In the eight years since Madoff’s arrest, a series of recent court decisions have favored investors who profited from the scam, dashing the hopes of trustee Irving Picard to return more to Madoff’s victims who lost $17.5 billion in principal, legal experts say, Bloomberg News reported today. At the core of the disputes is how far Picard can go to make the Ponzi scheme’s investors whole. “The rulings all lower the risk associated with investing in something that might be a Ponzi scheme,” said Anthony Casey, a University of Chicago law school professor. “The courts weren’t necessarily being lenient to the big institutions. It just happens to help the wealthier investors.” While Picard and his team of New York-based lawyers have recovered about 65 cents on the dollar — more than anticipated after the collapse of the biggest Ponzi scheme in U.S. history — the rulings took billions of dollars off the table and now make a 100 percent return seem impossible. Madoff customers who invested through offshore-feeder funds — and whose profits were transferred to an overseas account before the scam collapsed — didn’t need to return them, U.S. Bankruptcy Judge Stuart Bernstein in Manhattan ruled in November. Their cash should stay out of reach in deference to local jurisdictions, Judge Bernstein ruled, meaning victims must turn to non-U.S. courts to recover funds. The ruling, which may be appealed, rejected the trustee’s claim that investors, including many American citizens, should be subject to U.S. law because they knew their money was going to be invested with Madoff’s New York-based company. Read more.
For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case.
