Hedge funds scammed by Madoff won't get payments

Customers of hedge funds – or so-called 'feeder funds' – that invested with Madoff don't qualify for a settlement fund, a federal judge affirms. Thousands of clients of 16 hedge funds hoped to collect from the $500,000 fund.

Shannon Stapleton/Reuters/File
Bernard Madoff walks back to his apartment in New York in this 2008 file photo. A federal judge has affirmed that clients of 16 hedge funds that had invested with Madoff don't qualify for payments from a special reimbursement fund. Mr. Madoff is serving a 150-year prison sentence for his Ponzi scheme.

A federal judge has affirmed a bankruptcy court ruling that thousands of clients of funds that invested money with jailed financier Bernard Madoff do not qualify for payouts that reimburse Madoff customers.

The decision made public Thursday by Judge Denise Cote (koht) agreed with a judge's finding last year. It said the clients don't qualify because they did not hold accounts in their names.

It means investors still cannot recover up to $500,000 from a fund created to reimburse small investors who are victims of fraudulent schemes.

The ruling came in a case brought on behalf of 16 feeder or hedge funds that invested with Madoff.

Lawyers for the funds did not immediately return messages seeking comment.

Madoff is serving a 150-year prison sentence for masterminding the multibillion-dollar Ponzi scheme.

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