Madoff Recovery Questions Answered
How big is the Bernard Madoff scandal?
The Madoff fraud is being called the largest financial fraud in U.S. history. Following Bernard (Bernie) Madoff’s arrest on Dec. 11, authorities estimate that the scale of the alleged scam could be as much as $50 billion, with 4,000 or more investors suffering extraordinary financial losses. Among those investors: ordinary citizens, charities, foundations, pension funds, municipalities, college trusts, senators, wealthy celebrities, hedge funds, universities and global banks, even Madoff’s own sister.
At the time of his arrest on Dec. 11, investigators discovered more than 100 signed checks worth $173 million in Madoff’s office that he was ready to distribute to family members and friends.
How did Madoff operate his scam?
Madoff conducted what is known as a “Ponzi” scheme. Named after Charles K. Ponzi who used the technique after arriving in the United State in 1903, a Ponzi scheme entails paying early investors with proceeds from those who enter the the investment scheme later on. A Ponzi scheme is similar to a Pyramid scheme.
Madoff conducted his Ponzi scheme through his investment-advising business, Bernard L. Madoff Investment Securities LLC.
Why wasn’t Madoff caught earlier by authorities?
A number of factors apparently were at play that allowed Madoff to remain under the radar for so many years. First, Madoff himself was an extremely savvy financial money manager. As the former president of NASDAQ, he was highly respected on Wall Street and in financial circles. His clients were equally influential, and included the Who’s Who of the wealthy, cultural organizations, higher education institutions, charities and global financial services firms, among others.
Second, Madoff alone oversaw the accounting of his investment advisory business. There was no third-party oversight whatsoever.
Did any red flags exist regarding Madoff’s scam before his arrest on Dec. 11?
Unfortunately, signs of Madoff’s deceit may go back as far as the 1970s, when charges of misconduct were brought against the disgraced money manager. In terms of the $50 billion Ponzi scheme, several Wall Street whistleblowers made reports in 1992 and 1999 to the Securities and Exchange Commission (SEC) about Madoff and his operation of what they called a “modern-day Ponzi scheme.”
Publication articles, including a 2001 story in Barrons’ magazine, also openly questioned as to how Madoff could produce such consistent high returns for investors when no other brokers seemingly could.
Can investors who lost money with Madoff recover anything?
Despite Madoff’s claims of financial insolvency, Irving Picard, the court-appointed trustee charged with liquidating Madoff’s assets, numerous individual attorneys, and the SEC all believe investors will be able to recover some of their lost funds.
If you invested money with Madoff, you can call a special FBI hotline at 212-384-2359. Investors also can contact the Securities Investor Protection Corporation (SIPC) at 888-727-8695.
In addition, the SEC provides regular updates regarding Madoff on its Web site at http://www.sec.gov/.
Where can I find additional information about investor recovery?
Our Web site, www.subprimelosses.com, offers a comprehensive library of articles on the Madoff case, as well as information on other investment-related issues.
If I decide to take legal action, what is the cost to file a suit?
First and foremost, our team of lawyers will work with you to review your situation. You are not responsible for any fees or expenses unless a recovery is obtained. To review your case, call us at 866-827-6537.
Are there other avenues for recovery?
The Securities Investor Protection Corporation (SIPC) serves as the FDIC of brokerage and investment firms in the United States. In the event a brokerage firm fails, this is an investor’s first line of defense to retrieve money missing from his or her account.
In the Madoff case, the SIPC may pay up to $500,000 to individuals who invested directly with Madoff. Indirect investors – those who invested in so-called feeder funds that then funneled money to Madoff’s funds – also can file claims with SIPC.
However, the reserve funds held by SIPC can in no way cover the entire $50 billion that investors allegedly lost in the Madoff scam. The SIPC’s fund, which is supported by broker-dealer assessment fees, currently has a balance of $1.6 billion.
The trustee handling the liquidation of Madoff’s business also has identified more than $830 million in liquid assets that may be subject to recovery.
Where is Madoff today?
Madoff remains free on a $10 million bond. On Jan. 13, United States Magistrate Judge Ronald L. Ellis ruled Madoff to be confined to his Manhattan penthouse with an electronic ankle bracelet and 24-hour monitoring. In addition, the judge ordered searches of Madoff’s outgoing mail. Prosecutors in the case continue to argue that Madoff’s bail should be revoked because Madoff violated previous restrictions when he sent more than $1 million worth of jewelry as gifts to friends and family over the holidays.
Madoff has yet to enter a plea in the case. Both the New York Times and the Wall Street Journal have suggested that Madoff’s lawyers are actively negotiating a plea agreement that could result in the case never going to trial.