New York state attorney general Andrew Cuomo filed a lawsuit Tuesday against a subsidiary of Bank of New York Mellon, Ivy Asset Management, LLC, and a couple of its executives, claiming that they misled clients about investments linked to the Madoff fraud.

Cuomo alleges that Ivy, its former CEO, and its former chief investment officer, deliberately misled clients about investments tied to Bernard Madoff so that it could bring in advisory fees. In particular, the lawsuit alleges that Ivy learned that Madoff was not investing funds as advertised, but did not disclose this information to clients for fear of losing revenue. These allegations have not been proven.

The firm released a statement promising to defend itself from the charges. It notes “a limited number of clients from a legacy non-discretionary advisory business” were among Madoff’s victims. “These non-discretionary advisory clients were primarily professional investment advisors who chose to maintain Madoff exposure for their own clients. Ivy informed its clients that it had questions about Madoff that it could not answer and recommended to its clients that they reduce their exposure to Madoff,” it says, adding, “We have been cooperating with the Attorney General’s investigation and intend to defend ourselves against these claims.”

The accused CIO, Howard Wohl, also issued a statement proclaiming his innocence, and expressing confidence that he will be vindicated. “Contrary to the attorney general’s allegations, the facts will show that Mr. Wohl repeatedly told Ivy’s advisory clients — the fund managers, who were responsible to the investors — about concerns he had with the Madoff funds. In fact, he urged them to drastically reduce their positions in Madoff investments. These fund managers rejected his counsel, and their investors suffered significantly as a result. It should be made clear, that even as Mr. Wohl raised his concerns regarding Madoff to these fund managers, Mr. Wohl never knew or concluded that Madoff was running a Ponzi scheme.”

But Cuomo claims that, “These defendants violated their basic responsibility as investment advisers by putting their own financial interests ahead of their clients. They shamelessly profited off of their own clients’ impending misfortune and we are holding them accountable for their actions.”

The lawsuit seeks restitution, damages, and penalties, as well as the disgorgement of all fees that Ivy received.

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