IN RE J. EZRA MERKIN AND BDO SEIDMAN SEC. LITIG., CASE NO. 08 CIV. 10922 (DAB) (S.D.N.Y.)

Abbey Spanier is Co-Lead Counsel in a class action lawsuit pending in the United States District Court for the Southern District of New York on behalf of all persons and entities who purchased limited partnership interests of Ascot Partners, L.P. (the "Ascot Fund") and/or Gabriel Capital, L.P. (the "Gabriel Fund") and/or shares of the Ariel Fund Limited (the "Ariel Fund") between December 11, 2003 and December 11, 2008 (the "Class Period") for claims arising under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and between January 20, 1994 through and including December 11, 2008 for claims arising under common law and state law.

The Ascot Fund and the Gabriel Fund are each domestic hedge funds managed by the same general partner, Ezra Merkin ("Merkin"). The Ariel Fund is an offshore "fund of funds", incorporated in the Cayman Islands and managed by Gabriel Capital Corporation ("GCC"), of which Merkin is the sole shareholder and sole director. The Ariel Fund is essentially a separate but parallel fund to the Gabriel Fund that was open to foreign investors and others not subject to U.S. taxes. Defendants include Merkin, GCC, BDO Seidman, LLP, BDO Binder, BDO Tortuga (collectively the "BDO Defendants").

This case arises from a massive fraudulent scheme perpetrated by Bernard L. Madoff ("Madoff") through his investment firm, Bernard L. Madoff Investment Securities, LLC ("BMIS"), and others. On December 10, 2008, Madoff confessed to running the largest Ponzi scheme in history, a fraud that Madoff himself admitted could have taken as much as $50 billion from investors. On December 11, 2008, the SEC charged Madoff and BMIS with securities fraud for a multi-billion dollar Ponzi scheme that Madoff and other perpetrated on advisor clients of BMIS, including the Ascot, Gabriel and Ariel Funds. Madoff and BMIS were also charged criminally for securities fraud by the U.S. Attorney's Office for the Southern District of New York. On March 12, 2009, Madoff pleaded guilty to securities fraud charges, admitting that beginning in the early 1990s, he stopped purchasing securities for his investment management clients and began operating a Ponzi scheme. On June 29, 2009, Judge Denny Chin sentenced Madoff to 150 years in prison.

The complaint alleges that defendants, recklessly or with gross negligence and/or in breach of fiduciary duties owed to plaintiffs and other class members, caused virtually the entire investment capital of the Ascot Fund and at least 25% of the investment capital of both the Gabriel and Ariel Funds --- to be handed over to Madoff to be "invested" for the benefit of investors in these Funds. Investments in those Funds have been decimated, as a direct result of: (a) defendant Merkin's abdication of his responsibilities and duties as General Partner, Manager and Investment Advisor to the Ascot, Gabriel and Ariel Funds; and (b) the failure of the Funds' auditor the BDO Defendants to perform audits and provide annual audit reports in conformance with generally accepted auditing standards.

Initially, cases were filed separately on behalf of investors in the Ascot, Gabriel and Ariel Funds. The Ascot Fund and Gabriel Fund cases were consolidated by Order of the Court dated April 9, 2009. On June 25, 2009, the Court consolidated the Ariel Fund case with the already consolidated Ascot and Gabriel Funds case, ordering that the case be captioned as In re J. Ezra Merkin and BDO Sideman [sic] Securities Litigation. On January 28, 2010, the Court amended its June 25, 2009 Order and appointed New York Law School and Scott Berrie as Lead Plaintiffs on behalf of all investors in this litigation (including the Ariel Fund investors) and appointed Abbey Spanier as Lead Counsel. On March 1, 2010, Plaintiffs filed a Second Consolidated Amended Class Action Complaint consolidating the claims of investors in the Ascot, Gabriel and Ariel Funds. On May 12, 2010, the Court amended its June 25, 2009 Order and appointed Jacob E. Finkelstein CGM IRA rollover Custodian as co-lead plaintiff on behalf of the Ariel Fund investors. On June 18, 2010, Plaintiffs filed a Third Consolidated Amended Class Action Complaint. Defendants moved to dismiss the complaint on August 2, 2010. Plaintiffs filed opposition briefing on October 22, 2010. Defendants filed reply briefing on November 20, 2010. On December 20, 2010, Plaintiffs filed a Fourth Consolidated Amended Class Action Complaint.