Phyllis Molchatsky, a 61-year-old retiree from Valley Cottage, NY, who lost nearly $2 million investing with Bernard Madoff, filed a claim against the SEC on Monday. The administrative claim alleges that the SEC was negligent in failing to detect alleged Madoff’s alleged fraud, the WSJ reports, and seeks $1.7 million in damages.
Howard Elisofon, the lawyer who filed the case, stated that the SEC’s “statutory purpose is to protect the public interest. We feel they fell down on the job in this instance.” The SEC acknowledged last week that it failed to follow up on credible, specific allegations brought to it about Madoff.
According to the WSJ article, an administrative claim for relief is the first step in filing a lawsuit against the government. If the SEC doesn’t negotiate or respond to the claim within six months, the investor can file a lawsuit in federal court. However, the government may assert the doctrine of sovereign immunity as a defense when it is sued for damages.