Investors’ Claims Against Investment Advisers Who Recommended Madoff Feeder Fund Survive Motion for Summary Judgment

At the recommendation of the defendant investment advisers, in April 2008, plaintiffs Thomas and Margaret Van Dyke invested over $850,000 in Anchor Hedge Fund Limited (Anchor).  Anchor, in turn, invested its assets with Bernard Madoff.  Plaintiffs’ entire investment was lost in Madoff’s fraud.  Plaintiffs sued Sovereign International Asset Management, Inc., the investment adviser that recommended Anchor, along with its principals.  They alleged fraud under the Investment Advisers Act of 1940 and analogous provisions of Ohio law, breach of contract, negligence and other common law claims.  Plaintiffs’ fraud claims were based in large part on the failure of the defendants to disclose how they were compensated by Anchor.  The parties moved for summary judgment.  We summarize the Court’s ruling on the motions, and its implications for disclosure of fees by hedge fund managers to investors.

To read the full article

Continue reading your article with a HFLR subscription.