Irving Picard, Madoff Trustee Vs Steven Mendelow Et Al

Baker & Hostetler LLP
45 Rockefeller Plaza
New York, NY 10111
Telephone: (212) 589-4200
Facsimile: (212) 589-4201
David J. Sheehan
Keith R. Murphy
Geraldine Ponto
Attorneys for Irving H. Picard, Trustee

for the Substantively Consolidated SIPA Liquidation
of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff
UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK
SECURITIES INVESTOR PROTECTION
CORPORATION, Adv. Pro. No. 08-01789 (BRL)
Plaintiff-Applicant, SIPA LIQUIDATION
v. (Substantively Consolidated)
BERNARD L. MADOFF INVESTMENT
SECURITIES LLC,
Defendant.
In re:
BERNARD L. MADOFF,
Debtor.
IRVING H. PICARD, Trustee for the Liquidation

of Bernard L. Madoff Investment Securities LLC,
Plaintiff,
Adv. Pro. No. 10-_______ (BRL)
v.
STEVEN B. MENDELOW, NTC & Co. LLP, as

former custodian of an Individual Retirement
Account for the benefit of STEVEN B.
MENDELOW, NANCY MENDELOW, NTC &
Co. LLP as former custodian of an Individual
Retirement Account for the benefit of NANCY
MENDELOW, CARA MENDELOW, PAMELA
CHRISTIAN, C&P ASSOCIATES, LTD., and
C&P ASSOCIATES, INC.,
Defendants.
COMPLAINT
Irving H. Picard, (the “Trustee”), as trustee for the liquidation of the business of Bernard
L. Madoff Investment Securities LLC (“BLMIS”), under the Securities Investor Protection Act,
15 U.S.C. §§ 78aaa, et seq. (“SIPA”),1 and the substantively consolidated estate of Bernard L.
Madoff, individually (“Madoff”), by and through his undersigned counsel, for his Complaint,
states as follows:
INTRODUCTION
1. This adversary proceeding arises from the massive Ponzi scheme perpetrated by
Madoff. Over the course of the scheme, there were more than 8,000 client accounts at BLMIS.
In early December 2008, BLMIS generated client account statements for its approximately 4,900
open client accounts. These statements purport that clients of BLMIS had invested an aggregate
of approximately $65 billion with BLMIS. In reality, BLMIS had assets on hand worth a small
fraction of that amount. On March 12, 2009, Madoff admitted to engaging in a fraudulent
scheme and pled guilty to 11 felony counts and was sentenced on June 29, 2009 to 150 years in
prison. Defendants received, directly or indirectly, avoidable transfers from BLMIS, and the
purpose of this proceeding is to recover the avoidable transfers received by the Defendants.
2. Defendant Steven B. Mendelow (“Mendelow”) is a “principal” at Konigsberg
Wolf & Co., P.C. (“KW”), an accounting firm with numerous significant links to BLMIS and
Madoff. Mendelow has been with KW for more than 25 years. Trained as an accountant,
Mendelow’s biography on the KW website states that he “specializes in unique transactions,
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family wealth building and generational matters, and financial restructuring.” Upon information
and belief, Mendelow has been and continues to be a member of the boards of directors of
various public companies and serves or served on the audit committee of those companies.
Mendelow had special access to BLMIS, its employees, and Madoff. Mendelow contacted
Madoff directly to help prospective clients open accounts with the notoriously secretive BLMIS.
3. Mendelow reaped the benefits of Madoff’s fraud for almost 20 years. In 1989,
Mendelow, along with another individual, Edward Glantz (“Glantz”), started Telfran Associates
Ltd. Telfran Associates Ltd.’s general partner was Telfran Associates Corp., an entity formed in
1982, which was owned by Mendelow and Glantz. (Telfran Associates Ltd. and Telfran
Associates Corp. are collectively referred to as “Telfran.”) As discussed infra, Telfran and
Mendelow initially funneled money to BLMIS through the accounting firm owned and operated
by Frank Avellino and Michael Bienes (“Avellino & Bienes”), and later Mendelow funneled
money directly to BLMIS.
4. From 1989 to 1992 Telfran operated as an unregistered investment company
selling unregistered securities to the public. Telfran solicited approximately 800 clients to invest
through Telfran promising them a guaranteed rate of return on their original investment. In an
effort to avoid scrutiny from securities regulators, Telfran called these investments “loans” and
provided letters promising investors a fixed rate of return. Telfran was able to guarantee the rate
of return to its investors by simply turning around and making similar arrangements with
Avellino & Bienes, with a higher guaranteed rate of return. Telfran profited by the spread in the
guaranteed rates of return. Avellino & Bienes, however, was nothing more than a feeder fund
for BLMIS, and thus funneled money raised from Telfran investors directly into Madoff’s Ponzi
scheme.
1
For convenience, future reference to SIPA will not include “15 U.S.C.”
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5. On or about September 29, 1993, in the matter of Securities and Exchange
Commission v. Telfran Associates, Ltd., Telfran Associates Corp., Steven Mendelow and Edward
Glantz, 92 Civ. 8564 (JES), Telfran and Mendelow were permanently enjoined by the United
States Securities & Exchange Commission (“SEC”) for selling unregistered securities, and both
were fined. Avellino & Bienes (also the subject of an SEC action) and Telfran were forced to
return all money invested to their “investors.” The majority of that returned money was almost
immediately reinvested directly with BLMIS by the investors. Thereafter, under a new
arrangement between Madoff and Mendelow, Mendelow was compensated by BLMIS directly
through a fraudulent side payment (an annual payment made to Mendelow for referring former
Telfran investors to BLMIS) and a guaranteed rate of return on his individual BLMIS customer
accounts instead of through the spread.
6. C&P Associates, Ltd. and C&P Associates Inc. (collectively “C&P Associates”)
and Mendelow, his wife, Nancy Mendelow, his daughters, Cara Mendelow and Pamela
Christian, are all collectively referred to as “Defendants.” All had accounts with BLMIS, that,
upon information and belief, were managed and/or overseen by Mendelow.
7. Defendant NTC & Co. LLP, as former custodian of the Individual Retirement
Account for the benefit of Steven B. Mendelow, and Defendant NTC & Co. LLP, as former
custodian of the Individual Retirement Account for the benefit of Nancy Mendelow (collectively
“Defendant NTC”), is either an initial transferee of the avoidable Transfers (as defined below) or
a conduit of such Transfers for the benefit of Defendant Steven B. Mendelow (“FBO Defendant
S. Mendelow”) or Defendant Nancy Mendelow (“FBO Defendant N. Mendelow”) (collectively
“FBO Defendants”). If Defendant NTC is the initial transferee, then FBO Defendants are the
subsequent transferees of the Transfers for purposes of this Complaint. To the extent Defendant
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NTC served as a conduit for the funds withdrawn for the benefit of FBO Defendants, FBO
Defendants are initial transferees of the Transfers for whose benefit such Transfers were made
for purposes of this Complaint. The within defendants, Defendant NTC and/or FBO Defendants,
received avoidable transfers from BLMIS.
8. Defendants, Defendant NTC and/or FBO Defendants were beneficiaries of
Madoff’s Ponzi scheme and received avoidable transfers from BLMIS. Since the opening of
these various accounts, Defendants, Defendant NTC and/or FBO Defendants withdrew the
amount of $20,250,720 from BLMIS in connection with the accounts they held at BLMIS. The
Trustee’s investigation has revealed that $11,435,809 of this amount was fictitious profit from
the Ponzi scheme, in that Defendants, Defendant NTC and/or FBO Defendants withdrew more
than they invested in their BLMIS accounts. Accordingly, Defendants, Defendant NTC and/or
FBO Defendants have received $11,435,809 that was stolen from other BLMIS customers, under
circumstances that should have put Defendants, Defendant NTC and/or FBO Defendants on
notice of fraud.
9. Upon information and belief, Defendants Mendelow, Nancy Mendelow, Cara
Mendelow and Pamela Christian are also “Subsequent Transferee Defendants” as they received
subsequent transfers of the avoidable transfers referenced above from C&P Associates. Upon
information and belief, Mendelow is also a subsequent transferee of FGLS Equity LLC
(“FGLS”). Upon information and belief, FGLS was an investment vehicle operated by
Mendelow through which he invested other people’s money in BLMIS. FGLS is or will be the
subject of a separate preference action commenced by the Trustee and the allegations contained
in the complaint in that action are incorporated herein. To the extent the funds transferred from
BLMIS to Defendant NTC, C&P Associates, and FGLS were for the benefit of the Subsequent
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Transferee Defendants, Subsequent Transferee Defendants are included in the definition of
Defendants for purposes of the allegations herein.
10. Mendelow, and the accounts he oversaw, were some of a small number of BLMIS
customers with special access to information from BLMIS. Among other reasons, Defendants,
Defendant NTC and/or FBO Defendants knew or should have known that Defendants, Defendant
NTC and/or FBO Defendants were profiting from fraud because of the implausibly consistent
and high rates of return that their accounts supposedly achieved, in some instances as high as
43%, 34.7%, and 28.7%, while other of Defendants’ or FBO Defendants’ accounts in the same
investment strategy received returns that were less than half those amounts, ranging from no
greater than 10.4% to 14.5% over the same period. These rates of return were neither credible
nor consistent with legitimate trading activity, and should have caused any reasonable investor to
inquire further. Defendants, Defendant NTC and/or FBO Defendants also knew or should have
known that Defendants, Defendant NTC and/or FBO Defendants were reaping the benefits of
manipulated purported returns and false documents based on apparent trading irregularities.
11. Mendelow is an accountant with a high level of experience and sophistication in
the world of investments, including extensive investments in real estate. He is not a casual
investor and knew or should have known he was reaping the benefits of a fraudulent scheme.
Moreover, Mendelow was on notice for over 15 years that all was not as it seemed at BLMIS.
At least since he was fined by the SEC in 1993, and perhaps even earlier, he knew or should
have known that BLMIS was engaged in fraud.
NATURE OF PROCEEDING
12. This adversary proceeding is brought pursuant to §§ 78fff(b), 78fff-1(a), and
78fff-2(c)(3), §§ 105(a), 544, 548(a), 550(a) and 551 of title 11 of the United States Bankruptcy
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Code (the “Bankruptcy Code”), the New York Fraudulent Conveyance Act (New York Debtor &
Creditor § 270, et seq. (McKinney 2001) (“DCL”)), NY CPLR 203(g) and 213(8), and other
applicable law, and the avoidance and recovery of fraudulent conveyances, or their value, made
