Two former investors are suing the Securities and Exchange Commission for $2.4 billion in damages, claiming the agency acted with negligence while examining Ponzi schemer Bernard Madoff's investment business.
The 63-page complaint, filed by Phyllis Molchatsky and Dr. Steven Schneider, claims the agency engaged in "serial, gross negligence" over the course of 16 years.
It alleges that because the SEC's negligence occurred during the course of its regular functions, rather than when crafting policy, the agency is not shielded by the doctrine of sovereign immunity.
This is the first suit brought against the SEC in relation to the Madoff case.
Madoff is serving a 150-year prison sentence for orchestrating a $65-billion Ponzi scheme.