Hedge fund charged as part of Madoff fraud

May 11, 2010 | By Jim Kim

The Bernard Madoff (Bernard Madoff news) dominoes continue to fall. Andrew Cuomo, New York attorney general, has just sued Ivy Asset Management, a unit of BNY Mellon (NYSE: BK), charging that it discovered a decade ago that Bernard Madoff was running a fraudulent asset management firm but kept quiet.

The hedge fund wound up losing $227 million when the scheme collapsed, according to the suit. But the AG said the firm and its former principals, CEO Lawrence Simon and CIO Howard Wohl, "had a duty to tell clients about their concerns," reports the AP. The complaint alleges that they stayed quiet because "pulling their clients money entirely would have cost them millions of dollars in management fees."

The firm disputes the allegations. "Ivy informed its clients that it had questions about Madoff that it could not answer and recommended to its clients that they reduce their exposure to Madoff," said a statement from the firm. Who knows how many more firms are in the same situation. It would have been easy to look the other way, until the scheme came crashing down.

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