by BLMIS to or for the benefit of Defendants, Defendant NTC and/or FBO Defendants, which
shall be preserved for the benefit of BLMIS’s defrauded customers.
JURISDICTION AND VENUE
13. This is an adversary proceeding brought before the Court in which the main
underlying SIPA proceeding, No. 08-01789 (BRL) (the “SIPA Proceeding”) is pending. The
SIPA Proceeding was originally brought in the United States District Court for the Southern
District of New York as Securities Exchange Commission v. Bernard L. Madoff Investment
Securities LLC et al., No. 08 CV 10791 (the “District Court Proceeding”) and has been referred
to this Court. This Court has jurisdiction over this adversary proceeding under 28 U.S.C.
§ 1334(b) and § 78eee(b)(2)(A), (b)(4).
14. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (H) and (O).
15. Venue in this district is proper under 28 U.S.C. § 1409.
DEFENDANTS
16. Upon information and belief, Defendant, FBO Defendant and Subsequent
Transferee Defendant Steven B. Mendelow is an individual residing in New York, New York.
FBO Defendant holds a BLMIS account in the name, “NTC & Co. FBO Steven B. Mendelow,”
with the account address reported as P.O. Box 173859 Denver, Colorado 80217.
17. Upon information and belief, Defendant, FBO Defendant and Subsequent
Transferee Defendant Nancy Mendelow is an individual residing in New York, New York. FBO
Defendant holds a BLMIS account in the name, “NTC & Co. FBO Nancy Mendelow,” with the
account address reported as P.O. Box 173859 Denver, Colorado 80217.
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18. Defendant NTC is a limited liability partnership that was formed under the laws
of the state of Colorado. Its principal place of business is located at 717 17th Street, Suite 2100,
Denver, Colorado 80202.
19. Upon information and belief, Defendant and Subsequent Transferee Defendant
Cara Mendelow is an individual residing in New York, New York. Defendant holds a BLMIS
account in the name, “Cara Mendelow,” with the account address reported in New York, New
York.
20. Upon information and belief, Defendant and Subsequent Transferee Defendant
Pamela Christian is an individual residing in Ridgewood, New Jersey. Defendant holds a
BLMIS account in the name, “Pamela Mendelow,” with the account address reported in
Ridgewood, New Jersey.
21. Upon information and belief, C&P Associates, Ltd. is a Florida limited
partnership formed on January 15, 1988. Mendelow is its general partner.
22. Upon information and belief, C&P Associates, Inc. is a Florida corporation
incorporated on January 8, 1988. Its principal place of business is 440 Park Avenue South, 10th
Floor, New York, New York 10016, which is the same address as Mendelow’s employer, KW.
Steven Mendelow and Nancy Mendelow are the only officers. C&P Associates, Inc. is a general
partner of C&P Associates, Ltd. Upon information and belief, C&P Associates holds an account
in the name “C&P Associates” with an account address reported in New York, New York.
23. Furthermore, Mendelow’s knowledge and bad faith should be imputed to C&P
Associates because of his equitable and/or beneficial ownership and his domination and control
over C&P Associates’ investment account.
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24. Upon information and belief, Mendelow and his wife, Nancy, were at all times the
equitable, absolute and/or beneficial owners of C&P Associates and the account held in its name.
Upon information and belief, Mendelow and Nancy Mendelow not only owned, formed, funded,
directed and controlled C&P Associates, they also retained the beneficial use over all funds and
assets of that entity, including its BLMIS account. Any actions Mendelow and Nancy Mendelow
took with respect to C&P Associates’ BLMIS account was taken for their benefit.
25. Furthermore, Mendelow and Nancy Mendelow are the only officers of C&P
Associates. They acted on behalf of, and, in effect, as agents for, C&P Associates, and thus their
bad faith and knowledge should be imputed to it. Additionally, upon information and belief, the
corporate form of C&P Associates should be disregarded. Upon information and belief,
Mendelow and Nancy Mendelow routinely disregarded corporate formalities of C&P Associates,
a company that they owned, formed, funded, dominated and controlled, and freely transferred
funds among themselves and C&P Associates. Upon further information and belief, Mendelow
and Nancy Mendelow deliberately used C&P Associates to shield from their creditors the
fictitious profits and other fraudulent transfers that C&P Associates received from Madoff that
they either knew, or should have known, were the product of fraudulent activity. Accordingly,
there is no distinction between the knowledge and bad faith of Mendelow, Nancy Mendelow and
C&P Associates.
BACKGROUND, THE TRUSTEE AND STANDING
26. On December 11, 2008 (the “Filing Date”),2 Madoff was arrested by federal
agents for violation of the criminal securities laws, including, inter alia, securities fraud,
2
Section 78lll(7)(B) of SIPA states that the filing date is “the date on which an application for a protective decree is
filed under 78eee(a)(3),” except where the debtor is the subject of a proceeding pending before a United States court
“in which a receiver, trustee, or liquidator for such debtor has been appointed and such proceeding was commenced
before the date on which such application was filed, the term ‘filing date’ means the date on which such proceeding
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investment adviser fraud, and mail and wire fraud. Contemporaneously, the SEC filed a
complaint in the District Court which commenced the District Court Proceeding against Madoff
and BLMIS. The District Court Proceeding remains pending in the District Court. The SEC
complaint alleged that Madoff and BLMIS engaged in fraud through the investment advisor
activities of BLMIS.
27. On December 12, 2008, The Honorable Louis L. Stanton of the District Court
entered an order appointing Lee S. Richards, Esq. as receiver (“Receiver”) for the assets of
BLMIS.
28. On December 15, 2008, pursuant to § 78eee(a)(4)(A), the SEC consented to a
combination of its own action with an application of the Securities Investor Protection
Corporation (“SIPC”). Thereafter, pursuant to § 78eee(a)(4)(B) of SIPA, SIPC filed an
application in the District Court alleging, inter alia, that BLMIS was not able to meet its
obligations to securities customers as they came due and, accordingly, its customers needed the
protections afforded by SIPA.
29. Also on December 15, 2008, Judge Stanton granted the SIPC application and
entered an order pursuant to SIPA (the “Protective Decree”), which, in pertinent part:
a. appointed the Trustee for the liquidation of the business of BLMIS
pursuant to § 78eee(b)(3);
b. appointed Baker & Hostetler LLP as counsel to the Trustee pursuant to §
78eee(b)(3); and
c. removed the case to this Bankruptcy Court pursuant to § 78eee(b)(4).
By this Protective Decree, the Receiver was removed as Receiver for BLMIS.
was commenced.” § 78lll(7)(B). Thus, even though the application for a protective decree was filed on December
15, 2008, the Filing Date in this action is December 11, 2008.
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30. By orders dated December 23, 2008 and February 4, 2009, respectively, the
Bankruptcy Court approved the Trustee’s bond and found that the Trustee was a disinterested
person. Accordingly, the Trustee is duly qualified to serve and act on behalf of the estate of
BLMIS.
31. At a Plea Hearing on March 12, 2009 in the case captioned United States v.
Madoff, Case No. 09-CR-213(DC), Madoff pled guilty to an eleven-count criminal information
filed against him by the United States Attorneys’ Office for the Southern District of New York.
At the Plea Hearing, Madoff admitted that he “operated a Ponzi scheme through the investment
advisory side of [BLMIS].” See Plea Allocution of Bernard L. Madoff at 23, United States v.
Madoff, No. 09-CR-213(DC) (S.D.N.Y. March 12, 2009) (Docket No. 50). Additionally, Madoff
asserted “[a]s I engaged in my fraud, I knew what I was doing [was] wrong, indeed criminal.”
(Id. at 23:20-21.) On June 29, 2009, Madoff was sentenced to 150 years in prison.
32. On August 11, 2009, a former BLMIS employee, Frank DiPascali, pled guilty to
participating and conspiring to perpetuate the Ponzi scheme. At a Plea Hearing on August 11,
2009 in the case entitled United States v. DiPascali, Case No. 09-CR-764 (RJS), DiPascali pled
guilty to a ten-count criminal information. Among other things, DiPascali admitted that the
fictitious scheme had begun at BLMIS since at least the 1980s. See Plea Allocution of Frank
DiPascali at 46, United States v. DiPascali, No. 09-CR-764 (RJS) (S.D.N.Y. August 11, 2009)
(Docket No. 11).
33. As the Trustee appointed under SIPA, the Trustee has the statutory responsibility
of, among other duties, investigating the acts, conduct, property, liabilities and financial
condition of BLMIS, recovering and paying out customer property to BLMIS’s customers,
assessing claims, and liquidating any other assets of the firm for the benefit of the estate and its
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creditors. The Trustee is in the process of marshalling BLMIS’s assets, and the liquidation of
BLMIS’s assets is well underway. However, such assets will not be sufficient to reimburse the
customers of BLMIS for the billions of dollars that they invested with BLMIS over the years.
Consequently, the Trustee must use his authority under SIPA and the Bankruptcy Code to pursue
recovery from BLMIS account holders who received preferences and/or payouts of fictitious
profits to the detriment of other defrauded customers whose money was consumed by the Ponzi
scheme. Absent this or other recovery actions, the Trustee will be unable to satisfy the claims
described in subparagraphs (A) through (D) of § 78fff-2(c)(1).
34. Pursuant to § 78fff-1(a) of SIPA, the Trustee has the general powers of a
bankruptcy trustee in a case under the Bankruptcy Code in addition to the powers granted by
SIPA. Pursuant to SIPA § 78fff(b), “chapters 1, 3, 5 and subchapters I and II of Chapter 7 of
[the Bankruptcy Code]” are applicable to this case, “to the extent consistent with SIPA.”
35. Pursuant to §§ 78fff-(b) and 78lll(7)(B) of SIPA, the Filing Date is deemed to be
the date of the filing of the petition within the meanings of §§ 547, 548 of the Bankruptcy Code
and the date of the commencement of the case within the meaning of § 544 of the Bankruptcy
Code.
36. The Trustee has standing to bring these claims pursuant to § 78fff-1 of SIPA and
the Bankruptcy Code, including § 323(b) and 704(a)(1), because, among other reasons:
a. Defendants, Defendant NTC and/or FBO Defendants received
“customer property” as defined in § 78lll(4);
b. BLMIS incurred losses as a result of the claims set forth herein;
c. BLMIS’s customers were injured as a result of the conduct detailed
herein;
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d. SIPC cannot by statute advance funds to the Trustee to fully reimburse
