Kachroo Legal Services announced Friday a lawsuit against the United States claiming that taxpayers are liable for billions in losses because the Securities and Exchange Commission was too incompetent to understand the complaints filed with it that detailed notorious Ponzi schemer Bernie Madoff's scam.
The suit seeks to be a class action representing investors who filed administrative complaints with the SEC, and to recover money for direct investors who lost more than $500,000 with Madoff and indirect investors who lost money with Madoff.
Neither group is currently being helped by the current legal efforts against Madoff.
If the suit goes forward, it would be the first such class action ever. To file this ground-breaking case, plaintiffs are relying in part on a precedent from a Louisiana district court case brought over Hurricane Katrina.
Although the SEC has the discretion not to do anything about a Ponzi scheme it's aware of, the suit charges, it doesn't have the discretion to fail to understand the complaints filed with it. Not coincidentally, Kachroo Legal Services also represents Madoff whistleblower Harry Markopolos, whose reports to the SEC in large part underlie this suit.
The SEC has not yet responded to a call for comment.
Gaytri Kachroo, the lead counsel for the case, urged investors to file complaints with the SEC by December 10 if they want to be included in the class, and to do that they should contact her firm. She also emphasized:
We're leaving the lines of communication open with the SEC and the Obama administration to establish a Madoff task force to get the feeder funds, banks -- those that channeled money to Madoff -- to put money into a fund for investors.
So although the suit is against the U.S. and thus taxpayers, Kachroo is looking to make Madoff's funders pay.