Who Gets the Rest of Madoff’s Money?

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While today’s sentencing of Mr. Madoff was favorable to his victims, it will take months or even years longer to resolve their claims.  The trustee Irving Picard, has recovered only $1.2 billion of the approximately $65 billion in estimated net losses suffered by investors.

SIPC has mailed out about $142 million in checks to eligible claimants, out of a total of $188.4 million that already has been approved. As the July 2 deadline for filing SIPC claims approaches, more than 10,000 claims have been filed. Many of those claims will likely be denied. Some people, such as those who invested with Mr. Madoff indirectly through feeder funds, probably won’t be eligible for SIPC payments.     Eligible victims may get payments of up to $500,000 from the SIPC.     However, the rest of their losses will be partially recouped from whatever assets Mr. Picard manages to gather in the liquidation process.

On Friday, Ruth Madoff, agreed to a settlement with prosecutors in which she relinquished all the assets she shared with her husband. Mrs. Madoff will keep $2.5 million.   Mrs. Madoff gave up tens of millions in cash and securities as well as her $7.5 million interest in a New York City apartment and a $7 million Montauk, N.Y., property, and jewelry insured at more than $2.6 million. The agreement covers many items, including two fur coats valued at $48,500, $18,000 in linens and bedding, and $8,500 in silverware.  Also, Mr. Picard recently sold Mr. Madoff’s market-making operation for $25.5 million.

Prosecutors, the Securities and Exchange Commission and Mr. Picard’s office are coordinating how to recover assets now considered tainted that were received by other Madoff family members and close associates.

Most of what the trustee is expected to recover from now on will come from potential “clawback” suits against investors who pulled out money from the Madoff firm in recent years. Clawback suits in Ponzi schemes assert that recent redemptions were fraudulently obtained from other investors.

Bankruptcy law allows Mr. Picard to go after entities that received payments from the Madoff firm on or after Sept. 12, 2008, within 90 days of the bankruptcy filing. However, federal and state statutes are broader when it comes to recovering money that the courts deem to be fraudulently conveyed as part of the Ponzi scheme. Under New York state law, Mr. Picard could try to recover fictitious profits paid out within the last six years.

Even as Mr. Picard gathers up assets, fights are brewing over how much will be paid out. Mr. Picard has said he intends to pay claims on a “net equity” basis, or the difference between what customers put in and what they took out.   Some of investors said their claims should be based on what was shown on their November 2008 account statements, which reflected balances of nearly $65 billion, before the fraud collapsed. Several investors have sued Mr. Picard over the matter. The suits are pending.

Anna Timone (195 Posts)


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