Madoff fraud recovery for bilked investors tops

Madoff fraud recovery for bilked investors tops $10 billion
Irving Picard, the trustee liquidating Bernard L. Madoff’s investment firm, speaks at a news conference in 2010. Picard has surpassed $10 billion in recoveries for victims – or about 59 percent of the principal lost in the Ponzi scheme.

Irving Picard, the trustee liquidating Bernard L. Madoff’s investment firm, speaks at a news conference in 2010. Picard has surpassed $10 billion in recoveries for victims – or about 59 percent of the principal lost in the Ponzi scheme. Bloomberg

By Erik Larson

Bloomberg NEws

on November 17, 2014 - 5:58 PM


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The trustee unwinding Bernard Madoff’s defunct investment firm said he surpassed $10 billion in recoveries for victims – or about 59 percent of the principal lost in the Ponzi scheme – after reaching a deal with two offshore funds that funneled money to the fraud.

Primeo Fund and Herald Fund, both based in the Cayman Islands, agreed to pay a total of $497 million to end lawsuits over their withdrawals from Madoff’s investment advisory business, the trustee, Irving Picard, said Monday in a statement.

If the settlement is approved, the total amount recovered by Picard’s team of lawyers over the past six years will total more than $10.3 billion of the $17.5 billion lost by thousands of investors when Madoff’s scheme unraveled in December 2008.

“The prospect of amassing $10 billion in recoveries for Madoff victims was not viewed by many as a serious possibility at the start of the case,” Stephen Harbeck, president of the industry-funded Securities Investor Protection Corp., which has helped repay victims, said in an emailed statement.

The settlement is among dozens Picard has reached with feeder funds that collected cash from their own customers and then directed it to Madoff’s company to tap his steady rate of return. The stream of cash from such funds, often with a lack of due diligence, helped keep Madoff’s fraud going for years, the trustee has said.

Picard will ask a judge to approve the accord at a hearing scheduled for Dec. 17 in U.S. Bankruptcy Court in Manhattan, according to the statement.

Herald is to return $467 million it withdrew from Madoff’s firm in the six years before it collapsed and receive a $1.6 billion claim in the bankruptcy case, according to the statement.

Picard said he’ll pay Herald $258 million, based on the agreed claim, to “catch up” to the amount paid to other claim-holders. Primeo agreed to pay $29 million and forfeit its claim, Picard said.

Both of the funds are being liquidated and have victims of their own to repay, according to the filing.

Madoff’s victims, who believed their investments were used to buy securities, have been paid almost $6 billion by Picard since he started distributing the recovered funds. The last distribution was in May, for about $349 million.

SIPC, which makes advance payments of up to $500,000 each to victims of failed brokerage firms and which has worked closely with Picard, has contributed about $816.2 million to the case, according to Harbeck. More than 1,100 claims representing all Madoff victims with claims worth $925,000 or less have been completely paid off, Harbeck said.

A federal jury in Manhattan in March found five former Madoff employees guilty of aiding his fraud for decades by creating fake trading documents and account statements. They were accused of targeting thousands of retirees, wealthy investors, charities and even family and friends, and getting rich in the process. The five ex-workers are scheduled to be sentenced next month.

Madoff, 76, pleaded guilty to fraud in 2009 and is serving a 150-year sentence at a federal prison in North Carolina. At least seven other people have pleaded guilty to roles in the scheme, including his brother Peter Madoff, who is serving a 10-year term.

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