# kaal:claim:2811718-027

**Claim.** Madoff's reliance on large feeder funds created a massive industry of investor due diligence lawsuits, because those funds collected high advisory fees as due diligence experts yet caused large numbers of investors to lose their investments.

**Type.** mechanism  **Support.** argued

**Holds when.**

- post 2008 Madoff related litigation

**Source quote.**

> created a massive industry for IDD lawsuits.148 The feeder funds had collected high advisory fees as due diligence experts, but caused large numbers of investors to lose their investments as a result of the Madoff fraud.

**From.** Wulf A. Kaal, *Private Fund Investor Due Diligence – Evidence from 1995 to 2015* (2016), III.B.3. Impact of the Madoff Ponzi Scheme, page 43

**Cite as.** Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718

**Verify.** sha256 of source PDF `b52152af561288173840a1cabbcf8f4b337e73507c856ee01600799073f4156f` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202016%20-%20Private%20Fund%20Investor%20Due%20Diligence%20%E2%80%93%20Evidence%20from%201995%20to%202015.pdf

**Failure mode.** delegated diligence collapse  (family: agency-cost-and-managerial-opportunism)

**Topics.** law-and-legal-systems

**Keywords.** madoff, feeder-funds, litigation-growth, advisory-fees

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