A federal appeals court has approved the method used by the trustee liquidating Bernard Madoff’s scandal-plagued financial firm to divide up the losses from the Ponzi scheme, wire services reported Tuesday.
The decision means court-appointed trustee Irving Picard can use the so-called “net equity” method, meaning investors’ losses will be calculated based on what they put into Madoff’s funds, minus what they withdrew.
The method may lead many investors to have much smaller losses than they thought. Sine sued to force Picard to tabulate losses based on what their statements showed at the time of Madoff’s arrest, figures that were bloated by years of fraud.
Some investors actually had gains under Picard’s calculation method, and may now be ordered to pay significant amounts.
Among the most prominent losers under the ruling are New York Mets owners Fred Wilpon and Saul Katz. Picard has claimed $300 million in fictitious profits from a group of defendants tied to Wilpon and Katz. He is also seeking $700 million in principal from Wilpon and Katz, claiming they should have known Madoff was running a fraud.
Madoff claimed to have grown investors’ money to some $60 billion, but most of that stemmed from a decades-long scheme in which he concocted phony returns.
Madoff, 73, was arrested in December 2008 and is serving a 150-year prison term.
This story "Court Backs Trustee's Method for Dividing Up Madoff Losses" was written by Forward Staff.