Massachusetts' top securities regulator charged hedge fund firm Fairfield Greenwich Group with fraud for allegedly lying to investors about confessed swindler Bernard Madoff's phony management business.
The action on Wednesday marks the first charges against one of Madoff's feeder funds, which funneled billions of dollars into the disgraced Wall Street legend's long-running Ponzi scheme.
William Galvin, Massachusetts' secretary of state, accused Fairfield Greenwich, a prominent hedge fund firm in Connecticut, of failing to check how Madoff generated the strong and steady returns he said he made year after year.
The allegations against Fairfield in this complaint outline a total disregard for such (fiduciary) responsibility which helped the Madoff scheme to stay afloat for so long, Galvin said in a statement.
Galvin wants Fairfield Greenwich to return the money that Massachusetts investors lost in the scheme and return the performance fees they paid the firm. He is also seeking an administrative fine against Fairfield.
Fairfield Greenwich's Sentry Funds had placed about $7.2 billion, or 95 percent of its assets, with Madoff, whose fraud appears to have totaled about $65 billion.
Galvin found that Fairfield Greenwich insiders pumped $14.8 million into Madoff's business only days before the 70-year-old former Nasdaq stock market chairman confessed to authorities that his business had been a fraud.
Madoff, who was jailed on March 12 after pleading guilty, will be sentenced on June 16.
(Reporting by Svea Herbst-Bayliss; Editing by Lisa Von Ahn)