Irving Picard, the court-appointed trustee overseeing the liquidation of Madoff’s assets on behalf of his victims, sued J. Ezra Merkin for more than $500 million, claiming that Merkin’s Gabriel Capital Corp. withdrew that amount in “nonexistent principal” from Madoff’s firm in the 13 years before it collapsed. The complaint, filed in bankruptcy court in Manhattan last week, also says Merkin “`earned’ tens of millions of dollars in management and performance fees, even though he knew or should have known that [Madoff] was engaged in fraud.”

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