Citadel and Goldman Sachs have not yet answered the complaint filed by Frederick J. Grede, trustee for the Sentinel Management Group’s bankruptcy, but that doesn’t mean he hasn’t been busy. This week Grede filed suit against Keefe, Bruyette & Woods Inc. (“KBW”) and Cohen & Company Securities LLC to recover $130 million from KBW and $150 million from Cohen.
Sentinel bankruptcy trustee Frederick J. Grede says he has a very good idea what happened to the rest of the money that disappeared in the Sentinel scandal. “We think there are significantly more sources of recovery,” he says, including the Bank of New York and “the accountants,” and adds that there will be other lawsuits to recovery more of the Sentinel customer funds going forward.
In the two settlements with Philip Bloom and son Eric Bloom, Grede recovered $10.7 million of the missing $350 million, and released Philip Bloom, Eric Bloom, their trusts and Sybille Bloom, Philip’s wife, against any pending or future lawsuits from the creditors.
Bloom et al have settled with Sentinel Management Group’s bankruptcy trustee Frederick J. Grede for $10.7 million, which, considering that the trustee was seeking $350 million, doesn’t’ seem like a lot of money.
According to the settlement, $10.7 million “represents substantially all the assets of the Settling Defendants, other than assets which are or are claimed to be exempt.” As a stipulation of the settlement, the defendants will not challenge bankruptcy petitions by or against Sentinel Investment Group (SIG), parent company, and waives interest in any tax refund due to SIG.
Sentinel Capital Management’s bankruptcy trustee Frederick J. Grede has filed suit against the Bank of New York Mellon Corp. (BONY), which acted as custodian of securities on behalf of Sentinel and its customers, clearing agent for Sentinel’s securities transactions, and lender to Sentinel.
Grede asserts that BONY established a fundamentally flawed account structure for Sentinel’s accounts that commingled customer assets and facilitated the misuse of customer assets. That allowed BONY to apply the proceeds securities transactions involving customer assets to pay down a portion of Sentinel’s debt to BONY.
Grede goes on to say that BONY aided and abetted breaches of fiduciary duty committed by Sentinel insiders, who misused customer securities for their own benefit and causing Sentinel to lose hundreds of millions of dollars. Further, he says that BONY knowingly colluded and facilitated the misconduct.
He also says that BONY knowingly accepted fraudulent and preferential transfers as part the insiders’ scheme, engaged in inequitable conduct and violated the Commodity Exchange Act and the Investment Advisers Act of 1940.
Here’s the 121 page complaint with exhibits.
