Legal•Info

Judge Upholds Trustee’s Decision for Madoff Victims

Posted: Wednesday, March 17th, 2010 at 10:07 am

A United States Bankruptcy Court Judge, Burton Lifland, has upheld an earlier ruling that says investors who were swindled by Ponzi-scheme perpetrator Bernard Madoff can claim only their initial investment, minus any withdrawals they made.

Trustee Irving Picard is the man charged with overseeing the liquidation of Madoff’s investment company, and he has previously said that investors’ claims must be based on they amount of money they invested in the firm, with any withdrawals they made over the years deducted from that amount.

Some investors, however, feel that they are owed whatever amount was in their account at the time the Madoff scandal broke, just prior to his arrest in November 2008 on charges of investment fraud. Lifland disagreed in a recent ruling, saying that only deposits and withdrawals that actually occurred without fraud can be considered. The application of this method, called the Net Investment Method, is an attempt to restore investors’ financial situation, vis-a-vis the Bernard L. Madoff Investment Securities LLC, to its original position prior to the discovery of the swindle.

Picard has begun to process claims under this method, and to make payments to investors. Yet some investors are angry that they might not receive any monies; others who withdrew profits which were in essence false may have to actually make a payment to the trustee.

The customer money held by the firm totaled over $73 billion on December 11, 2008—the day of Madoff’s arrest. Lifland has said that the net of so-called negative accounts hovers around $8 billion, with customers owing an alleged $64.8 billion.

Madoff is currently serving a 150-year prison sentence following his guilty plea and conviction in what has been called the largest Ponzi scheme in American history. His crooked dealings ruined investors, companies and charities. Despite several allegations, some dating back a decade prior to the unravelling of the scheme, the U.S. Securities and Exchange Commission did not spot the fraud—rattling consumer confidence in both the market and its regulators.

Madoff, 71, falsified accounts and instructed others at his firm to do the same, while making few actual securities trades. The Ponzi scheme played out over two decades, and five people in addition to Madoff have been criminally charged.

Legal experts expect more appeals from investors.

 

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