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Madoff trustee seeks more money for Ponzi scheme victims

Bernard Madoff leaves court after a hearing regarding

Bernard Madoff leaves court after a hearing regarding his bail on Jan. 14, 2009, in New York. Credit: Getty Images

The trustee who has been recovering assets in the massive Bernard Madoff Ponzi scheme wants to give an additional $247 million back to victims, a distribution that would raise the amount of funds returned to investors to $9.45 billion, according to legal papers filed Thursday in federal bankruptcy court in Manhattan.

Irving Picard, whose legal team has been working since December 2008 in a worldwide search for customer funds, said that the latest distribution, if approved by the court, would be the seventh he has made in the $17.4 billion scam. Picard has recovered more than $11 billion.

The funds are being returned to 2,597 customers who have approved claims. Thousands of other investors have had their claims denied by Picard, either because they received from Madoff more money than they invested with him or because they indirectly invested through various hedge funds.

The largest disbursement since Picard began returning money in October 2011 was the nearly $5 billion distributed in September 2012. If the latest planned distribution is made it would increase the total returned to investors to 58.23 percent of their losses.

“The victims have waited years for restitution,” Picard said in a statement. “This distribution is somewhat smaller than our prior actions, but is still significant, especially for the additional claimants whose claims now will be fully satisfied.”

Customers have also separately received $836 million in advances from the Securities Investor Protection Corp., the nonprofit organization which essentially acts as a form of insurance for brokerage customers.

The 58 percent recovery level is mixed news for the owners of the New York Mets. In settling a lawsuit with Picard in 2012, the partnership involving Fred Wilpon and Saul Katz owed the trustee $162 million but get a bookkeeping credit each time Picard makes payments to investors. The group gets a credit because they were also owed over $178 million from losses in some its Madoff accounts.

So far, based on all payouts to investors, the Katz-Wilpon group has been credited with over $94 million, making a substantial dent in the debt. However, under the settlement and its intricate math the group would be obligated to start paying back Picard by June 1 any shortfall if total repayments by the trustee to customers do not reach 92 percent, less any later recoveries. That repayment schedule could in theory be renegotiated with court approval.

Madoff is serving a 150-year sentence in federal prison after he plead guilty to committing the fraud in 2009. A number of Madoff’s staffers who were found guilty of involvement in his scheme after his trial also were hit with prison sentences.

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