The trustee seeking to recover money for investors who lost money in Bernard Madoff’s Ponzi scheme said that payouts for victims had been delayed by litigation, but said he hoped to begin distributing some of the money to victims before the end of the year.
Irving Picard confirmed that he has so far recovered $2.6 billion of cash and equivalents for victims adding that he was “moving forward” in collecting more. Speaking to reporters on a conference call, Mr Picard said that although a court had approved the recovery a further $7.2 billion from the estate of the late investor and philanthropist Jeffry Picower, the settlement is being delayed by a legal challenge by two Madoff investors.
“While we hope to initiate distributions in the near future, it will take some time to distribute all the funds,” in part because of litigation, Mr Picard said. “We anticipate that our position will ultimately prevail”.
He added that he was also awaiting the result of an appeal by a group of Madoff investors who are contesting his way of calculating their losses.
Mr Picard’s view is that investors should be able initially to recover only the amount of money they put into Madoff’s scheme, and cannot make claims based brokerage statements supplied by Madoff because those numbers were merely made up by Madoff.
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Investors who withdrew money from Madoff, whom he described as ‘net winners’, had no claim, whereas the, ‘net losers’ who invested more with Madoff than they withdrew, did.
“Those who didn’t get their money back are entitled to get it from those who have it,” he said because any withdrawal made from investments with Madoff that were over the original amount invested represented “a transfer from others’ accounts.”
The outcome of this appeal will decide which Madoff investors can collect up to $500,000 each from the Securities Investor Protection Corporation (SIPC), an industry fund that compensates investors in failed brokerages, and how to divide up the money recovered from ‘net winners’.
The SIPC had already paid out more than $700 million to Madoff claimants with eligible claims based on lost principal, Mr Picard said.
Mr Picard also told reporters that he has filed more than 1,000 lawsuits in 30 countries to recover a further $100 billion. His fees and those of his team had so far come to around $200 million.
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He added that contrary to Madoff’s own claims that his crimes began in the 1990s, the fraudster had never invested any of the money he collected from investors.
David Sheehan, the trustee’s general counsel, said members of Mr Picard’s team met Madoff in prison. The fraudster was a “confirming source” for much of the information they had themselves gleaned about the Ponzi scheme through their own investigations.
But he too questioned Madoff’s assertions that the fraud began in the 1990s. “We are very comfortable that this fraud began as early as 1983,” he said.