all customers for all of their losses;
e. the Trustee will not be able to fully satisfy all claims;
f. the Trustee, as bailee of customer property, can sue on behalf of
customer bailors;
g. the Trustee is the assignee of claims paid, and to be paid, to customers of
BLMIS who have filed claims in the liquidation proceeding (such claim-filing customers,
collectively, “Accountholders”). As of the date hereof, the Trustee has received multiple
express unconditional assignments of the applicable Accountholders’ causes of action, which
actions could have been asserted against the Defendants, Defendant NTC and/or FBO
Defendants and Subsequent Transferee Defendants. As assignee, the Trustee stands in the
shoes of persons who have suffered injury in fact, and a distinct and palpable loss for which the
Trustee is entitled to reimbursement in the form of monetary damages. The Trustee brings this
action on behalf of, among others, those defrauded customers of BLMIS who invested more
money in BLMIS than they withdrew;
h. SIPC is the subrogee of claims paid, and to be paid, to customers of
BLMIS who have filed claims in the liquidation proceeding. SIPC has expressly conferred
upon the Trustee enforcement of its rights of subrogation with respect to payments it has made
and is making to customers of BLMIS from SIPC funds; and
i. the Trustee has the power and authority to avoid and recover transfers
pursuant to §§ 544, 548, 550(a) and 551 of the Bankruptcy Code and SIPA § 78fff-2(c)(3).
THE FRAUDULENT PONZI SCHEME
37. BLMIS was founded in 1959 by Madoff and, for most of its existence, operated
from its principal place of business at 885 Third Avenue, New York, New York. Madoff, as
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founder, chairman, chief executive officer, and sole owner, operated BLMIS together with
several of his friends and family members. BLMIS was registered with the SEC as a securities
broker-dealer under Section 15(b) of the Securities Exchange Act of 1934, SIPA § 78o(b). By
virtue of that registration, BLMIS is a member of SIPC. BLMIS had three business units: the
Investment Advisory (“IA”) Business, market-making, and proprietary trading.
38. Outwardly, Madoff ascribed the consistent success of the IA Business to his so-
called “split-strike conversion” strategy (“SSC Strategy”). Pursuant to that strategy, Madoff
purported to invest BLMIS customers’ funds in a basket of common stocks within the S&P 100
Index – a collection of the 100 largest publicly traded companies. He asserted that he would
carefully time purchases and sales to maximize value, and correspondingly, BLMIS customers’
funds would, intermittently, be out of the equity markets. While out of the market, those funds
were purportedly invested in United States Treasury bills or in mutual funds holding Treasury
bills. The second part of the SSC Strategy was the hedge of Madoff’s stock purchases with S&P
100 Index option contracts. Those option contracts functioned as a “collar,” limiting both the
potential gains and the potential losses. Madoff purported to use proceeds from the sale of S&P
100 Index call options to finance the cost of purchasing S&P 100 Index put options. Madoff also
told IA Business customers, including Mendelow and the other Defendants, that he would enter
and exit the market between six and ten times each year.
39. BLMIS’s IA Business customers received fabricated monthly or quarterly
statements showing that securities were held in, or had been traded through, their accounts. The
securities purchases and sales shown in such account statements never occurred and the profits
reported were entirely fictitious. At the Plea Hearing, Madoff admitted that he never purchased
any of the securities he claimed to have purchased for the IA Business’s customer accounts. In
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fact, there is no record of BLMIS having cleared a single purchase or sale of securities in
connection with the SSC Strategy. Madoff’s SSC Strategy was entirely fictitious.
40. At times prior to his arrest, Madoff generally assured customers and regulators
that he purchased and sold the put and call options over-the-counter (“OTC”) rather than through
an exchange. Yet, like the underlying securities, the Trustee has yet to uncover any evidence
that Madoff ever purchased or sold any of the options described in customer statements. The
Options Clearing Corporation, which clears all option contracts based upon the stocks of S&P
100 companies, has no record of the IA Business having bought or sold any exchange-listed
options on behalf of any of the IA Business customers.
41. Additionally, Madoff periodically wired hundreds of millions of dollars to
BLMIS’s affiliate, Madoff Securities International Ltd. (“MSIL”), a London based entity
substantially owned by Madoff and his family. There are no records that MSIL ever used the
wired funds to purchase securities for the accounts of the IA Business clients.
42. For all periods relevant hereto, the IA Business was operated as a Ponzi scheme.
The money received from investors was not invested in stocks and options. Rather, BLMIS used
its IA Business customers’ deposits to pay redemptions by other customers, and to make other
transfers, which are avoidable by the Trustee. Many of these transfers were to enrich Madoff,
his associates, and his family.
43. The falsified monthly account statements reported that the accounts of IA
Business customers had made substantial gains, but, in reality, because it was a Ponzi scheme,
BLMIS did not have the funds to pay investors. BLMIS was only able to survive for as long as it
did by using the stolen principal invested by some customers to pay other customers.
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44. The payments to investors constituted an intentional misrepresentation of fact
regarding the underlying accounts and were an integral and essential part of the fraud. The
payments were necessary to validate the false account statements, and were made to avoid
detection of the fraud, to retain existing investors and to lure other investors into the Ponzi
scheme.
45. Madoff’s scheme continued until December 2008, when the requests for
redemptions overwhelmed the flow of new investments and caused the inevitable collapse of the
Ponzi scheme.
46. During the scheme, certain investors requested and received distributions of the
“profits” listed for their accounts, which were nothing more than fictitious profits. Other
investors, from time to time, redeemed or closed their accounts, or removed portions of the
purportedly available funds, and were paid consistently with the statements they had been
receiving.
47. When payments were made to or on behalf of these investors, including
Defendants, Defendant NTC and/or FBO Defendants, the falsified monthly statements of
accounts reported that the accounts of such investors included substantial gains. In reality,
BLMIS had not invested the investors’ principal as reflected in customer statements. In an
attempt to conceal the ongoing fraud and thereby hinder, delay, and defraud other current and
prospective investors, BLMIS paid to or on behalf of certain investors, such as Defendants,
Defendant NTC and/or FBO Defendants, the inflated amounts reflected in the falsified financial
statements, including principal and/or fictitious profits.
48. BLMIS used the funds deposited from new investments to continue operations
and pay redemption proceeds to or on behalf of other investors and to make other transfers. Due
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to the siphoning and diversion of new investments to fund payments or redemptions requested by
other investors, BLMIS did not have the funds to pay investors. BLMIS was able to stay afloat
only by using the principal invested by some clients to pay other investors or their designees.
49. Defendants, Defendant NTC and/or FBO Defendants knew or should have known
that the activity purportedly conducted in their BLMIS accounts was patently false on its face,
and that their purported returns were the result of fictitious activity. Defendants, Defendant NTC
and/or FBO Defendants were beneficiaries of this scheme, receiving $11,435,809 of other
people’s money since these accounts opened.
50. In an effort to hinder, delay and defraud authorities from detecting the fraud,
BLMIS did not register as an Investment Adviser until August 2006.
51. In or about January 2008, BLMIS filed with the SEC an Amended Uniform
Application for Investment Adviser Registration. The application represented, inter alia, that
BLMIS had 23 customer accounts and assets under management of approximately $17.1 billion.
In fact, in January 2008, BLMIS had approximately 4,900 active client accounts with a purported
value of approximately $68 billion under management.
52. Not only did Madoff seek to evade regulators, Madoff also had false audit reports
“prepared” by Friehling & Horowitz, a three-person accounting firm located in a strip mall in
Rockland County, New York. Of the two accountants at the firm, one was semi-retired and
living in Florida for many years prior to the filing date and who is since deceased. Mendelow, a
trained accountant and principal of an established accounting firm where, upon information and
belief, he has worked for more than 25 years, should have realized it would be impossible for
Friehling & Horowitz to properly audit a business as large as BLMIS.
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53. At all times relevant hereto, the liabilities of BLMIS were billions of dollars
greater than the assets of BLMIS. At all relevant times, BLMIS was insolvent in that (i) its
assets were worth less than the value of its liabilities; (ii) it could not meet its obligations as they
came due; and (iii) at the time of the transfers, BLMIS was left with insufficient capital.
54. Defendants, Defendant NTC and/or FBO Defendants knew or should have known
that Madoff’s IA Business was predicated on fraud, that Defendants, Defendant NTC and/or
FBO Defendants were benefitting from fraudulent transactions in their accounts, and that their
purported account activity was inconsistent with legitimate trading activity and credible returns.
55. To the extent that any of the avoidance and/or recovery counts may be
inconsistent with each other, they are to be treated as being pled in the alternative.
THE WRONGFUL ACTIVITIES
56. The Defendants, Defendant NTC and/or FBO Defendants received money stolen
from other customers. Specifically, FBO Defendant S. Mendelow took $4,366,322 of other
people’s money since his multiple accounts were opened with BLMIS, FBO Defendant N.
Mendelow took $1,572,066 of other people’s money since her account was opened with BLMIS,
C&P Associates took $5,192,421 of other people’s money since its account was opened with
BLMIS, Cara Mendelow took $135,000 of other people’s money since her account was opened
with BLMIS and Pamela Christian took $170,000 of other people’s money since her account was
opened with BLMIS.
