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Madoff victims sue SEC for 'negligence'
By Aaron Smith
CNNMoney.com staff writer
October 14, 2009
Two victims of the convicted Ponzi schemer Bernard Madoff filed suit Wednesday against the Securities and Exchange Commission, accusing the government regulator of negligence in failing to protect investors.
Molchatsky and Schneider accuse the SEC of failing to detect Madoff's long-running scam, which stole billions of dollars from thousands of investors.
"Through its negligent actions and inactions ... the SEC caused Madoff's scheme to continue, perpetuate and expand, eventually in billions in losses by investors...
The lawsuit said that SEC regulators had "countless opportunities" to stop Madoff's scheme "and botched all of them."
"Instead of watching the backs of Ms. Molchatsky and Dr. Schneider and the backs of all the other investors, the SEC -- through its negligence -- was effectively watching Bernie Madoff's back," said one of the plaintiffs' lawyers, former SEC attorney Howard Elisofon. "Now it is time for the SEC to be held accountable and for the federal government to do what the law says it must do: compensate the victims for its negligence."
The lawsuit noted that, between 1992 and 2008, the SEC received "at least eight complaints or submissions indicating that Madoff was operating a Ponzi scheme."