Madoff Victims Sue SEC

Two investors are pointing their fingers at the U.S. government for failing to stop Bernard Madoff’s giant Ponzi scheme.

Phyliss Molchatsky, a retired office workers, and Steven Schneider, a doctor, filed a lawsuit in federal court in Manhattan, accusing the Securities and Exchange Commission (SEC) of negligence for failing to detect Madoff’s fraud despite numerous tips. Molchatsky lost $1.7 million from her retirement savings and Schneider lost $750,000, according to the lawsuit.

The suit seeks monetary restitution of the lost savings.

Madoff is serving a life sentence after operating a decades-long, multibillion-dollar Ponzi scheme (see “Madoff Gets Life—and the Some”). Under the new leadership of Mary Schapiro, the SEC has vowed not to let another Madoff happen (see “SEC Ready to Ward off Next Madoff with New Hire”). But that is no consolation for many who lost their savings.

“The SEC caused Madoff’s scheme to continue, perpetuate, and expand, eventually resulting in billions in losses by investors, and directly caused Plaintiffs to lose more than $2.4 million,” the lawsuit said.

The case in the U.S. District Court in the Southern District of New York is Phyllis Molchatsky and Steven Schneider, M.D. v. United States of America.