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Update: material developments emerge in Madoff Ponzi scheme

Irving Picard, the trustee for investors defrauded in the epochal Ponzi scheme authored by Bernard Madoff, filed a lawsuit against a described "Madoff middleman" in 2009 demanding the return of approximately $1.3 billion from that individual's estate.

He'll have to settle for $277 million.

That sum is hardly trifling, of course, and it will go far toward reimbursing many individuals and institutional investors who were ripped off in one of the most notorious securities fraud cases in American history. Reportedly, Picard has thus far recovered in excess of $11 billion in money for bilked consumers.

A recent article in the Wall Street Journal spotlights the central role played by Stanley Chais, a now deceased California money manager who was an early investor in Madoff's company. The Journal notes that Chais invested huge amounts of cash from good-faith investors in so-called "feeder funds" that ended up in Madoff accounts and were used to both pay back earlier investors and to enrich Madoff and his family and associates.

Chais died in 2010. Prior to passing away, he consistently contended that he was flatly unaware that Madoff was engaged in any fraudulent activity.

Picard just as persistently refuted that allegation, and a settlement filed last week in bankruptcy court seems to firmly support his view. The pact mandates the recovery of $262 million from Chais's estate, with additional monies to be recouped from his widow's assets.

There is a central California nexus to the case, given separate litigation filed by the state attorney general's office. California investors who are named in a special restitution fund will collectively be paid about $15 million from Chais's estate.

The settlement will be reviewed later this month by a U.S. bankruptcy court.

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