Reuters reports there are more than 51,700 claims to recover more than $40 billion from Bernard Madoff’s Ponzi scheme. The Madoff Victim Fund has been created to compensate victims, but the number of claimants has surprised U.S. officials.
According to Richard Breeden, appointed by the U.S. Department of Justice, the Madoff Victim Fund, which now totals $4.05 billion, will be distributed to investors who have lost millions of dollars due to Madoff’s fraudulent activities.
The claimants, who are from over 119 countries, including Kazakhstan, Madagascar and Vietnam, may not all be legitimate. In fact, Breeden acknowledged many of the claims would eventually be determined ineligible, duplicative or inflated. Breeden also said there has been no decision about when the compensation funds will be distributed.
“The volume was surprisingly large,” Breeden, a former chairman of the U.S. Securities and Exchange Commission, said, “The fact we have victims in 119 countries makes this a very unique process. I can’t think of any situation where there has been such a widespread distribution of a fraud.”
Indirect investors also file claims against Madoff Victim Fund
In the second wave of compensation efforts, indirect investors have been allowed to try to recover their losses. According to Reuters, however, “Irving Picard, a court-appointed bankruptcy trustee winding down Bernard L. Madoff Investment Securities LLC, has allowed only direct investors to recover.”
Through the bankruptcy process Picard was able to recover close to $10 billion and distributed nearly $6 billion of it to an estimated 2,518 of the 16,519 claims he received. This recovery was estimated to be roughly 56 percent of the $17.5 billion in principal that was lost by those who claimed they were Madoff’s victims.
Fifty-eight percent of the lost claims were submitted by United States citizens. Another thirty-eight percent were from other claimants in other countries. Many of the claimants lost less than $500,000. Breeden is reviewing each claim individually and hopes that he will be able to repay more victims than Picard was able to pay through the bankruptcy process.
Many of Breeden’s claimants did not file bankruptcy claims and 36,000 failed to recoup any of their investments. So far an estimated 43,500 claims have been filed ahead of an April 30 deadline.
“Our first distribution will go to people who have recovered very little or nothing,” he said. “Our message is, there is hope here. Help is coming, if you meet the eligibility standards.”
Where did the compensation fund come from?
The victims would have recovered very little if it had not been from money paid by JPMorgan Chase & Co, which was Madoff’s bank for two decades. Experts note that more than $1.7 billion of Breeden’s fund came from the bank and another $2.2 billion came of the estate of Jeffry Picower, a Florida investor who benefited from Madoff’s scheme. Picower also paid Picard money for the bankruptcy settlement.
Bernard Madoff pled guilty in 2008 for his crimes and is currently serving a 150 year prison term.
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