I. Mendelow Funneled Money to BLMIS Through Telfran
57. Upon information and belief, Mendelow and Glantz did not come up with their
idea to feed money to BLMIS under the false pretense of accepting “loans” from their
“investors” on their own. Instead, they modeled their scheme of funneling money to BLMIS for
profit (with minimal effort on their part) on Avellino & Bienes.
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58. Mendelow had longstanding relationships with Frank Avellino and Michael
Bienes, having known each of them since the early 1970s. Even before the days of Telfran, in or
about the late 1970s or early 1980s, Mendelow invested with Avellino & Bienes and he had
accounts with Avellino & Bienes in either his name, his wife’s name or in the name of a
partnership, C&P Associates.
59. Avellino & Bienes, and its predecessor firms, operated as significant feeder funds
for BLMIS from the early 1960s through November 1992 when it was liquidated pursuant to
enforcement actions commenced by the SEC. Avellino & Bienes achieved great success in
raising hundreds of millions of dollars for investment with BLMIS while retaining tens of
millions of dollars in profits for placing money into the Ponzi scheme.
60. In order to attract new investors, Avellino & Bienes collected money from
individuals and entities by promising a guaranteed rate of return that ranged from 13% - 18% of
the original investment. In an attempt to avoid scrutiny from regulators, Avellino & Bienes
termed these investments “loans” and provided letters with the specified rate of return for the
particular investor. Avellino & Bienes successfully raised hundreds of millions of dollars
utilizing this methodology, and deposited this money for investment with BLMIS and the Ponzi
scheme.
61. As the operators of one of Madoff’s first and oldest sources of proceeds for his
Ponzi scheme, Avellino & Bienes enjoyed special access and privileges not available to other
investors in BLMIS. In order to keep the money flowing and the Ponzi scheme operating,
Madoff guaranteed significant returns to Avellino & Bienes. In turn, Avellino & Bienes retained
the difference between the returns promised by Madoff and the returns promised to the
underlying Avellino & Bienes investors. For example, there were certain periods where Madoff
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promised Avellino & Bienes annual returns of 20%. Avellino & Bienes would thereafter
promise 18% or less to its individual investors, retaining the difference as profits in order to
enrich themselves at the expense of their individual investors.
62. Upon information and belief, Mendelow structured Telfran similarly and issued
letters to Telfran’s investors. Telfran then took investor money and gave it to Avellino &
Bienes, which, in turn, gave it to Madoff. Telfran had two accounts with Avellino & Bienes. In
the “payout account,” investors received their interest quarterly, while in the “rollover account,”
investors compounded their interest.
63. Upon information and belief, Mendelow’s responsibilities at Telfran included
making deposits with Avellino & Bienes and dealing directly with investors to address their
various inquiries. Also, Mendelow was a part owner of a privately held company, Teledata
Financial, that was created to receive a share of the profits from Telfran. That share varied from
$200,000 to $400,000 per year.
64. This operation to fund Madoff’s Ponzi scheme worked until 1992 when the SEC
commenced an investigation of Avellino & Bienes and its solicitation of investors. See
Securities and Exchange Commission v. Avellino & Bienes, Frank J. Avellino and Michael S.
Bienes, 92 Civ. 8314 (JES).
65. On September 7, 1993, the U.S. District Court issued a Final Judgment of
Permanent Injunction and Other Equitable Relief By Consent Against Avellino & Bienes, Frank
Avellino and Michael Bienes ordering, among other things, that they be enjoined from violating
§§ 5(a) and (c) of the Securities Act of 1933 [§§ 77e(a) and (c)] by selling unregistered securities
and § 7 of the Investment Company Act of 1940 [§ 80a-7], by operating an unregistered
investment advisory company.
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66. The SEC investigation of Avellino & Bienes led to an investigation of Telfran, as
Telfran’s only purpose was to invest in BLMIS through Avellino & Bienes. Like Avellino &
Bienes, Telfran and Mendelow were sued by the SEC for sales of unregistered securities by an
unregistered investment advisor. Ultimately, Telfran and Mendelow entered into a consent
decree with the SEC by which they were enjoined in the same way as Avellino & Bienes, namely
from further violations of §§ 5(a) and 5(c) of the Securities Act of 1933 (selling unregistered
securities) and § 7 of the Investment Company Act of 1940 (operating an unregistered
investment advisory company). Telfran paid a civil penalty in the amount of $250,000 while
Mendelow paid a civil penalty in the amount of $50,000.
67. As a result of the SEC investigations, and in an effort to avoid possible exposure
to regulators of his own fraudulent operation, Madoff agreed to “return” money to Avellino &
Bienes and/or the Court appointed receiver for Avellino & Bienes, which was distributed to its
investors, including those invested through Telfran. Madoff recorded fraudulent trading activity
in customer statements to create the appearance of sufficient value in their accounts to cover the
Avellino & Bienes/Telfran investors.
68. Upon information and belief, in or about June 1992, at Madoff’s direction, BLMIS
employees scrambled to create a fictitious and backdated IA account with account number 1A0053
in the name of Avellino & Bienes. Unlike the six other Avellino & Bienes accounts which had
been in existence for more than a decade, BLMIS records indicate this account did not exist until
in or around June 23, 1992. BLMIS generated fictitious and backdated account statements for this
account going back to at least November 1989.
69. The fictitious account statements for this account were filled with fictitious
transactions predetermined to show gains from security and options transactions. The
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transactions in these accounts included dozens of blatantly backdated purchases and sales of
securities and options contracts designed to generate the millions of dollars needed to create the
appearance that Madoff was holding securities sufficient to meet the distributions required by the
investors in Avellino & Bienes. Even a cursory analysis of this account and these statements
would have revealed that these transactions did not and could not have occurred.
70. For example, some of these statements contained the following blatantly
backdated and fictitious transactions:
▪ the backdated January 1991 statement, which records at BLMIS show was
created months later, reflects the purchase of 5,950 “S&P 100 Index – April
335 Calls” contracts which were thereafter reported on the April 1991
statement to have been sold for an approximate gain of $18,019,575;
▪ the backdated December 1991 statement, which records at BLMIS show as
created months later, reflects purchases on December 12, 1991 of 3,500
“S&P 100 Index – January 355 Call” contracts and 3000 “S&P 100 Index –
January 250 call contracts. The January 1992 statement reflected the
purported sale of these same call contracts for approximate gains of
$10,480,750 and $8,458,500 respectively; and
▪ the backdated December 1991 statement, which records at BLMIS show
was created months later, also reflected the purchase of 550,000 shares of
Ford stock, all on margin for approximately $13,181,250. On June 30,
1992, the 550,000 shares had a fair market value of $25,231,250 translating
into an unrealized gain of $12,050,000.
71. Significantly, a version of the June 30, 1992 account statement recovered from
BLMIS reflects that each of the transactions described above was entered into BLMIS systems
that generated these phony statements long after the dates the transactions purportedly occurred.
72. Thereafter, as a result of the SEC investigation upon information and belief, in or
about November 1992, Telfran received approximately $89 million dollars from Avellino &
Bienes which corresponds to the approximate amount of money Telfran had invested with
Avellino & Bienes for investment in BLMIS.
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II. Mendelow Received Fraudulent Side Payments from BLMIS for Former Telfran
Investors
73. Despite the SEC investigations of Avellino & Bienes and Telfran and the
injunctions preventing the further sale of unregistered securities on their part, Madoff continued
to reward Mendelow by providing him annually with fraudulent side payments and a guaranteed
rate of return on certain Mendelow accounts.
74. Upon information and belief, by March 31, 1993, approximately $372 million of
the $441 million returned to the original Avellino & Bienes investors by Madoff (including those
who invested through Telfran) had been reinvested directly with BLMIS. Of this $372 million,
$62 million was attributable to Telfran investors. The return of their investment was really a
charade as, upon information and belief, all Avellino & Bienes and Telfran investors were
encouraged to reinvest directly in BLMIS.
75. Upon information and belief, Mendelow demanded and received fraudulent side
payments from Madoff based on the amount of money former Telfran clients reinvested directly
in BLMIS after Avellino & Bienes and Telfran were shut down by the SEC.
76. Upon information and belief, in order to keep the Ponzi scheme afloat, Madoff
agreed to compensate Avellino and Bienes an annual 2% fraudulent side payment primarily
based on reinvested amounts attributable specifically to them.
77. Upon information and belief, Mendelow and his Telfran business associates
received a combined 1% fraudulent side payment primarily based on reinvested amounts
attributable to them. Of the 1%, 37.5% of those fees went to Mendelow.
78. Based on this calculation, Mendelow received approximately $232,000 per year.
Mendelow also received an additional $200,000 per year on top of his percentage, which was
referred to as the “FA+MB contrib.” Upon information and belief, “FA” refers to Frank
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Avellino and “MB” refers to Michael Bienes, the partners in Avellino & Bienes. From 1993
through 2001, therefore, Mendelow received fraudulent side payments totaling approximately
$430,000 per year.
79. Based on documents recovered at BLMIS, the fraudulent side payment
calculation changed in 2002. The Telfran-related percentage was cut to a combined .5% and
stayed at this level until the collapse of BLMIS. This structure resulted in fraudulent side
payments to Mendelow of approximately $215,000 per year from 2002 through 2007.
80. To identify, track and reconcile accounts to ensure the guaranteed rates of return
and/or fraudulent side payments to dozens of different customers of BLMIS, BLMIS employees
