Close to $10 billion is likely to be recovered soon for the benefit of the victims of the giant Wall Street fraud, said an attorney for the trustee handling Madoff's collapsed business empire. That could allow some investors to recover 50 percent of their investments.
"More than a probability," was how the attorney, David Sheehan, characterized for bankruptcy court Judge Burton Lifland the likelihood of the large recovery. At the moment, bankruptcy trustee Irving Picard has about $1.6 billion in hand.
Sheehan, an attorney at the firm of Baker & Hostetler, also disclosed that Picard believes the actual losses in the giant Ponzi scheme will come to between $18 billion and $20 billion. Madoff had told investors in their last account statements in November 2008 that their investments totaled $65 billion.
Legal sources said it is expected that Picard will announce settlements of claims he filed against several big Madoff investors. Among them was the late Jeffry Picower, who Picard has said in court papers took out $7 billion.
But it also became apparent during Tuesday's court hearing that the hard-fought legal battle over the tallying of customer funds may not be resolved quickly. The side that loses will likely appeal.
"It will take a while," investor attorney Jerry Reisman told Newsday later.
Sheehan and lawyers for the Securities and Exchange Commission, as well as the nonprofit Securities Investor Protection Corp. (SIPC) are taking the position that Madoff's account statements about fictional stock purchases are worthless and can't be used to determine how much customers should recover.
Instead, said Sheehan, investors who took out more money than they invested would get nothing, while those who lost the money they invested could recover up to $500,000 from SIPC and share in the assets Picard recovers.
"People would get nothing more than they put [in]. . . . How can they get more?" Sheehan said to Lifland.
But lawyers for investors such as Sterling Equities - owner of the New York Mets, which has been denied SIPC money and a share of recovered assets - insisted to Lifland that Picard is legally wrong. Customers can be paid for securities never purchased by Madoff as they expected, they said.