Madoff ‘Winners’ Lose Court Fight On Restitution

Mar 2 2010 | 4:36am ET

A federal bankruptcy judge has sided with the receiver in the Bernard Madoff case, approving Irving Picard’s methodology for determining  who will get what’s left of Madoff’s once-$17 billion empire.

The ruling by U.S. Bankruptcy Judge Burton Lifland is a defeat for those Madoff investors who withdrew more from their Madoff accounts than they put in. Those clients—who in addition to being denied any share of the restitution pie may now also face the prospect of having to repay any phony profit they withdrew from their Madoff accounts—had argued that the receiver, Picard, was bound by law to use their final account statements, even if the figures contained therein were totally bogus.

But Lifland said “the plain meaning and legislative history” of the law allowed Picard to deduct withdrawals from cash deposits in determining who gets what.

“Because securities positions are in fact nonexistent, the trustee cannot discharge claims upon the false premise that customers’ securities positions are what the account statements purport them to be,” the judge ruled.

Picard’s methodology was backed by Madoff’s less fortunate victims, the so-called net losers, who stood to receive much less if the net-winners were included in the pool, as well as the Securities and Exchange Commission.

A lawyer for those net winners, Brian Neville, promised an appeal.

“We respectfully disagree with the judge, but as he noted during the oral arguments, this is a case that the Second Circuit [Court of Appeals] will ultimately rule on,” he told Bloomberg News.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.