By Jonathan Stempel

NEW YORK (Reuters) -A Texas funding agency agreed on Friday to pay $2.51 million to settle a U.S. authorities lawsuit accusing it of fraudulently acquiring funds from a fund meant to compensate victims of Bernard Madoff’s huge Ponzi scheme.

The U.S. Division of Justice mentioned Fulcrum Capital Companions violated the federal False Claims Act between October 2016 and October 2022 by inflicting the Madoff Sufferer Fund (MVF) to make inflated payouts to victims, which they then turned over to Fulcrum, a “non-victim” of Madoff’s fraud.

In a civil criticism filed in Manhattan federal courtroom, the Justice Division mentioned Fulcrum purchased restoration rights from Madoff victims and required them to hide from the fund how a lot it paid for these rights.

The Justice Division mentioned Fulcrum makes a speciality of buying and selling distressed property, together with shares in “feeder funds” that despatched investor cash to Madoff.

“Fulcrum is a declare shopping for monetary agency that by no means misplaced a penny from Madoff’s conduct,” Richard Breeden, the previous U.S. Securities and Change Fee chairman who oversees the Madoff fund, mentioned in an announcement. “The inevitable consequence of orchestrating false stories to MVF was diminishing the assistance that… may very well be supplied to actual fraud victims.”

The settlement got here after the Justice Division joined a non-public whistleblower lawsuit filed in 2018. Most of that case stays below seal. Fulcrum additionally agreed to not search additional payouts from the Madoff fund.

“Fulcrum fulfilled a essential want for victims of Mr. Madoff’s fraud by offering quick compensation for claims,” a Fulcrum spokesperson mentioned in an announcement. “We concluded that resolving this dispute to keep away from the expense and distraction of ongoing litigation was in one of the best pursuits of Fulcrum and our restricted companions, and we’re glad to place this matter behind us and look towards the longer term.”

The fund was created in 2013, primarily from settlements with Madoff’s former financial institution, JPMorgan Chase (NYSE:), and the property of former Madoff investor Jeffry Picower.

Greater than $4 billion has been distributed by the fund. One other $14.6 billion has been recouped for former Madoff clients by the trustee liquidating the swindler’s agency.

Madoff pleaded responsible to 11 felony counts after his fraud was uncovered in December 2008. He was serving a 150-year jail time period when he died at age 82 in April 2021.