The court-appointed bankruptcy trustee for Bernard Madoff's massive Ponzi scheme is seeking to make a sixth distribution to Madoff's defrauded victims that, if approved, would fully repay victims with losses of $1.1 million or less. Trustee Irving Picard has scheduled a hearing for November 18, 2015 over whether his proposal to make a collective distribution of approximately $1.5 billion may move forward. Combined with the up-to-$500,000 distribution each victim received as a result of Madoff's membership in the Securities Industry Protection Corporation ("SIPC"), the distribution will effectively fully repay all victims with losses of $1,161,193.87 or less - an unprecedented outcome for the largest Ponzi scheme in history.
Picard's filing comes two weeks after the U.S. Supreme Court rejected an appeal by certain Madoff victims who argued that they were entitled to an upward adjustment on their allowed claim to account for interest and/or inflation. That decision freed up approximately $1.25 billion that had been held in reserve pending the outcome of the appeal, as well as an additional nearly $350 million that included nearly $270 million in recent recoveries from clawback actions.
In his proposed sixth distribution, Picard seeks to make an average payment of $1.11 million on 1,063 allowed victim claims. This average claim amount is significantly higher than the average distribution of $330,000 in the previous distribution made earlier this year. While 2,564 claims were ultimately approved out of the over-16,500 claims submitted for consideration, 1,160 of those allowed claims were previously paid in full by virtue of previous distributions and the initial SIPC advance of up to $500,000. The latest distribution, if approved, will also fully repay an additional 104 claimants, bringing the number of fully repaid claims to 1,264. Including the proposed distribution, Picard will have distributed more than $8.3 billion to victims - or 56.988% of each victim's allowed claim (not accounting for the SIPC advance).
As the seven-year anniversary approaches of the date the world learned of Madoff's massive Ponzi scheme, it is becoming increasingly possible that all victims could recover 100% of their allowed losses from various sources - 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 nearly $11 billion out of the estimated $17.8 billion in principal lost by Madoff's victims. Additionally, government forfeiture and recovery efforts have secured 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. In December 2008 and the subsequent months, such a scenario seemed nothing more than a fantasy.
A copy of Picard's notice of hearing and supplemental filing is below: