On December 22, 2008, as discussed here, Phyllis Molchatsky, a 61-year-old retiree from Valley Cottage, NY who lost nearly $2 million investing with Bernard Madoff, filed a novel claim against the SEC. Her administrative claim reportedly alleges that the SEC was negligent in failing to detect alleged Madoff’s alleged fraud and seeks $1.7 million in damages.
Legal experts such as renowned law professor Erwin Chemerinsky have opined that they do not see a viable suit for money damages against the SEC because the United States government (including the SEC) has sovereign immunity in such cases. Prof. Chemerinsky told Securities Docket in late December 2008 that the only statute he could think of that might be relevant is the Federal Tort Claims Act, but that the FTCA has an exception for “discretionary functions.” “The bottom line,” he said, “is that I do not see a viable suit for money damages against the United States. Perhaps there might be claims against other defendants.”
