Madoff Investors' Won't Get Much from Asset LiquidationJan 21, 2009 | Parker Waichman LLP
Bernard Madoff's investors may not recover much money once the accused Ponzi schemer's assets are liquidated. What's more, it will likely take years before any amount of money is returned to Madoff's alleged victims.
According to the Associated Press, Madoff's clients will be lucky to get as much as 10 cents on the dollar. Madoff's businesses didn't have many assets, and the money managed by his investment advisory firm has disappeared into thin air. So it seems that any recovery would come from Madoff's personal assets - including homes in Montauk, N.Y. and Palm Beach, Fla., a penthouse in Manhattan and a handful of luxury yachts. So far, those assets have been valued at $830 million - a mere fraction of the $50 billion Madoff's investors may have lost.
It could also take as many as three years for the funds from any liquidation of Madoff's assets to be disbursed to investors. Experts told the Associated Press that Madoff could already have assets scattered around the world and therefore it might be difficult to track where all his money and wealth is being held, especially if he had been defrauding customers for decades.
In addition to the asset liquidation, some investors might be able to recover up to $500,000 each through the Securities Investor Protection Corp.(SIPC), the Associated Press said. The SIPC, which acts essentially as an insurance fund set up to help victims of securities fraud, sent out 8,000 claim forms to Madoff investors who might be eligible for recovery in early January.
According to the Associated Press, third-party investors - those whose Madoff investments were made through other entities - might not be eligible for the full SIPC benefit. Those investors could choose to sue the third party, and some hedge funds have already been named in such lawsuits.
The 70-year-old Madoff was arrested on one count of securities fraud on December 11. Madoff - once a chairman of the Nasdaq stock exchange - is the founder and primary owner of Bernard L. Madoff Investment Securities LLC. The firm is primarily known for its business in market-making, or serving as the middleman between buyers and sellers of shares. However, Madoff also oversaw an investment-advisory business that managed money for high-net-worth individuals, hedge funds and other institutions.
According to the FBI complaint against Madoff, that business was largely a Ponzi scheme. The FBI said Madoff “deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in losses of approximately billions of dollars.”
Recent reports have speculated that despite taking their money, there is no evidence Madoff's investment advisory business never made a single trade on behalf of clients.