Madoff’s Victims Are Close to Getting Their $19 Billion Back | Bloomberg

Bloomberg
Bloomberg James Alexander Michie

A decade after Bernard Madoff was arrested for running the world’s biggest Ponzi scheme, the bitter fight to recoup investors’ lost billions has astounded experts and victims alike.

While no one will ever collect the phantom profits Madoff pretended he was earning, the cash deposits by his clients have been the primary objective for Irving Picard, a New York lawyer overseeing liquidation of Madoff’s firm in bankruptcy court. So far he’s recovered $13.3 billion — about 70 percent of approved claims — by suing those who profited from the scheme, knowingly or not. And Picard has billions more in his sights.

“That kind of recovery is extraordinary and atypical,” said Kathy Bazoian Phelps, a bankruptcy lawyer at Diamond McCarthy LLP in Los Angeles who isn’t involved in the case. Recoveries in Ponzi schemes range from 5 percent to 30 percent, and many victims don’t get anything, Phelps said.

Madoff’s Billions

The Madoff trustee is on track to recover most of victims’ lost principal

Note: The total lost principle was $20 billion, including $1 billion tied up in disputed claims or that hasn’t been claimed yet.

The scam by Madoff wiped out $19 billion that wealthy investors, charities and celebrities had entrusted to him starting as long ago as the 1970s, based on approved claims so far. For years, he doctored client accounts with phony trades and $45 billion in fake profits, until the 2008 financial crisis exposed the fraud and led to the collapse of his investment advisory firm.

When Madoff was arrested on fraud charges Dec. 11, 2008, the collapse of his company affected about 4,800 client accounts and kicked off prolonged legal battles over the scraps. Madoff pleaded guilty and is serving a 150-year prison term, while his five top aides were convicted. His sons, who worked for him, are dead—one hanged himself and the other died of cancer. Madoff’s wife, Ruth, is living in a rented home in Connecticut. The government allowed her to keep $2.5 million after Madoff’s plea.

“This was the biggest, longest-running and one of the more complex frauds of all times, so it’s not surprising that it’s taking a very long time to be dealt with,” said Matthew L. Schwartz, a former federal prosecutor who worked on the massive criminal case sparked by Madoff’s fraud. Picard, appointed as trustee in the case, “has really returned unexpected amounts of money to victims,” Schwartz said.

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Source: Erik Larson and Christopher Cannon | Bloomberg

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