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The U.S. Securities and Exchange Commission (“SEC”) suffered a setback in its efforts to go after a firm that marketed Bernard Madoff’s investments. A federal court judge dismissed the majority of the SEC’s complaint for securities fraud against Cohmad Securities Corp. and its top executives Robert Jaffe, Maurice Cohn, and Marcia Cohn who was Cohmad Securities’ chief operating officer.
The SEC had alleged that Cohmad Securities, Jaffe and the Cohns were part of the $65 billion Ponzi-scheme that Bernard Madoff perpetuated for more than 20 years.
According to Judge Louis Stanton, although Cohmad Securities was in the same building as Madoff’s firm, Madoff successfully pulled the wool over his marketer’s eyes, just as he fooled regulators and investors.
Judge Stanton’s Order was signed on February 1, less than six months after lawyers for Bernard Madoff’s friend Robert Jaffe had asked the Manhattan federal court to dismiss the four counts in the SEC’s civil fraud suit. “The claims for securities fraud are dismissed as against all defendants,” Stanton wrote in his ruling. Judge Stanton did, however, allow the SEC to refile the complaint within 30 days.
“There is nothing fraudulent about referring customers to an investment adviser for fees, and the complaint does not allege statements or omissions by defendants that are fraudulent absent awareness or notice that Madoff’s investment advisory business was a sham,” Stanton wrote.
The case is captioned SEC v. Cohmad Securities Corp., et al., U.S. District Court, (S.D.N.Y.), No. 09-5680.