Victims of Madoff Ponzi scam near full recovery of principal with payout
Victims of Bernard Madoff’s Ponzi scheme are set to begin 2018 with new cheques totalling US$584 million from the trustee unwinding the con man’s company, boosting total payouts to almost US$11.4 billion.
The latest cheques will range from US$563 to almost US$88 million, trustee Irving Picard said Monday. With the payments, more than half of Madoff’s customers who submitted approved claims to Picard — or 1,386 of 2,265 — will have recovered their lost principal in full.
The distribution is financed by US$1.3 billion in settlements and recoveries since the last payout in February, Picard said. It’s the ninth so far. Additional recoveries and payments are expected for 2018, he said.
“Nearly a decade since the unmasking of the Madoff fraud, we are still finding and recovering millions of dollars for the victims of this complex global deception,” Picard said in a statement.
The US$12.8 billion recovered so far represents about 73 per cent of the lost principal of US$17.5 billion. Some of the money has been set aside pending resolution of lawsuits by victims seeking more cash than the trustee says they’re entitled to.
Picard has said he expects to recover all of the lost principal and perhaps more.
But that hinges on whether a federal appeals court overturns a November 2016 ruling that moved billions of dollars in potential recoveries out of reach. The judge in that case ruled the cash was beyond U.S. jurisdiction because it had been transferred — usually from offshore feeder funds to foreign banks — in the years before Madoff’s arrest.
“We think those cases were wrongly decided,” David Sheehan, the trustee’s top lawyer, said Monday in an interview on Bloomberg Television. “If we win that opens the door to US$4 billion. I think we’ve got a very good chance of hitting 100 per cent here.”
The trustee has been liquidating Manhattan-based Bernard L. Madoff Investment Securities LLC since shortly after Madoff’s arrest in December 2008, which also wiped out tens of billions of dollars in fake profit that victims believed they held in their accounts. The trustee said he’d seek court approval of the distribution at a hearing set for Jan. 31 in U.S. Bankruptcy Court in Manhattan.
Picard’s efforts got a major boost in September when Thema International Fund Plc, the Irish investment fund that helped open a floodgate of European cash for Madoff’s firm in the early 1990s, agreed to pay US$687 million to resolve the trustee’s lawsuit — the biggest such deal in six years. In June, the estates of Madoff’s dead sons, who worked for their father, agreed to pay US$23 million to resolve similar litigation.
A separate US$4 billion fund overseen by the Justice Department made its first distribution to victims in November, paying US$772.5 million to more than 24,000 victims worldwide. That fund, administered by former SEC chairman Richard Breeden, differs from Picard’s by taking claims from indirect investors, such as feeder-fund customers.
Madoff, 79, pleaded guilty in 2009 and was sentenced to 150 years in prison. Five of Madoff’s top aides were convicted after a trial in 2014.
Picard, an attorney with Baker & Hostetler LLP in Manhattan, was hired by the industry-financed Securities Investor Protection Corp. to recover cash for victims shortly after Madoff’s arrest. SIPC, rather than the victim fund, has funded all the fees and expenses associated with the case.
“SIPC has confidence that the Madoff recovery initiative will continue to deliver additional, significant distributions in 2018 and beyond,” SIPC president Stephen Harbeck said in the statement.