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Bankruptcy Judge Rules on Interest for Madoff Victims

Posted: Friday, September 13th, 2013 at 6:48 am

A judge from the US Bankruptcy Court for the Southern District of New York has decided that the people who were swindled by Bernie Madoff will only be able to recoup their principle investments from the Madoff Ponzi scheme. Defrauded investors are only entitled to their original investments under the Securities Investors Protection ACT, and their returned funds will also not account for inflation. Although the victims of the Ponzi scheme will take a loss on their initial investments due to inflation, the reality is that their losses are much smaller than what they could have been. One of the main objections to the ruling has been that it favors people who got into Madoff’s investment scheme at a later date. Early investors will actually lose more money because their investments will be more susceptible to losses due to inflation. The court responded by saying any kind of real resolution for the victims of the Ponzi scheme will lead to some parties benefiting more than others.

It is believed that Madoff defrauded his investors to the tune of $65 billion. Although the SEC was warned about the problem on more than one occasion, a federal appeals court decided that the Securities and Exchange Commission would not be charged with negligence for not putting a stop to the Ponzi scheme at an earlier date. Although the signs of the Ponzi scheme seem rather obvious after the fact, the reality is that Madoff had a pristine reputation in the eyes of Wall Street and Washington while he was running the Ponzi scheme. Large banks such as JPMorgan Chase and HSBC have also had suits filed against them in related to the Ponzi scheme. Madoff is schedule to spend 150 years in jail due to his crimes, although it is likely that he will only spend a fraction of that time in jail due to his old age. He pleaded guilty to 11 different charges related to his defrauding of investors back in March of 2009.

 

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