MadoffKachroo 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.

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126 Comments

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croone22

I'm curious as to who is going to sue the investors for their incompetence for investing with Madoff.

November 14 2010 at 12:33 AM Report abuse +1 rate up rate down Reply
hottair47

Class action law suites are a joke.The only ones to make money are the lawyers,talk about scamming!

November 13 2010 at 10:56 PM Report abuse +1 rate up rate down Reply
hottair47

90% of the people say our government is corrupt aand they are a 100% right.Over the last 30 years our politicians have made themselves immune to any prosecution,an act of Congress to get them out of office,and padded their pay in the middle of the night.Rule without consequence,sounds like Socialism to me.

November 13 2010 at 10:50 PM Report abuse +2 rate up rate down Reply
krazzicraig

What we the people should do is start a class action lawsuit. Start a web site and seek funding from all.Say $10 per family. Then find the best lawyers money can buy. Go after every wall street firm and big bank that were part of the fraud.

November 13 2010 at 10:28 PM Report abuse +1 rate up rate down Reply
1 reply to krazzicraig's comment
jkennedy806

I'll go for that -- we can get that lawyer who went after big tobacco and won. Then when his house in Hurrican Katrina dissppeared, he and a host of others sued the insurance companies. Now no insurance company will go near Alabama, Miss, and LA. One way to get rid of insurance companies. Hint Hint Obama Care is next. Imagine suing the government for incompetence? Even though I can't wait for the discovery and investigation to start.

November 14 2010 at 10:10 AM Report abuse rate up rate down Reply
fliesandlies

Sue the SEC! Aren't these the same guys who complain about too much government regulation? Let 'em eat cake!

November 13 2010 at 10:09 PM Report abuse +1 rate up rate down Reply
Allan

It seems that anything with the US Governments name on it anymore amounts to nothing more than a payday for a worthless bunch of lowlife bureaucratic scumbags who do absolutely nothing for their pay and infact cause more harm than good! A good case in point would be OBAMA!

November 13 2010 at 10:08 PM Report abuse +1 rate up rate down Reply
mike030567

If we could sue for incompetence, then we'd all make a fortune from suing politicians.

November 13 2010 at 10:07 PM Report abuse rate up rate down Reply
1 reply to mike030567's comment
jkennedy806

At all levels too -- it's like they are finally going to legalize stupid

November 14 2010 at 10:11 AM Report abuse rate up rate down Reply
muted3

This is what happened with the laissez-faire Bush republicans at the helm.

November 13 2010 at 10:00 PM Report abuse rate up rate down Reply
krazzicraig

They have little no chance of winning this. Most that lost money in this scheme were not poor. Some are now, but greed was their motive. He hung out a carrot and they chased it.The reason they will not win is, it will open the door for every person that lost money to file a suit.If you lost money in a 401k , your house , retirement account,what ever. What took place at the end of 2008 was the biggest fraud by wall street and big banks ever. What we should done(we the people) is ban together and file a suit against those that caused the problem ,AIG , Goldman Sack,and their kind.

November 13 2010 at 9:33 PM Report abuse rate up rate down Reply
jpark377

This is ridiculous. Gee, who would pay for the settlement with the SEC (I'm guessing that this won't go to trial)?. We, the TAXPAYERS will have to "pony-up". Investing inherently involves risk; and when rich (or formerly rich) people give all of their money to one man: they are absolute fools. Buyer beware!

November 13 2010 at 9:07 PM Report abuse +1 rate up rate down Reply