News About Banking Industry

Court approves $1.18B distribution for Madoff victims

A federal bankruptcy court on Wednesday approved plans to distribute $1.18 billion to investors burned by Bernard Madoff’s infamous Ponzi scheme. The action by the Manhattan-based court means the money is available for immediate distribution to customers whose repayment claims have been allowed by Irving Picard, the trustee seeking recovery of Madoff-linked assets. The distribution, the sixth so far stemming from the estimated $20 billion investment fraud, is expected to start before the end of December, said Amanda Remus, a Picard spokeswoman.

An additional $320 million will be held in reserve for Madoff victim claims currently involved in litigation or still pending for other issues. In all, the distribution will bring the amount paid to former Madoff customers to approximately $9.13 billion — nearly 57% of the losses documented by victims who entrusted their investments to the disgraced financier.

Former customers who invested up to $1,161,000 with Madoff will “be made completely whole,” while those who invested more ultimately will get back 61 cents for each $1, Stephen Harbeck, president and CEO of the Securities Investor Protection Corp., said in October. Picard and his staff have recovered or entered agreements to recover more than $10.9 billion to date.

Madoff’s decades-long scam, among history’s largest, involved using money from new investment clients to pay earlier customers. He never conducted any of the securities trades he promised. Instead, much of the money funded lives of luxury for Madoff, some of his favored investors and a group of the scam architect’s employees.

The scheme imploded in December 2008 as investors sought their investments back during the financial crisis. The collapse devastated thousands of average investors, charities, celebrities and other Madoff clients worldwide. The Ponzi scheme architect pleaded guilty the following year without standing trial. He’s now serving a 150-year federal prison sentence.