created handwritten schedules that showed the amount of fictitious gains needed to bring the
account to the promised rate of return and the calculation of the fraudulent side payment. The
schedule used to determine the amounts owed to these customers was referred to internally at
BLMIS as either the “Shupt”, “Schupt” or “Bingo” number (hereinafter “Schupt”).
81. To compensate for any deficiencies from the guaranteed rates of return and/or
fraudulent side payments in the accounts, as set forth in the Schupt schedules, additional value
was added to those accounts through fictitious options transactions that would precisely deliver
the guaranteed rates of return and/or fraudulent side payments.
82. In addition to calculating the amount owed, the handwritten Schupt schedules also
indicated the type of option and the amount of options contracts that would be “purchased or
sold” to create the predetermined gain. An account statement was generated to reflect these
purported transactions and the associated gains generated. The balance within these accounts,
including the fraudulent side payments, was then available for withdrawal by the accountholder.
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83. Upon information and belief, the ability to create gains each year that matched the
expected fraudulent side payment and guaranteed rate of return should have placed Mendelow on
notice that these results were not the result of legitimate trading activity.
84. For example, in or around December 2003, the Schupt schedule contains entries
for account 1ZR179, held for the benefit of Mendelow, indicating that the account “NEED[ED]”
$215,000, which is consistent with the predetermined fraudulent side payment. The Schupt
schedule also indicated that the gain “NEED[ED]” was “REQ” per the “WHY” column on the
schedule. Upon information and belief, “REQ” is short for required. The Schupt schedule
further indicated that the account was “REQ” to “purchase” units that would have a resulting
profit of $215,860.
85. The December 2003 account statement for Mendelow’s 1ZR179 account reflects
the purchase and sale of 215 “S&P 100 Index – January 550 Call” and 430 “S&P 100 Index –
January 555 Call” contracts, generating $215,860 in proceeds, which is exactly what the Schupt
schedule indicated was required for Mendelow’s account.
86. These purported options transactions never actually occurred and could not have
occurred at the precise amounts required to generate the gain “NEED[ED]” per the Schupt
schedule without the benefit of hindsight, backdating and fraud.
87. Combined, Mendelow received fraudulent side payments totaling approximately
$5,116,000 from BLMIS.
Mendelow was Guaranteed a Certain Rate of Return
88. In addition to Mendelow’s lucrative fraudulent side payments, documents
recovered from BLMIS indicate that Mendelow received a guaranteed rate of return of 17% on
his own BLMIS investments. This rate of return was guaranteed to Mendelow from at least 1993
through 1996.
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89. The fact that Mendelow received a guaranteed rate of return on his personal
investments should have put Mendelow on inquiry notice that Madoff was engaged in fraudulent
trading practices. From 1993 to 2007, Mendelow received consistently high rates of return
which would have been impossible to achieve through legitimate investing.
Allocation of the Fraudulent Side Payment and Guaranteed Rate of Return
90. Documents recovered from BLMIS indicate that the fraudulent side payments and
guaranteed rate of return were allocated across accounts belonging to FBO Defendant S.
Mendelow (Account No. 1ZR179), FBO Defendant N. Mendelow (Account No. 1ZR180), and
C&P Associates (Account No. 1ZA542). The total amount of fraudulent side payments and
guaranteed rates of returns allocated to each account for the period from 1994 through 2007 was
$1,732,896, $1,249,512, and $2,344,742, for accounts 1ZR179, 1ZR180, and 1ZA542,
respectively.
91. Based on records recovered at BLMIS, the fraudulent side payments and
guaranteed rates of return across these accounts were created through fictitious options
transactions predominately entered into in December of each year. A chart depicting the
unusually consistently high rates of return generated across Mendelow’s accounts every
December is attached to the Complaint as Exhibit C. This consistent spike in returns every
December should have been apparent on the face of the FBO Defendants’ and/or C&P
Associates’ BLMIS customer statements, putting the FBO Defendants and/or Mendelow on
notice of Madoff’s fraudulent activities.
92. Documents recovered from BLMIS indicate that the transactions to be entered
and the pricing to be used were chosen by BLMIS with hindsight, picking the optimal times to
create the needed results to “pay” Mendelow his fraudulent side payments and guaranteed rate of
return.
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Mendelow Tracked His Fraudulent Side Payments and Guaranteed Returns
93. Documents recovered from BLMIS indicate that Mendelow closely monitored his
accounts to ensure he received the full amount of his fraudulent side payment and guaranteed
returns each year.
94. Documents recovered from BLMIS indicate that Mendelow calculated what he
thought his account balances should be and compared those with what was listed on his Portfolio
Management Reports generated by BLMIS. He then instructed BLMIS to make up any shortfall
of the amounts that he calculated he was due. These “corrections” typically occurred at the end
of each calendar year through fictitious option transactions.
95. In tracking this information, Mendelow referred to the fraudulent side payment as
either a “vig” or “fee.” Upon information and belief, “vig” is short for “vigorish” which is
commonly used by bookies or individuals involved with organized crime to describe the interest,
“take” or “juice” on a usurious loan. Mendelow’s use of the word “vig” reveals his awareness of
the corrupt trading practices of BLMIS that were used to enrich individuals such as Mendelow.
96. The fact that Mendelow was able to direct the value of his accounts at BLMIS
based upon his own calculations, and to ensure he received specific amounts through fictitious
options transactions is indicative of his knowledge of fraudulent trading activity. Also,
Mendelow would have seen this implausible options activity on his BLMIS customer statements
which put him on notice of Madoff’s fraudulent trading activities. As a trained accountant and
businessman, and based on these factors, Mendelow either knew or should have known that
BLMIS was not a legitimate securities trading operation.
97. When questioned about his involvement in Telfran, his relationship with Avellino
& Bienes, his receipt of fraudulent side payments and his receipt of guaranteed rates of return,
Mendelow invoked his Fifth Amendment Rights and refused to answer the questions.
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Other Indicia of Fraud
98. Beyond these indicia of fraud in Defendants’ own accounts and professional
dealings, Mendelow and the Defendants ignored numerous other indicia of irregularity and fraud
from the general manner in which BLMIS operated. Among other things, Defendants were on
notice of the following additional indicia of irregularity and fraud but failed to make sufficient
inquiry.
99. BLMIS, which reputedly ran the world’s largest hedge fund, was purportedly
audited by Friehling & Horowitz, an accounting firm that had three employees, one of whom
was semi-retired, with offices located in a strip mall. No experienced business person, especially
one with 40 years of accounting experience as Mendelow has, could reasonably have believed it
possible for any such firm to have competently audited an entity the size of BLMIS.
100. Financial industry press reports, including a May 27, 2001 article in Barron’s
entitled “Don’t Ask, Don’t Tell: Bernie Madoff is so secretive, he even asks investors to keep
mum,” and a May, 2001 article in MAR/Hedge, a widely read industry newsletter entitled
“Madoff Tops Charts; Skeptics Ask How,” raised serious questions about the legitimacy of
BLMIS and Madoff and their ability to achieve the IA Business returns they purportedly had
achieved using the investment strategy Madoff claimed to employ for most clients. The
Defendants were invested in BLMIS when these reports were issued.
101. BLMIS functioned as both investment manager and custodian of securities. This
arrangement eliminated another frequently utilized check and balance in investment management
by excluding an independent custodian of securities from the process, and thereby furthering the
lack of transparency of BLMIS to other investors, regulators and outside parties.
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102. Despite its immense size in terms of assets under management, BLMIS was
substantially a family-run operation, employing many of Madoff’s relatives and virtually no
outside professionals.
THE TRANSFERS
103. According to BLMIS’s records, multiple accounts (Nos. 1ZA542, 1ZB336,
1ZB337, 1ZR179, 1ZR180, and 1ZR208) were maintained with BLMIS, as set forth on Exhibit A
(collectively, the “Accounts”). Upon information and belief, for each Account, a
Customer Agreement, an Option Agreement, and/or a Trading Authorization Limited to Purchases
and Sales of Securities and Options (collectively, the “Account Agreements”) were executed and
delivered to BLMIS at BLMIS’s headquarters at 885 Third Avenue, New York, New York. At all
times relevant hereto, Defendant NTC was the custodian of FBO Defendants’ Account.
104. The Account Agreements were to be performed in New York, New York through
securities trading activities that would take place in New York, New York. The Accounts were
held in New York, New York and Defendants, Defendant NTC and/or FBO Defendants sent funds
to BLMIS and/or to BLMIS’s account at JPMorgan Chase & Co., Account
#XXXXXXXXXXXX703 (the “BLMIS Bank Account”) in New York, New York for application
to the Accounts and the conducting of trading activities. Defendants, Defendant NTC and/or FBO
Defendants made deposits to BLMIS through checks and/or wire transfers into bank accounts
controlled by BLMIS, including the BLMIS Bank Account, and/or received inter-account transfers
from other BLMIS accounts.
105. Prior to the Filing Date, BLMIS made payments or other transfers (collectively, the
“Transfers”) directly or indirectly to Defendants, Defendant NTC and/or FBO Defendants totaling
the amount of $20,250,720.
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106. The Defendants and FBO Defendants willfully turned a blind eye to indicia of
BLMIS’s fraud based upon the information available to them. They knew, and were on notice of,
irregularities and problems concerning the trades reported by BLMIS, and strategically chose to
ignore these concerns in order to continue to enrich themselves through their relationship with
Madoff and BLMIS. Of the Transfers, $11,435,809 constituted non-existent profits supposedly
