The market-making arm of jailed swindler Bernard Madoff's firm is set to be sold to Castor Pollux, a Boston financial company, for $500,000 plus future payments of up to $15 million, according to a statement by a court-appointed trustee.
Madoff, 70, pleaded guilty on March 12 to running the biggest investment fraud in Wall Street's history, which prosecutors have said involved as much as $65 billion.
His Bernard L. Madoff Investment Securities LLC had a market-making business and an investment advisory business. The fraud took place in the investment arm but the entire operation is still under investigation.
Now, unless a better bid emerges in an auction that is being overseen by a bankruptcy judge, the market-making business will be sold to Castor Pollux, the designated stalking horse in the bidding process.
Under the current bid, Castor Pollux would buy the infrastructure and intellectual property of the business. The sale would exclude cash and securities related to the business.
Castor Pollux would pay $500,000 right away, then make payments of up to $15 million based on certain criteria through 2012, according to the statement by the court-appointed trustee.
The court-appointed trustee Irving Picard, a New York lawyer, noted the difficulty of selling the division.
We have faced many challenges in this process, he said in a statement. The initial proceeds reflect that the business has not been operational since December 12 and that significant capital is required to restart operations.
Picard is working with the Securities Investor Protection Corp (SIPC) to recover as much of Madoff's assets as possible to sell or collect money to give to his defrauded customers.
The trustee said this week that so far he has located just more than $1 billion. SIPC was established by Congress in 1970 to maintain a reserve for investors of failed brokerages.
(Reporting by Grant McCool and Paul Thomasch; editing by Gary Hill and Carol Bishopric)