For Madoff’s Victims, Here’s a Guide to the Complex World of Legal Restitution

By Alison Cies and Nathaniel Popper

Published July 01, 2009, issue of July 10, 2009.

Now that Bernard L. Madoff’s fate has been sealed by a 150 year-long prison sentence, many victims are shifting their focus to the issue of recouping some part of their finan-cial loss. What follows is a list of the different avenues through which victims of the fraud, including individuals, charities, and universities, may win back some of their money — a seemingly complex process that already has many people shaking their heads in dismay.

Those seeking to recoup money fall into two categories — those who invested directly with Madoff and those who invested in his scheme through an intermediary, such as J. Ezra Merkin, the philanthropist and investment advisor who funneled money from many Jewish non-profits into Madoff’s Ponzi scheme.

For the direct investors, the most high-profile chance for some restitution will come from the trustee overseeing the bankruptcy of Madoff’s estate, Irving Picard, who is tasked with doing everything in his power to gather up Madoff’s ill-gained assets — suing, settling, and even seizing yachts and jewelry owned by the Madoff family. In January, Picard notified 8,000 investors who may be eligible to receive some of the proceeds. Direct investors may also be able to receive up to $500,000 from an insurance fund run by the Securities Investor Protection Corporation (SIPC), which has already begun making payouts to destitute investors.


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For those investors, such as Yeshiva University, who went through an intermediary, the benefits from Picard and SIPC are far more limited. The best hope for these victims lies in the courts. Some indirect investors are bringing their own lawsuits against individuals like Merkin, and a number of class-action lawsuits and suits are being brought by public bodies, such as the New York Attorney General, Andrew Cuomo. Cuomo recently announced plans to sell Merkin’s art collection, and some of the proceeds will be given to victims.

Sally Blinken, who worked in the New York Attorney General’s office, said that lawsuits are a risky undertaking because they have to meet a high standard of proof to win in the courts — and even then, the suits could go on for years.

“It could take a long, long time to recoup money,” Blinken said.



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