Banking and Finance

Madoff Victims That Invested $1 Million or Less Will Soon Be Even

 The court-appointed bankruptcy trustee overseeing the recovery of assets in Bernard Madoff's massive Ponzi scheme is seeking approval to distribute more than $1.25 billion to the notorious con man's victims - an effort that, if approved, will result in the full repayment of losses suffered by victims with allowed claims of $1.13 million or less. Irving Picard, the court-appointed trustee, filed a motion seeking court approval to distribute more than $1 billion that had previously been held in reserve pending a decision on whether Madoff victims were entitled to an interest- or inflation-based adjustment on their claim amounts. A decision earlier this year by the U.S. Court of Appeals for the Second Circuit sided with Picard in ruling that victims were not entitled to an upward adjustment to account for interest or inflation.

To date, Picard has returned over $7.2 billion to Madoff's victims through five distributions that began in September 2011. Combined with an initial advance of up to $500,000 per victim through Madoff's broker-dealer's insurance through the Securities Investor Protection Corporation, many Madoff victims have been made completely whole - an unprecedented outcome for a fraud of this magnitude. Not including the SIPC distributions to victims, Picard will have returned nearly 56% of each victim's approved loss if the sixth distribution is approved - a recovery which ranks as one of the highest recoveries on record. (For a list of the highest recoveries, click here).

According to Picard, 2,552 claims have been approved relating to 2,213 accounts with Madoff's brokerage firm, Bernard L. Madoff Investment Securities LLC ("BLMIS"). Following the approval of the contemplated sixth distribution, 1,252 allowed claims will have been fully satisfied (including the SIPC advances) - including any customer claim of $1.126 million or less. The amount of the distributions range from a low of $1,082 to the largest distribution of $168.5 million.

As distributions continue to Madoff's victims more than six years after the world learned of his massive Ponzi scheme, it is becoming increasingly possible that all victims could recover 100% of their allowed losses - a feat that has happened only twice in recent memory and certainly not in the magnitude of Madoff's scheme. To date, Picard and his team have recovered approximately $10.5 billion out of the estimated $17.8 billion in principal lost by Madoff's victims. Additionally, government forfeiture and recovery efforts have secured an additional approximately $4 billion that is being separately administered by a special master. These funds are not subject to diminution to satisfy the vast amounts of legal and professional fees incurred by Picard and his team, as these fees are covered by SIPC. Thus, coupled with the advance made by SIPC, it is entirely possible (and increasingly likely) that Madoff's victims will recover most, if not all, of their losses. Six years ago, such a scenario seemed nothing more than a fantasy.

Previous Ponzitracker coverage of Madoff's scheme is here.

Picard's Motion

 For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.

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