The U.S. Supreme Court Monday put out of reach billions that could have been used to pay victims of Bernard Madoff when it refused to hear an appeal of a lower-court ruling against the trustee searching for assets in the giant Ponzi scheme.
Without comment, the high court turned down a request by bankruptcy trustee Irving Picard to hear his challenge to a Second Circuit Court of Appeals ruling last year. The appeals court said Picard couldn't pursue certain common law claims against several banks he alleged helped the fraud. The appellate court said Picard didn't have standing to bring such claims.
But while the Supreme Court rejection scuttled Picard's efforts to seek what one legal source estimated as $7.7 billion in damages, a spokeswoman for the trustee said he is still able to pursue $3.5 billion in claims against some of the banks in bankruptcy court.
"We continue to move forward with the . . . Trustee's bankruptcy claims of approximately $3.5 billion, which remain active against these international financial institution defendants -- including, but not limited to, UBS and HSBC -- that facilitated Madoff's fraud," said Picard spokeswoman Amanda Remus. USB and HSBC have continually denied any wrongdoing in the Madoff case.
So far Picard has recovered about $9.8 billion through lawsuits and settlements that he will use to pay back Madoff clients with approved claims in the $17 billion fraud. Picard has made four distributions to those customers totaling $5.2 billion. A separately administered federal government fund of $4 billion will also eventually pay customers.
It is unclear just how much more money might be in Picard's sights. He is currently pursuing civil racketeering claims against some banks but those cases, which could potentially amount to billions of dollars more in recoveries, are on hold, said a legal source familiar with the matter.
Madoff's scheme, the biggest in Wall Street history, came to light in December 2008 when he admitted to the FBI that his business was a giant fraud. Madoff was promptly arrested, pleaded guilty and sentenced in June 2009 to 150 years in prison. His theft decimated the savings and wealth of thousands of customers who invested directly with him, as well as those who put their money in feeder funds which then invested with Madoff.