The court-appointed trustee overseeing the liquidation of Bernard Madoff's defunct brokerage firm has sought court approval to make a fifth distribution of over $300 million to victims of Madoff's massive Ponzi scheme - a distribution that will fully compensate victims with approved claims totaling $963,500 or less. Irving Picard, the court-appointed trustee, filed a motion seeking to return approximately $322 million to Madoff victims. If approved, the distribution would bring the total amount returned to Madoff victims to $7.2 billion.
Through the claims process overseen by the Bankruptcy Court, Mr. Picard has allowed 2,547 claims related to 2,213 accounts with Madoff's brokerage firm, Bernard L. Madoff Investment Securities LLC ("BLMIS"). Because of BLMIS's membership in the Securities Investor Protection Corporation ("SIPC"), an industry-funded insurance program, each of these claims initially received up to $500,000 of insurance coverage. Following the approval of the contemplated fifth distribution, 1,154 allowed claims will have been fully satisfied (by virtue of the SIPC advances) - including any customer claim of $963,500 or less. Without factoring in the SIPC contributions, the distribution represents a cumulative return to victims of 48.546% of allowed claims, which is one of the highest recoveries on record. (For a list of the highest recoveries, click here). The amount of the distributions range from a low of $390.96 to the largest distribution of $60,873,991.23.
As distributions continue to Madoff's victims more than six years after the world learned of his massive Ponzi scheme, it is becoming increasingly possible that all victims could recover 100% of their allowed losses - a feat that has happened only twice in recent memory and certainly not in the magnitude of Madoff's scheme. To date, Picard and his team have recovered approximately $10.5 billion of out of the estimated $17.8 billion in principal lost by Madoff's victims. Additionally, government forfeiture and recovery efforts have snared an additional approximately $4 billion that is being separately administered by a special master. These funds are not subject to diminution to satisfy the vast amounts of legal and professional fees incurred by Picard and his team, as these fees are covered by SIPC. Thus, coupled with the advance made by SIPC, it is entirely possible (and increasingly likely) that Madoff's victims will recover most, if not all, of their losses. Six years ago, such a scenario seemed nothing more than a fantasy.