Southern District Judge Jed Rakoff yesterday denied a motion by Irving Picard, the trustee overseeing the liquidation of Bernard L. Madoff Investment Securities, to block a $410 million settlement between Attorney General Eric Schneiderman and hedge fund manager Ezra Merkin, who was accused of steering clients’ money to Madoff’s Ponzi scheme. Rakoff not only denied Picard’s motion to enjoin the settlement, but dismissed his entire adversary proceeding against the A.G. sua sponte.

Picard, a partner at Baker & Hostetler, argued that the money properly belongs to the Madoff bankruptcy estate and should be available for distribution to all creditors, not just the investors in the Merkin funds. But Rakoff ruled that Picard had waited too long to challenge the A.G.’s claim. "The Trustee…having for more than three years issued empty threats to seek a halt to the Attorney General’s suit, has lost his right to complain," Rakoff wrote. "Even on the merits, moreover, his bluster proves to be without substance. Accordingly, not only this motion but this entire action seeking to derail the Attorney General’s settlement must be dismissed."

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