There are two officials charged with returning money to the victims of Bernie Madoff. Irving Picard, the trustee appointed by the U.S. Bankruptcy Court, has collected billions of dollars but has limited payment of claims to those who invested directly with Madoff. That is great news for some folks, but tens of thousands of investors invested indirectly through hedge funds, feeder funds and third parties. Those folks have been largely been left on the outside of the bankruptcy proceedings.
Enter Richard Breeden, former chairman of the Securities and Exchange Commission. Breeden was selected by the United States Attorney in Manhattan where the criminal case against Madoff was prosecuted. Breeden has collected less money than Picard but has still amassed $4 billion. Unlike Picard, Breeden says he will distribute money to all victims.
That sounds great but today the Wall Street Journal reported the following headline, “Claims for Madoff Cash Swell.”
Breeden reports that he has received more than 50,000 claims seeking a portion of the recovered funds. Originally, the bankruptcy court calculated the total Madoff losses at $17.5 billion. Now Breeden claims more than twice as many claims have been received. Some claims will be phony, of course, but Breeden still says he has $40 billion in claims meaning the full extent of the Madoff losses are far greater than anyone expected.
It’s hard to blame prosecutors for not knowing the total loss attributed to Madoff. After all, the man literally manufactured phony records. Knowing the full loss wouldn’t have changed anything during the prosecution, either. No matter what the loss amount, Madoff is already spending his life in prison.
The bad news is for investors. There is a big difference between receiving 20¢ on the dollar and 10¢. The sheer volume of reported losses means that everyone gets less; there is simply less money to go around.
The sheer volume of claims also means it will take longer to pay victims. Breeden and the courts can’t simply write checks to anyone who says they lost money. That wouldn’t be fair to the legitimate victims. What the new news means is that people who invested in PIWM, Maven, Anchor and other funds that in turn gave money to Madoff will have to wait even longer to receive less money.
We are happy to know that at least the Justice Department has agreed to share the recovery with all legitimate victims. The sheer volume and size of the losses means that no one will come close to being made whole from the receiver and trustee actions.
As we have noted in previous posts, it may be possible to recover your losses from third parties that sold these investments. Stockbrokers, insurance agents and investment advisors that sell or recommend investments have a duty to perform due diligence on what they market. Those folks can be held responsible for losses if they failed to perform due diligence or made unsuitable investment recommendations. Unfortunately, time is running out on those claims and it may already be too late in some jurisdictions.
We have teamed up with Chapman Law to pursue Madoff related and other fraud recovery claims. If you lost money in PIWM, Maven, Galaxy, Anchor or other indirect Madoff investments, call attorney John Chapman at 216-241-8172. Lost money in another Ponzi scheme or investment fraud? Contact attorney Brian Mahany at or by telephone at (414) 223-0464 (direct). All inquiries confidential.