Over the years, Merkin collected $470 million in fees and performance bonuses from his clients, the suit said. It said many of those customers, which included several large charities and colleges, had no idea where their money really was until December, when Madoff was arrested.
"Merkin duped individual investors, nonprofits, and charities into believing he was responsibly managing their investments, when in actuality he was dumping them into history's largest Ponzi scheme," Attorney General Andrew Cuomo said in a statement.
The complaint also accused Merkin of mingling his personal funds with the accounts of his management company, Gabriel Capital Group, and using some of the company's funds for personal purchases, including $91 million worth of artwork for his apartment.
Merkin's attorney, Andrew Levander, called the lawsuit "hasty," "ill-conceived," and "without merit," and he denied that clients had been kept in the dark.
"Contrary to the attorney general's allegation, investors in the Ascot Funds were well aware that the money was being invested with Madoff," Levander said in a statement.
He said Merkin had investigated and analyzed Madoff and his trading strategy before investing.
"Unfortunately," he wrote, "Mr. Merkin's due diligence, just like the detailed investigations performed by countless others, including regulators, was thwarted by the intricate, fraudulent scheme perpetrated by Madoff."
Also another of Madoff's assets has been seized. French authorities on the Cote d'Azur have chained up his $7 million yacht "Bull" at a port in the exclusive Mediterranean enclave of Cap d'Antibes.
