New York Attorney General Eric T. Schneiderman on Monday called the agreement one of the largest of its kind. As part of the deal, Schneiderman will drop civil charges against Merkin accusing him of misleading clients on Madoff's involvement in their investments.
Merkin managed four funds -- Ariel Fund, Gabriel Capital, Ascot Fund and Ascot Partners. New York officials said he surreptitiously funneled more than $2 billion in assets to Madoff while personally raking in hundreds of millions of dollars in management fees.
More than 10 percent of those assets belonged to charities and nonprofit groups, according to state officials, who accused Merkin of filing misleading documents and reports to conceal Madoff's role.
Madoff is serving a 150-year sentence in North Carolina after pleading guilty in 2009 to masterminding his extensive Ponzi scheme.
Of the settlement amount, $405 million is to go compensate investors over a three-year period, while $5 million is to go to the state of New York to help cover fees and costs. Irving Picard, the trustee in charge of liquidating Madoff's estate, is not involved in Monday's settlement.
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