earned in the Accounts (“Fictitious Profits”), and $8,814,911 constituted the return of principal.
The Fictitious Profits received by the Defendants, Defendant NTC and/or FBO Defendants came
from other people’s money. The Transfers were directly or indirectly made to the Defendants,
Defendant NTC and/or FBO Defendants and include, but are not limited to, the Transfers listed on
Exhibit B.
107. The Transfers are avoidable and recoverable under §§ 544, 548, 550(a) and 551 of
the Bankruptcy Code, applicable provisions of SIPA, particularly § 78fff-2(c)(3), and applicable
provisions of N.Y. CPLR 203(g) and 213(8) (McKinney 2001) and DCL §§ 273-279 (McKinney
2001).
108. Of the Transfers, BLMIS made payments to Defendants, Defendant NTC and/or
FBO Defendants of at least $9,185,000 (the “Six Year Transfers”) during the six years prior to the
Filing Date, which are avoidable and recoverable under §§ 544, 550(a) and 551 of the Bankruptcy
Code, applicable provisions of SIPA, particularly § 78fff-2(c)(3), and applicable provisions of
DCL §§ 273-279. Of these Six Year Transfers, $7,877,066 represented Fictitious Profits from the
Ponzi scheme, which constitute other people’s money. Of such fictitious profits, $4,250,000 was
received by C&P Associates, $135,000 was received by Cara Mendelow, $170,000 was received
by Pamela Christian, $1,750,000 was received by FBO Defendant S. Mendelow, and $1,572,066
was received by FBO Defendant N. Mendelow.
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109. Of the Six Year Transfers, BLMIS made payments to Defendants C&P Associates
and Cara Mendelow of at least $825,000 (the “Two Year Transfers”) during the two years prior to
the Filing Date, which are avoidable and recoverable under §§ 548, 550(a) and 551 of the
Bankruptcy Code and applicable provisions of SIPA, particularly SIPA § 78fff-2(c)(3). All of
these Two Year Transfers were Fictitious Profits. Of the Two Year Transfers, $700,000 was
received by C&P Associates, and $125,000 was received by Cara Mendelow.
110. Upon information and belief, the Transfers to Defendant NTC were subsequently
transferred by Defendant NTC to or for the benefit of FBO Defendants and the transfers to C&P
Associates were transferred by C&P Associates to or for the benefit of Defendants Mendelow,
Nancy Mendelow, Cara Mendelow and Pamela Christian (collectively the “Subsequent
Transfers”).
111. The Subsequent Transfers, or the value thereof, are recoverable from FBO
Defendants, or Defendants Mendelow, Nancy Mendelow, Cara Mendelow and Pamela Christian
pursuant to §550(a) of the Bankruptcy Code.
112. Additionally, during the 90 days prior to the Filing Date, BLMIS made payments
(the “FGLS Preference Period Transfers”) totaling the amount of $2,350,0003 to FGLS, of which
Mendelow was the general partner. These payments were as follows:
September 19, 2008: withdrawal in the amount of $1,225,000;
October 14, 2008: withdrawal in the amount of $125,000;
October 29, 2008: withdrawal in the amount of $250,000;
October 31, 2008: withdrawal in the amount of $1,200,000; and
November 24, 2008: withdrawal in the amount of $400,00.
3
This amount is net of an investment in the amount of $850,000, made on September 29, 2008.
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The FGLS Preference Period Transfers are avoidable, in a separate action, and are recoverable
under §§ 547, 550(a) and 551 of the Bankruptcy Code and applicable provisions of SIPA,
particularly SIPA § 78fff-2(c)(3). The Two Year Transfers, Six Year Transfers and FGLS
Preference Period Transfers are hereinafter collectively referred to as the “Transfers.”
113. Upon information and belief, some of the FGLS Preference Period Transfers were
subsequently transferred (“FGLS Subsequent Transfers”) to or for the benefit of Mendelow
(“FGLS Subsequent Transferee Defendant”).
114. To the extent that any of the recovery counts may be inconsistent with each other,
they are to be treated as being pled in the alternative.
115. The Trustee’s investigation is on-going and the Trustee reserves the right to (i)
supplement the information regarding the Transfers, Subsequent Transfers and any additional
transfers, and (ii) seek recovery of such additional transfers.
COUNT ONE
FRAUDULENT TRANSFER – 11 U.S.C. §§ 548(a)(1)(A), 550 AND 551
116. The Trustee incorporates by reference the allegations contained in the previous
paragraphs of this Complaint as if fully rewritten herein.
117. Each of the Two Year Transfers was made on or within two years before the filing
date of BLMIS’s case.
118. Each of the Two Year Transfers constituted a transfer of an interest of BLMIS in
property within the meaning of §§ 101(54) and 548(a) of the Bankruptcy Code and pursuant to §
78fff-2(c)(3) of SIPA.
119. Each of the Two Year Transfers was made by BLMIS with the actual intent to
hinder, delay or defraud some or all of BLMIS’s then existing or future creditors.
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120. Each of the Two Year Transfers constitutes a fraudulent transfer avoidable by the
Trustee pursuant to § 548(a)(1)(A) of the Bankruptcy Code and recoverable from Defendants
C&P Associates and Cara Mendelow pursuant to § 550(a) of the Bankruptcy Code and § 78fff-
(2)(c)(3) of SIPA.
121. As a result of the foregoing, pursuant to §§ 548(a)(1)(A), 550(a), and 551 of the
Bankruptcy Code, the Trustee is entitled to a judgment against Defendants C&P Associates and
Cara Mendelow: (a) avoiding and preserving the Two Year Transfers, (b) directing that the Two
Year Transfers be set aside, and (c) recovering the Two Year Transfers, or the value thereof,
from Defendants C&P Associates and Cara Mendelow for the benefit of the estate of BLMIS.
COUNT TWO
FRAUDULENT TRANSFER – 11 U.S.C. §§ 548(a)(1)(B), 550 AND 551
123. Each of the Two Year Transfers was made on or within two years before the
Filing Date.
124. Each of the Two Year Transfers constitutes a transfer of an interest of BLMIS in
property within the meaning of §§ 101(54) and 548(a) of the Bankruptcy Code and pursuant to §
78fff-2(c)(3).
125. BLMIS received less than a reasonably equivalent value in exchange for each of
the Two Year Transfers.
126. At the time of each of the Two Year Transfers, BLMIS was insolvent, or became
insolvent as a result of the Two Year Transfer in question.
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127. At the time of each of the Two Year Transfers, BLMIS was engaged in a business
or a transaction, or was about to engage in a business or a transaction, for which any property
remaining with BLMIS was an unreasonably small capital.
128. At the time of each of the Two Year Transfers, BLMIS intended to incur, or
believed that it would incur, debts that would be beyond BLMIS’s ability to pay as such debts
matured.
129. Each of the Two Year Transfers constitutes fraudulent transfers avoidable by the
Trustee pursuant to § 548(a)(1)(B) of the Bankruptcy Code and recoverable from Defendants
C&P Associates and Cara Mendelow pursuant to § 550(a) and § 78fff-(2)(c)(3) of SIPA.
130. As a result of the foregoing, pursuant to §§ 548(a)(1)(B), 550(a), and 551 of the
Bankruptcy Code, the Trustee is entitled to a judgment against Defendants C&P Associates and
Cara Mendelow: (a) avoiding and preserving the Two Year Transfers, (b) directing that the Two
Year Transfers be set aside, and (c) recovering the Two Year Transfers, or the value thereof,
from Defendants C&P Associates and Cara Mendelow for the benefit of the estate of BLMIS.
COUNT THREE
FRAUDULENT TRANSFER – NEW YORK DEBTOR AND CREDITOR LAW
§§ 276, 276-a, 278 AND/OR 279, AND 11 U.S.C. §§ 544(b), 550(a) AND 551
132. At all times relevant to the Six Year Transfers, there have been and are one or
more creditors who have held and still hold matured or unmatured unsecured claims against
BLMIS that were and are allowable under § 502 of the Bankruptcy Code or that were and are not
allowable only under § 502(e) of the Bankruptcy Code.
133. Each of the Six Year Transfers constitutes a conveyance by BLMIS as defined
under DCL § 270.
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134. Each of the Six Year Transfers was made by BLMIS with the actual intent to
hinder, delay, or defraud the creditors of BLMIS. BLMIS made the Six Year Transfers to or for
the benefit of the Defendants, Defendant NTC and/or FBO Defendants in furtherance of a
fraudulent investment scheme.
135. Each of the Six Year Transfers were received by the Defendants, Defendant NTC
and/or FBO Defendants with actual intent to hinder, delay or defraud the creditors of BLMIS at
the time of each of the Transfers, and/or future creditors of BLMIS.
136. As a result of the foregoing, pursuant to DCL §§ 276, 276-a, 278 and/or 279, §§
544(b), 550(a), and 551 of the Bankruptcy Code, and § 78fff-2(c)(3) of SIPA, the Trustee is
entitled to a judgment against Defendants, Defendant NTC and/or FBO Defendants: (a) avoiding
and preserving the Six Year Transfers, (b) directing that the Six Year Transfers be set aside; (c)
recovering the Six Year Transfers, or the value thereof, from the Defendants, Defendant NTC
and/or FBO Defendants for the benefit of the estate of BLMIS; and (d) recovering attorneys’ fees
from the Defendants, Defendant NTC and/or FBO Defendants.
COUNT FOUR
§§ 273 AND 278 AND/OR 279, AND 11 U.S.C. §§ 544(b), 550(a) AND 551
paragraphs of the Complaint as if fully rewritten herein.
under DCL § 270.
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140. BLMIS did not receive fair consideration for the Six Year Transfers.
141. BLMIS was insolvent at the time it made each of the Six Year Transfers or, in the
alternative, BLMIS became insolvent as a result of each of the Six Year Transfers.
142. As a result of the foregoing, pursuant to DCL §§ 273, 278 and/or 279, §§ 544(b),
550(a), and 551 of the Bankruptcy Code, and § 78fff-2(c)(3) of SIPA, the Trustee is entitled to a
judgment against Defendants, Defendant NTC and/or FBO Defendants: (a) avoiding and
preserving the Six Year Transfers, (b) directing that the Six Year Transfers be set aside; and (c)
and/or FBO Defendants for the benefit of the estate of BLMIS.
COUNT FIVE
§§274, 278 AND/OR 279, AND 11 U.S.C. §§ 544(b), 550(a) AND 551
under DCL§ 270.
147. At the time BLMIS made each of the Six Year Transfers, BLMIS was engaged or
was about to engage in a business or transaction for which the property remaining in its hands
after each of the Six Year Transfers was an unreasonably small capital.
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148. As a result of the foregoing, pursuant to DCL §§ 274, 278 and/or 279, §§ 544(b),
COUNT SIX
§§ 275, 278 AND/OR 279, AND 11 U.S.C. §§ 544(b), 550(a) AND 551
under DCL § 270.
153. At the time BLMIS made each of the Six Year Transfers, BLMIS had incurred,
was intending to incur, or believed that it would incur debts beyond its ability to pay them as the
debts matured.
154. As a result of the foregoing, pursuant to DCL § 275, 278 and/or 279, §§ 544(b),
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COUNT SEVEN – RECOVERY OF ALL FRAUDULENT TRANSFERS

