Madoff victims closer to getting payout
The trustee in the Bernard Madoff case expects to learn Tuesday morning if he can break out his checkbook and start distributing cash to victims of the giant Ponzi scheme.
But if all goes as expected, trustee Irving Picard will, for the moment, only be able to pay investors about 4 percent of their individual losses.
Picard is asking a federal bankruptcy judge for permission to give victims each a piece of $2.3 billion in assets he has recovered since the financial scandal exploded in December 2008. Close to 2,300 investors whose claims Picard has approved will share in the pot.
Picard has found $7.6 billion in customer funds but because of various legal challenges, including one by the owners of the New York Mets who dispute Picard's method of approving claims, the trustee has to hold back all but $2.3 billion of that amount in reserve, he said in court papers. If there were no legal challenges, Picard said victims with approved claims could recover 44 percent of their investments.
Picard said some $17.2 billion was taken in by Madoff's company from investors over at least two decades. Although Madoff, who is spending his life in federal prison, never invested customer money, his fake account statements claimed investors had holdings valued at around $57.3 billion when his Ponzi scheme unraveled in 2008.
If federal bankruptcy Judge Burton Lifland in Manhattan approves Picard's plan, checks could start going out later this summer. The payments wouldn't be the first to be received by Madoff victims. Customers with claims approved by Picard have for several months received payments of up to $500,000 from the Securities Investor Protection Corp., the nonprofit agency which advances investors money they have lost. As a result, some investors with relatively small accounts have actually recovered all of their losses. SIPC has committed $795 million for advances to investors.
Picard is locked in a number of legal battles with large investors such as the Wilpon family and their partners in the Mets. The Wilpons and other investors contend that Picard's method of calculating account equity is wrong and has improperly denied them SIPC money and a piece of the upcoming recovery. A federal appeals court will decide the issue. Picard has also sued the Wilpons to get back as much as $1 billion.
Lawyers for Picard have said their ultimate aim is to recover through clawback lawsuits and settlements enough money to pay back investors close to all of their losses.