy participating in the profitable, growing business of packaging loans into complex securities. When the financial crisis happened, the US government had to bail Citigroup out with $45 billion, which the financial firm has since paid back.

This is not the first case Citigroup has settled related to subprime mortgages and the financial crisis. In 2010, Citi paid $75 million to settle SEC charges that it had issued misleading statements to the public about the extent of its subprime exposure, even acknowledging that it had misrepresented the exposure to be at $13 billion or under between July and the middle of October 2007 when it was actually over $50 billion. Citigroup also consented to pay the SEC $285 million to settle allegations that it misled investors when it didn’t reveal that it was assisting in choosing the mortgage securities underpinning a CDO while betting against it.

This week, Citi agreed to pay a different group of investors a $25 million MBS settlement to a securities lawsuit accusing it of underplaying the risks and telling lies about appraisal and underwriting standards on residential loans of two MBS trusts. The plaintiffs, Greater Kansas City Laborers Pension Fund and the ‪City of Ann Arbor Employees’ Retirement System,‬ had sued Citi’s Institutional Clients Group. ‬

This $590 million settlement of Citigroup’s is the largest one reached over CDOs to date and one of the largest related to the economic crisis. According to The Wall Street Journal, the two that outsize this was the $627 million that Wachovia Corp. (WB) agreed to pay over allegations that investors were misled about its mortgage loan portfolio’s quality and the $624 million by Countrywide Financial (CFC) in 2010 to settle claims that it misled investors about its high risk mortgage practices.

Citigroup in $590 million settlement of subprime lawsuit, The New York Times, August 29, 2012

Citi’s $590 million settlement: Where it ranks, August 29, 2012

Citigroup Said To Pay $75 Million To Settle SEC Subprime Case, Bloomberg, July 29, 2010

More Blog Posts:

Morgan Keegan Settles Subprime Mortgage-Backed Securities Charges for $200M, Stockbroker Fraud Blog, June 29, 2011

SEC Securities Law Roundup: First Whistleblower Award Under New Program is Announced, Internet-Based Investment Adviser Seeks Regulator’s Recognition, & the Commission Stops Alleged $600M Online Ponzi Scheme

Published on: August 29, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has made its first award to a whistleblower under its new program created under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Informants who give the commission “original information” leading to action resulting in $1 million or greater in penalties are entitled to receive 10-30% of whatever sanctions the regulator collects.

The SEC announced that it would pay $50,000 to this particular tipster for assistance provided in stopping a “multi-million dollar fraud.” This person gave “significant information” and documents, which helped speed up the agency’s probe. Now, the defendants in the securities case must pay about $1 million in penalties, of which the Commission has collected about $150,000. The $50,000 is about 30% of that amount. If a final judgment is issued against other defendants, the whistleblower could receive a larger amount.

In other SEC-related news, Larry Eiben the co-founder of Moxy Vote, an investment web site, wants the Commission to put into effect rules that recognize a new investment adviser category. He wants investors to be able to use a “neutral Internet voting platform” to get information about investments, as well as be able to not just vote shares during corporate meetings, but also “designate as the recipient of proxy materials” for transmission by companies with SEC-registered stock.

Eiben believes the rule changes is necessary because under existing regulations, retail investors cannot use the Internet to vote their shares or collect and get information through means that they might find most helpful when determining how to vote. He says the change will tackle what he considers an ongoing issue: “low participation by retail investors in voting shares of their portfolio companies.”

Unfortunately, the Internet continues to prove an effective tool for perpetuating financial fraud. Earlier this month, the SEC obtained an emergency asset freeze order stopping an alleged $600 million Ponzi scam that was about to collapse. The defendants are Rex Venture Group and its owner Paul Burkes, who is an online marketer.

Per the Commission, the two of them raised money from over one million clients on the Internet using ZeekRewards.com. They allegedly gave customers several options for earning money through a rewards program. Two of them involved the purchase of investment contracts. However, none of these securities were SEC registered, which they are required to be under federal securities laws. Meantime, investors were promised up to half of the company’s daily net profits via a profit sharing system. Also, despite the defendants’ allegedly giving them the impression that the company was profitable, investors received payouts that were unrelated to such profits, and instead, in typical Ponzi scam fashion, the money paid to them came from the newer investors.

The SEC said its order to freeze assets will allow the Ponzi scam victims to recoup more of their money so whatever is left of what they invested with ZeekRewards can be used as payouts to them. Burkes has agreed to settle the Commission’s allegations without denying or admitting to wrongdoing. He will, however, pay a $4 million penalty.

Whistleblower Program, SEC

S.E.C. Pays Out First Whistle-Blower Reward, The New York Times, August 21, 2012

Read Eiben’s Petition to the SEC (PDF)

MoxyVote (PDF)

Read the SEC complaint in its case against Rex Venture Group (PDF)

More Blog Posts:
Merrill Lynch Agrees to Pay $40M Proposed Deferred Compensation Class Action Settlement to Ex-Brokers, Stockbroker Fraud Blog, August 27, 2012

Majority of Non-Traded REITs Underperform Compared to Benchmarks, Reports New Study, Stockbroker Fraud Blog, August 25, 2012

Institutional Investment Roundup: Madoff Ponzi Victims to Get 2nd Payout, Insurer’s MBS Lawsuit Against UBS Can Proceed, SEC Charges 2 in $10M Penny Stock Scam, & Hedge Fund Manager Found Guilty in $900K Insider Trading Scheme

Published on: August 29, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Bankruptcy Court for the Southern District has issued an order giving Irving Picard, the Bernard L. Madoff Investment Securities LLC liquidation trustee, permission to issue a second interim distribution to the victims of the Madoff Ponzi scam. Picard had asked to add $5.5 billion to the customer fund and issue a second payout of $1.5 billion to $2.4 billion to the investors that were harmed.

According to Bloomberg Businessweek, a $2.4 billion payout would be seven times more than what the bilked investors have been able to get back since Madoff, who is serving a 150-year prison term for his crimes, defrauded them. A huge part of the customer fund is on reserve because there are investors who have filed securities lawsuits contending they should be getting more.

Meantime, the U.S. District Court for the Southern District of New York has decided that the mortgage-backed securities lawsuit filed by insurance company Assured Guaranty Municipal Corp. against UBS Real Estate Securities Inc. can proceed. The plaintiff contends that UBS misrepresented the quality of the loans that were underlying the MBS it insured in 2006 and 2007.