Parker Waichman LLP

Madoff Investors Face Long Road to Recovery

They seek to recover any of their squandered funds. Victims of Bernard Madoff’s alleged investment fraud will face a herculean task if they seek to recover any of their squandered funds. In order to have any chance of recovery, investors will have to pursue a variety of avenues, including lawsuits against investment funds that placed […]

Madoff Investors Face Long Road to Recovery

They seek to recover any of their squandered funds. Victims of Bernard Madoff’s alleged investment fraud will face a herculean task if they seek to recover any of their squandered funds. In order to have any chance of recovery, investors will have to pursue a variety of avenues, including lawsuits against investment funds that placed client money with Madoff. But it could be years before the victims of Madoff’s alleged Ponzi scheme have a cent returned to them.

Madoff’s investors did receive a bit of good news earlier this week. According to the Associate Press, on Monday, a federal judge signed an order allowing clients of Madoff’s private investment business to seek relief under a federal statute created to rescue cheated investors. The order was signed after the Securities Investor Protection Corporation (SIPC) asked that steps be taken to protect investors in the scheme, the Associated Press said.

Congress created the SIPC in 1970 to protect investors when a brokerage firm fails and cash and securities are missing from accounts. Funds can be used to satisfy the remaining claims of each customer up to a maximum of $500,000.

The judge also ordered that Madoff’s business be liquidated under the jurisdiction of a bankruptcy court and assigned a trustee to oversee that process, the Associated Press said.

A Grasp on Madoff’s Records.

But according to a report on Law360.com, the SIPC will face a challenge just getting a grasp on Madoff’s records. Most likely, he kept more than set of books to hide his alleged scheme.

“It is unlikely that SIPC and the trustee will be able to transfer the customer accounts of the firm to a solvent brokerage firm,” SIPC President and CEO Stephen Harbeck said in a statement released Monday. “The state of the firm’s records may preclude a transfer of customer accounts. Also, because the size of the misappropriation has not yet been established, it is impossible to determine each customer’s pro rata share of ‘customer property.'”

According to Law360.com, Harbeck estimates it will take at least six months for the SIPC to sort out Madoff’s firm’s finances. Once that happens, a trustee will have the enormous task of determining investor reimbursement using a pro rata formula.

Some investors – and in fact, many already have – may choose to pursue their own lawsuits. The fact that Madoff’s firm is now in bankruptcy proceedings precludes such claims against the firm itself, but others could be held responsible for investor losses.

That includes other funds that invested with Madoff. One attorney already involved in such litigation told Law360 that Madoff’s failure to provide audited financial statements and other materials should have raised alarms with any firm investing with him. As such, the outside firms could be culpable for money their clients lost.

Need Legal Help Regarding Madoff Investors squandered funds?

The personal injury attorneys at Parker Waichman LLP offer free, no-obligation case evaluations.
For more information, fill out our online contact form or call 1-800-YOURLAWYER (1-800-968-7529).

 

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