NEW YORK CIVIL PROCEDURE
LAW AND RULES §§ 203(g) AND 213(8) AND NEW YORK DEBTOR AND CREDITOR
LAW§§ 276, 276-a, 278 AND/OR 279, AND 11 U.S.C. §§ 544(b), 550(a) AND 551
156. At all times relevant to the Transfers, the fraudulent scheme perpetrated by
BLMIS was not reasonably discoverable by at least one unsecured creditor of BLMIS.
157. At all times relevant to the Transfers, there have been one or more creditors who
have held and still hold matured or unmatured unsecured claims against BLMIS that were and
are allowable under § 502 of the Bankruptcy Code or that were and are not allowable only under
§ 502(e) of the Bankruptcy Code.
158. Each of the Transfers prior to the six years before the Filing Date constitutes a
conveyance by BLMIS as defined under DCL § 270.
159. Each of the Transfers was made by BLMIS with the actual intent to hinder, delay,
or defraud the creditors of BLMIS. BLMIS made the Transfers to or for the benefit of the
Defendants, Defendant NTC and/or FBO Defendants in furtherance of a fraudulent investment
scheme.
160. Each of the Six Year Transfers were received by the Defendants, Defendant NTC
and/or FBO Defendants with actual intent to hinder, delay or defraud the creditors of BLMIS at
the time of each of the Transfer, and/or future creditors of BLMIS.
161. As a result of the foregoing, pursuant to NY CPLR §§ 203(g) and 213(8), DCL §§
276, 276-a, 278 and/or 279, §§ 544(b), 550(a), and 551 of the Bankruptcy Code, and SIPA §
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78fff-2(c)(3), the Trustee is entitled to a judgment against Defendants, Defendant NTC and/or
FBO Defendants: (a) avoiding and preserving the Transfers, (b) directing that the Transfers be
set aside; (c) recovering the Transfers, or the value thereof, from the Defendants, Defendant
NTC and/or FBO Defendants for the benefit of the estate of BLMIS, and (d) recovering
attorneys’ fees from the Defendants, Defendant NTC and/or FBO Defendants.
COUNT EIGHT
RECOVERY OF SUBSEQUENT TRANSFER FROM DEFENDANT NTC – NEW YORK
DEBTOR AND CREDITOR LAW §§ 273-279 AND 11 U.S.C. §§ 544, 548, 550(a) AND 551
163. Each of the Transfers is avoidable under §§ 544 and 548 of the Bankruptcy Code,
DCL §§ 273-279 and § 78fff-2(c)(3) of SIPA.
164. Upon information and belief, the Defendant NTC Subsequent Transfers were
transferred by Defendant NTC to FBO Defendants. The transfers to Defendant NTC are
avoidable and it is those transfers that were transferred to the FBO Defendants.
165. FBO Defendants are immediate or mediate transferees of the Subsequent
Transfers from Defendant NTC.
166. Each of the Subsequent Transfers by Defendant NTC was made directly or
indirectly to or for the benefit of FBO Defendants.
167. Each of the Subsequent Transfers was received by the FBO Defendants with
actual intent to hinder, delay or defraud creditors of BLMIS at the time of each of the Subsequent
Transfers, and/or future creditors of BLMIS.
168. As a result of the foregoing, pursuant to DCL §§ 273-279, §§ 544(b), 548(a),
550(a) and 551 of the Bankruptcy Code, and § 78fff-2(c)(3) of SIPA, the Trustee is entitled to a
judgment against FBO Defendants: (a) recovering the Subsequent Transfers (made by Defendant
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NTC), or the value thereof, from FBO Defendants to or for the benefit of the estate of BLMIS
and (b) recovering attorneys’ fees from FBO Defendants.
COUNT NINE
RECOVERY OF SUBSEQUENT TRANSFER FROM FGLS TO MENDELOW – NEW
YORK DEBTOR AND CREDITOR LAW §§ 273-279 AND 11 U.S.C. §§ 547(b) AND 550
170. Each of the FGLS Preference Period Transfers is avoidable under § 78fff-2(c)(3)
of SIPA and § 547(b) of the Bankruptcy Code. Furthermore, each of the FGLS Preference
Period Transfers constitutes a transfer of an interest of BLMIS in property within the meaning of
§ 101(54) of the Bankruptcy Code.
171. At the time of each of the FGLS Preference Period Transfers received within the
90 days prior to the Filing Date, FGLS was a “creditor” of BLMIS within the meaning of §
101(10) of the Bankruptcy Code and pursuant to § 78fff-2(c)(3) of SIPA.
172. Each of the FGLS Preference Period Transfers was to or for the benefit of FGLS.
173. Each of the FGLS Preference Period Transfers was made for or on account of an
antecedent debt owed by BLMIS before such transfer was made.
174. Each of the FGLS Preference Period Transfers was made while BLMIS was
insolvent.
175. Each of the FGLS Preference Period Transfers was made within 90 days of the
Filing Date.
176. Each of the FGLS Preference Period Transfers enabled FGLS to receive more
than FGLS would receive if (i) this case was a case under chapter 7 of the Bankruptcy Code,
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(ii) the transfers had not been made, and (iii) FGLS received payment of such debt to the extent
provided by the provisions of the Bankruptcy Code.
177. Each of the FGLS Preference Period Transfers constituted a preferential transfer
avoidable by the Trustee pursuant to § 547(b) of the Bankruptcy Code and recoverable from
FGLS pursuant to § 550(a) and § 78fff-2(c)(3) of SIPA.
178. Upon information and belief, some or all of the FGLS Preference Period
Transfers were subsequently transferred by FGLS to Mendelow (as defined earlier, the FGLS
Subsequent Transfers).
179. Each of the FGLS Subsequent Transfers was made directly or indirectly to or for
the benefit of Mendelow.
180. Mendelow is an immediate or mediate transferee of the FGLS Subsequent
Transfers from FGLS.
181. Each of the Subsequent Transfers was received by Mendelow with actual intent to
hinder, delay or defraud creditors of BLMIS at the time of each of the Subsequent Transfers,
and/or future creditors of BLMIS
182. As a result of the foregoing, pursuant to §§ 547(b) and 550 of the Bankruptcy
Code, and § 78fff-2(c)(3) of SIPA, the Trustee is entitled to a judgment against Mendelow (a)
recovering the FGLS Subsequent Transfers, or the value thereof, from Mendelow for the benefit
of the estate of BLMIS and (b) recovering attorneys’ fees from Mendelow.
COUNT TEN
RECOVERY OF SUBSEQUENT TRANSFER FROM DEFENDANT C&P ASSOCIATES
– NEW YORK DEBTOR AND CREDITOR LAW §§ 273-279 AND 11 U.S.C. §§ 544, 548,
AND 550(a)
183. To the extent applicable, the Trustee incorporates by reference the allegations
contained in the previous paragraphs of this Complaint as if fully rewritten herein.
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184. Each of the Transfers is avoidable under §§ 544 and 548 of the Bankruptcy Code,
DCL §§ 273-279 and § 78fff-2(c)(3) of SIPA.
185. Upon information and belief, the Subsequent Transfers to Defendant C&P
Associates were transferred by C&P Associates to Subsequent Transferee Defendants
Mendelow, Nancy Mendelow, Cara Mendelow, or Pamela Christian.
186. Each of the Subsequent Transfers by C&P Associates was made directly or
indirectly to or for the benefit of Subsequent Transferee Defendants Mendelow, Nancy
Mendelow, Cara Mendelow, or Pamela Christian.
187. Each of the Subsequent Transfers was received by Mendelow, Nancy Mendelow,
Cara Mendelow, or Pamela Christian with actual intent to hinder, delay or defraud creditors of
BLMIS at the time of each of the Subsequent Transfers, and/or future creditors of BLMIS.
188. Subsequent Transferee Defendants Mendelow, Nancy Mendelow, Cara
Mendelow, or Pamela Christian are immediate or mediate transferees of the Subsequent
Transfers from C&P Associates.
189. As a result of the foregoing and the avoidance of the within Transfers, pursuant to
DCL §§ 273- 279, §§ 544(b), 548(a), and 550(a) of the Bankruptcy Code, and § 78fff-2(c)(3) of
SIPA, the Trustee is entitled to a judgment against Subsequent Transferee Defendants
Mendelow, Nancy Mendelow, Cara Mendelow, or Pamela Christian (a) recovering the
Subsequent Transfers (made by C&P Associates), or the value thereof, from Subsequent
Transferee Defendants Mendelow, Nancy Mendelow, Cara Mendelow, or Pamela Christian for
the benefit of the estate of BLMIS and (b) recovering attorneys’ fees from Subsequent
Transferee Defendants Mendelow, Nancy Mendelow, Cara Mendelow, or Pamela Christian.
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WHEREFORE, the Trustee respectfully requests that this Court enter judgment in favor
of the Trustee and against the Defendants as follows:
i. On the First Claim for Relief, pursuant to §§ 548(a)(1)(A), 550(a) and 551 of the
Bankruptcy Code and § 78fff-2(c)(3) of SIPA: (a) avoiding and preserving the Two Year
Transfers, (b) directing that the Two Year Transfers be set aside, and (c) recovering the Two
Year Transfers, or the value thereof, from Defendants C&P Associates and Cara Mendelow for
the benefit of the estate of BLMIS;
ii. On the Second Claim for Relief, pursuant to §§ 548(a)(1)(B), 550(a) and 551 of
the Bankruptcy Code: (a) avoiding and preserving the Two Year Transfers, (b) directing that the
Two Year Transfers be set aside, and (c) recovering the Two Year Transfers, or the value
thereof, from Defendants C&P Associates and Cara Mendelow for the benefit of the estate of
BLMIS;
iii. On the Third Claim for Relief, pursuant to DCL §§ 276, 276-a, 278 and/or 279,
§§ 544(b), 550(a) and 551 of the Bankruptcy Code and § 78fff-2(c)(3) of SIPA: (a) avoiding and
preserving the Six Year Transfers, (b) directing that the Six Year Transfers be set aside, (c)
and/or FBO Defendants for the benefit of the estate of BLMIS, and (d) recovering attorneys’ fees
from the Defendants, Defendant NTC and/or FBO Defendants;
iv. On the Fourth Claim for Relief, pursuant to DCL §§ 273, 278 and/or 279, §§
544(b), 550 and 551 of the Bankruptcy Code and § 78fff-2(c)(3) of SIPA: (a) avoiding and
preserving the Six Year Transfers, (b) directing that the Six Year Transfers be set aside, and (c)
and/or FBO Defendants for the benefit of the estate of BLMIS;
-43-
v. On the Fifth Claim for Relief, pursuant to DCL §§ 274, 278 and/or 279, §§
preserving the Six Year Fraudulent Transfers, (b) directing the Six Year Transfers be set aside,
and (c) recovering the Six Year Transfers, or the value thereof, from the Defendants, Defendant
NTC and/or FBO Defendants for the benefit of the state of BLMIS;
vi. On the Sixth Claim for Relief, pursuant to DCL §§ 275, 278 and/or 279, §§
preserving the Six Year Transfers, (b) directing that the Six Year Transfers be set aside, and (c)
and/or FBO Defendants for the benefit of the estate of BLMIS;
vii. On the Seventh Claim for Relief, pursuant to NY CPLR 203(g) and 213(8) DCL
§§ 276, 276-a, 278 and/or 279, §§ 544(b), 550(a), and 551 of the Bankruptcy Code and § 78fff-
2(c)(3) of SIPA: (a) avoiding and preserving the Transfers, (b) directing that the Transfers be set
aside, (c) recovering the Transfers, or the value thereof, from the Defendants, Defendant NTC
and/or FBO Defendants for the benefit of the estate of BLMIS, and (d) recovering attorneys’ fees
from the Defendants, Defendant NTC and/or FBO Defendants;
viii. On the Eighth Claim for Relief, pursuant to DCL §§ 273-279, §§ 544(b), 548, and
550(a) of the Bankruptcy Code, and § 78fff-2(c)(3) of SIPA recovering (a) the Subsequent
Transfers made by Defendant NTC, or the value thereof, from FBO Defendants and (b)
recovering attorneys’ fees from FBO Defendants;
ix. On the Ninth Claim for Relief, pursuant to DCL §§ 273-279, §§ 547(b) and 550
of the Bankruptcy Code, and § 78fff-2(c)(3) of SIPA (a) recovering the FGLS Subsequent
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Transfers, or the value thereof, from Mendelow for the benefit of the estate of BLMIS and (b)
recovering attorneys’ fees from Mendelow;
x. On the Tenth Claim for Relief, pursuant to DCL §§ 273-279, §§ 544(b), 548 and
550(a) of the Bankruptcy Code, and § 78fff-2(c)(3) of SIPA (a) recovering the Subsequent
Transfers made by C&P Associates, or the value thereof, from Subsequent Transferee
Defendants Mendelow, Nancy Mendelow, Cara Mendelow and Pamela Christian and (b)
recovering attorneys’ fees from Subsequent Transferee Defendants Mendelow, Nancy
Mendelow, Cara Mendelow and Pamela Christian;
xi. On all Claims for Relief, pursuant to federal common law and N.Y. CPLR 5001
and 5004, awarding the Trustee prejudgment interest from the date on which the Transfers were
received;
xii. On all Claims for Relief, establishment of a constructive trust over the proceeds of
the transfers in favor of the Trustee for the benefit of BLMIS’s estate;
xiii. On all Claims for Relief, assignment of Defendants’, Defendant NTC’s and/or
FBO Defendants’ income tax refunds from the United States, state and local governments paid
on fictitious profits during the course of the scheme;
xiv. Awarding the Trustee all applicable interest, costs, and disbursements of this
action; and
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xv. Granting Plaintiff such other, further, and different relief as the Court deems just,
proper, and equitable.
Date: November 12, 2010

