Madoff Victims Wait for Recouped Billions

Despite Successes, Legal Tangles Prevent Payouts Anytime Soon

Tangled Web: Billions have been recovered from Bernard Madoff’s Ponzi scheme. But legal tangles mean victims won’t see cash anytime soon.
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Tangled Web: Billions have been recovered from Bernard Madoff’s Ponzi scheme. But legal tangles mean victims won’t see cash anytime soon.

By Josh Nathan-Kazis

Published July 01, 2012, issue of July 06, 2012.
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Three and a half years later, victims of Bernard Madoff’s massive financial fraud are still waiting to get back their money.

Billions already recovered are tied up in litigation, and despite recent advances, there’s no resolution in sight.

Attorneys came a few steps closer to digging out of the financial chasm Madoff left behind when, on June 25, Madoff feeder-fund manager J. Ezra Merkin agreed to pay $400 million to his former investors in a settlement with the New York State Attorney General. The same day, the U.S. Supreme Court decided not to hear an appeal challenging the way court-appointed trustee Irving Picard was disbursing other recovered Madoff funds.

The two developments should free up more money for victims. But in an illustration of the exceptional, time-consuming complexity of the case, both the settlement and the Supreme Court’s decision will take months, if not years, to put cash in victims’ pockets.

NEWS UPDATE: Peter Madoff, the younger brother of jailed Ponzi scheme operator Bernard Madoff, surrendered himself Friday morning at his lawyer’s office in midtown Manhattan ahead of an expected guilty plea to criminal charges related to the Ponzi scheme.

Picard won’t know for sure until mid-July whether the next chunk of recovered funds he returns to Madoff investors will be in the millions or the billions of dollars.

And a spokesman for Picard said that the trustee might challenge the settlement between Merkin and the attorney general, delaying the disbursement of that money.

Such protracted legal complications are not unusual in the aftermath of such a massive Ponzi scheme, according to Troy McKenzie, a professor at the New York University School of Law.

“It’s not really surprising that unraveling a very complicated fraud scheme like this has taken years,” McKenzie told the Forward. “And in particular it’s not surprising when there are sophisticated, well-heeled parties who are… ready, willing, and able to litigate vigorously to protect their interests.”

So far, Picard’s office has distributed only $334 million in recovered funds to Madoff victims, plus $801 million in advances to so-called hardship cases. Picard has recovered billions more in settlements, cash that is still tied up in appeals.


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