Settlement Agreement Reached with Joint Liquidators of Fairfield Sentry, Madoff's Largest Feeder Fund

Irving H. Picard, the Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC, announced today that he has reached a settlement agreement with Kenneth Krys and Joanna Lau, the Joint Liquidators of Fairfield Sentry Limited, Fairfield Sigma Limited and Fairfield Lambda Limited, three offshore funds formerly managed by entities related to Bernard Madoff's largest feeder-fund operator, the Fairfield Greenwich Group. Terms of the settlement include an immediate and permanent reduction – of nearly $1 billion – in the total amount of claims against the BLMIS Customer Fund by the Fairfield Funds. In addition, the settlement agreement aligns the interests of the Trustee and the Joint Liquidators and strengthens their ability to pursue and recover billions of dollars in additional claims against the owners and management of the Fairfield Funds, as well as hundreds of subsequent transferees of stolen customer property. Some of the most significant terms of the settlement with the Liquidators are as follows: Under the terms of the settlement, Sentry's approximately $1.2 billion net equity SIPA claim is permanently reduced to $230 million and will not be increased in the future. The reduction of the Sentry SIPA claim by nearly $1 billion immediately and effectively increases the value of the BLMIS Customer Fund allocation by at least 3 percent for all BLMIS customers whose claims have been approved by the Trustee. In addition, the Joint Liquidators have agreed to make a $70 million payment to the BLMIS Customer Fund. Reduction in Sentry SIPA Claim and Cash Payment Under the terms of the settlement, Sentry's approximately $1.2 billion net equity SIPA claim is permanently reduced to $230 million and will not be increased in the future. The reduction of the Sentry SIPA claim by nearly $1 billion immediately and effectively increases the value of the BLMIS Customer Fund allocation by at least 3 percent for all BLMIS customers whose claims have been approved by the Trustee. In addition, the Joint Liquidators have agreed to make a $70 million payment to the BLMIS Customer Fund. Assignment by the Liquidators of Claims Against Fairfield Greenwich Group's Management Under this agreement, the Liquidators assign to the Trustee all of the Fairfield Funds' claims against the FGG management companies and FGG officers and partners. The Trustee retains his own claims against management defendants. The Trustee and the Liquidators will share any recoveries, with the Trustee receiving the first $200 million, and any recoveries in excess of $200 million allocated with 85 percent for distribution to the BLMIS Customer Fund and 15 percent for distribution to the Fairfield Funds investors. Sharing of Other Claims The Trustee and the Joint Liquidators will work cooperatively to enhance recoveries for the BLMIS Customer Fund and Fairfield Sentry shareholders with sharing arrangements ranging from 60 percent to the Trustee, 40 percent to the Liquidators to 15 percent for the Trustee to 85 percent for the Liquidators, depending on the nature of the claims to be shared. Judgments The Fairfield Funds dropped their objections to the Trustee's claims – approximately $3 billion against Sentry, approximately $752 million against Sigma, and approximately $53 million against Lambda – and agreed to the entry of judgments for the full amount of these claims, approximately $3.8 billion. The entry of the judgments eliminates some legal defenses which could impede additional, future recoveries. The Trustee has agreed not to seek collection of the judgments against the Fairfield Funds, which have a limited ability to pay cash toward any judgment.