New York, New York
Of Counsel: By: /s/ David J. Sheehan

/s/ Keith R. Murphy
BAKER & HOSTETLER LLP /s/ Geraldine E. Ponto
45 Rockefeller Plaza BAKER & HOSTETLER LLP
New York, New York 10111 45 Rockefeller Plaza
Telephone: (212) 589-4200 New York, New York 10111
Facsimile: (212) 589-4201 Telephone: (212) 589-4200
Jonathan B. New Facsimile: (212) 589-4201
Email: [email protected] David J. Sheehan
Robertson D. Beckerlegge Email: [email protected]
Email: [email protected] Keith R. Murphy
Essence Liburd Email: [email protected]
Email: [email protected] Geraldine E. Ponto
Email: [email protected]
Attorneys for Irving H. Picard, Trustee for the

Substantively Consolidated SIPA Liquidation
of Bernard L. Madoff Investment Securities
LLC and Bernard L. Madoff
-46-

Irving Picard, Madoff Trustee Vs Steven Mendelow Et Al

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Irving Picard, Madoff Trustee Vs Steven Mendelow Et Al

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Baker & Hostetler LLP

Attorneys for Irving H. Picard, Trustee

UNITED STATES BANKRUPTCY COURT

Plaintiff-Applicant, SIPA LIQUIDATION

IRVING H. PICARD, Trustee for the Liquidation

STEVEN B. MENDELOW, NTC & Co. LLP, as

2. Defendant Steven B. Mendelow (“Mendelow”) is a “principal” at Konigsberg

Mendelow’s biography on the KW website states that he “specializes in unique transactions,

money directly to BLMIS.

4. From 1989 to 1992 Telfran operated as an unregistered investment company

accounts instead of through the spread.

upon information and belief, were managed and/or overseen by Mendelow.

S. Mendelow”) or Defendant Nancy Mendelow (“FBO Defendant N. Mendelow”) (collectively

received avoidable transfers from BLMIS.

8. Defendants, Defendant NTC and/or FBO Defendants were beneficiaries of

9. Upon information and belief, Defendants Mendelow, Nancy Mendelow, Cara

Defendants for purposes of the allegations herein.

11. Mendelow is an accountant with a high level of experience and sophistication in

have known that BLMIS was engaged in fraud.

12. This adversary proceeding is brought pursuant to §§ 78fff(b), 78fff-1(a), and

shall be preserved for the benefit of BLMIS’s defrauded customers.

JURISDICTION AND VENUE

District of New York as Securities Exchange Commission v. Bernard L. Madoff Investment

§ 1334(b) and § 78eee(b)(2)(A), (b)(4).

15. Venue in this district is proper under 28 U.S.C. § 1409.

account address reported as P.O. Box 173859 Denver, Colorado 80217.

Denver, Colorado 80202.

Pamela Christian is an individual residing in Ridgewood, New Jersey. Defendant holds a

Ridgewood, New Jersey.

partnership formed on January 15, 1988. Mendelow is its general partner.

over C&P Associates’ investment account.

BACKGROUND, THE TRUSTEE AND STANDING

28. On December 15, 2008, pursuant to § 78eee(a)(4)(A), the SEC consented to a

Corporation (“SIPC”). Thereafter, pursuant to § 78eee(a)(4)(B) of SIPA, SIPC filed an

protections afforded by SIPA.

a. appointed the Trustee for the liquidation of the business of BLMIS

b. appointed Baker & Hostetler LLP as counsel to the Trustee pursuant to §

c. removed the case to this Bankruptcy Court pursuant to § 78eee(b)(4).

(Docket No. 11).

described in subparagraphs (A) through (D) of § 78fff-2(c)(1).

SIPA. Pursuant to SIPA § 78fff(b), “chapters 1, 3, 5 and subchapters I and II of Chapter 7 of

a. Defendants, Defendant NTC and/or FBO Defendants received

“customer property” as defined in § 78lll(4);

b. BLMIS incurred losses as a result of the claims set forth herein;

c. BLMIS’s customers were injured as a result of the conduct detailed

all customers for all of their losses;

e. the Trustee will not be able to fully satisfy all claims;

f. the Trustee, as bailee of customer property, can sue on behalf of

g. the Trustee is the assignee of claims paid, and to be paid, to customers of

express unconditional assignments of the applicable Accountholders’ causes of action, which

money in BLMIS than they withdrew;

h. SIPC is the subrogee of claims paid, and to be paid, to customers of

and is making to customers of BLMIS from SIPC funds; and

THE FRAUDULENT PONZI SCHEME

Investment Advisory (“IA”) Business, market-making, and proprietary trading.

39. BLMIS’s IA Business customers received fabricated monthly or quarterly

options on behalf of any of the IA Business customers.

41. Additionally, Madoff periodically wired hundreds of millions of dollars to

his associates, and his family.