Madoff Victims, Trustee Bicker Over Recovering Funds

Yesterday, victims of Ponzi schemer Bernard Madoff faced off in court against the trustee liquidating Madoff's assets over how much they are owed. Victims believe they should be given claims based on their fake returns, while trustee Irving Picard disagrees. Picard's lawyer, who contended with "mocking laughter" and heckling pointed out, "No one in their right mind would suggest you should use the last statement. As soon as we give money to someone who took all their money out, we're taking money from another customer—stolen money."

Victims of Madoff's $64+ billion fraud were seduced by thinking their investments were really working for them, with amazing returns like 46% and 950%. They are hoping for the $500,000 maximum cash advance from the SIPC; a lawyer representing some victims said the last Madoff Investments statement should stand, "Congress’s intent was to protect a customer’s legitimate expectations, even if the broker stole the customer’s money and never bought securities."

However, Picard believes a formula of deposits minus withdrawals should be used—which would impact investors who took out money based on fake profits before the scam was revealed. One of those "net winners" investors includes Sterling Equities, owned by Mets owner Fred Wilpon, and if Picard has his way, Sterling could owe $48 million to other victims.

Bankruptcy Judge Burton Lifland told the two sides, "No matter how I come down and rule, it's going to be unpalatable to some degree to one party or another." It's unclear when he'll make a decision.

Contact the author of this article or email tips@gothamist.com with further questions, comments or tips.

By Jen Chung in News on February 3, 2010 1:05 PM

Comments [rss]

ozik

Isn't there a precedent for taking back money from payees in bankruptcy proceedings?

Johnnyb1000

The "victims" who got all of their money back (plus some profits) are now trying to prevent those who lost everything from getting any compensation.

The Madoff fund is like the Titanic and only some were able to get into lifeboats. Except now, those in the lifeboats are going to court asking the judge to order those left to drown in the water to give any possessions they may have to those privileged ones in the lifeboats.

The Times reported that these "victims" and their attorneys laughed at the trustee when he asked for help for those who lost everything. These "victims" and their attorneys are as bad as Madoff.

jibbly

These are just good accounting practices. To reconcile this mess you need to focus on actual amounts that were deposited and taken out of the fund. Unfortunately this means that a lot of accounts that withdrew more than they put in (which I'll assume is a lot of them) will owe money...money that they either don't have or will be highly reluctant to give up.

Another complication is how to deal with closed accounts that withdrew their funds based on the faked statements.