Madoff Investors' Group Questions Clawback Suits

Dec 8 2010 | 6:17pm ET

The Network for Investor Action and Protection, a group set up to assist victims of Bernard Madoff’s Ponzi scheme, is questioning some of the latest suits filed by the trustee overseeing the liquidation of Madoff’s investment business.

NIAP President Ron Stein has written the Securities Investor Protection Corporation and Iriving Picard, the trustee in question, to explain why “innocent” investors are being targeted with clawback actions.

Picard has filed hundreds of suits in recent weeks, many of them against what he has termed the “net winners” in the Ponzi scheme i.e. investors who withdrew more than they invested. Picard doesn’t claim these investors knew about the fraud, simply that they should return their profits to help reduce the losses of other victims.

Picard has approved 15,491 investor claims for a total of $5.8 billion. The lawsuits filed to date are for more than $32 billion. Stein wants to know what will be done with money over and above the $5.8 billion needed by the SIPC to satisfy claims.

“The Trustee has said he must sue investors to recover monies to give to so-called net losers,” said Stein. “Having already sued guilty parties for over $32 billion to cover only $5.8 billion in claims, why is it necessary to also sue innocent people, who often are aged, many who are suffering tremendous economic stress and emotional distress, and cannot even afford lawyers?”

Picard’s findings suggest the total lost to Madoff’s scheme was just under $20 billion. Picard’s law firm has said any funds recovered by the trustee will be distributed to investors based on the size of their claims. Next, the trustee will settle the $1.7 billion owed to non-investor creditors (including $250 million in fees to the SIPC, which has paid to retain Picard and other professionals trying to recover investor money).

It has been suggested that anything left over could be distributed to Madoff investors as profit, but SIPC President Stephen Harbeck told Time magazine this week that the chances of Picard recovering that much money were slim.

"There is a big difference between filing a suit, winning a suit and being able to collect on that suit," said Harbeck.


In Depth

Don’t Overlook These 6 Hybrid Cloud Concerns

Sep 14 2017 | 6:27pm ET

Cloud-based technology solutions have made tremendous inroads into the alternative...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Cash: An Asset In Adolescence

Aug 31 2017 | 3:34pm ET

If the investment industry has a rebellious teenager in the house today, that teenager...

 

From the current issue of