Digital Assets Report

Newsletter

Like this article?

Sign up to our free newsletter

Madoff trustee requests allocation of USD342m to customer fund

Related Topics

Irving H Picard, Securities Investor Protection Act (SIPA) trustee for the liquidation of Bernard L Madoff Investment Securities (BLMIS), has filed a court motion seeking approval for an allocation of recoveries to the BLMIS Customer Fund.

He is also seeking authorisation for an eighth pro rata interim distribution from the Customer Fund to BLMIS customers with allowed claims.
 
A hearing has been scheduled for 12 January 2017 at 10am EST.
 
The eighth pro rata interim distribution approval filing arrives on the eve of the eighth anniversary of the District Court’s 2008 appointments of Picard and BakerHostetler as SIPA trustee and counsel, respectively, for the Madoff liquidation. Their appointments followed the revelation of Madoff’s decades-long fraud in which more than USD17.5 billion was stolen from Madoff’s customers in the largest Ponzi scheme in history.
 
Plans for the eighth pro rata interim distribution are the result of settlements and recoveries achieved by the SIPA trustee, his chief counsel David J Sheehan, and their legal teams during the second half of 2016.
 
The most notable was the universal recovery agreement of approximately USD277 million – made in cooperation with the California Attorney General – that ended litigation against the Estate of Stanley Chais and other Chais-related defendants. The BLMIS Customer Fund benefited by approximately USD234 million after court approval of the settlement on 19 November 2016.
 
With this and other additional settlement outcomes, the SIPA trustee stands ready to make an eighth pro rata interim distribution to allowed claimants of 1.729 per cent on each allowed claim.
 
If the distribution motion is approved on 12 January 2017, the SIPA Trustee will allocate a total of approximately USD342 million to the BLMIS Customer Fund, with approximately USD252 million available for immediate distribution to customers with allowed claims and approximately USD90.7 million held in reserve for claims that are deemed determined pending the resolution of litigation, as well as other issues.
 
This eighth pro rata interim distribution, when combined with the prior seven distributions, will equal 60.098 per cent of each customer’s allowed claim amount, unless that claim has been fully satisfied. The amount distributed to eligible BLMIS customers will total approximately USD9.72 billion, which includes more than USD839.6 million in advances committed by the Securities Investor Protection Corporation (SIPC).
 
Stephen P Harbeck, president and CEO of SIPC, says: “The eighth distribution is the latest positive outcome of the excellent work done by SIPA trustee Picard and his counsel on this SIPA liquidation. The settlement of major litigation prior to trial makes this expedited payment possible. I also want to emphasise that none of the money recovered in these settlements is used to pay administrative costs. All trustee, legal and accounting fees, as well as administrative expenses, are paid by SIPC in the Madoff case. My hope today is that future recoveries will result in additional distributions to Madoff’s victims as soon as possible.”
 
Picard adds: “For those who find the annual December anniversary of Madoff’s arrest difficult, we hope the recoveries that have resulted in eight distributions so far have been helpful. I am proud of our team’s accomplishments and I am gratified that many of Madoff’s victims have gotten back more of their principal investment than they ever expected to recover.”
 
Sheehan says: “The Madoff Recovery Initiative continues to defy expectations. With each distribution, the SIPA trustee continues to beat the odds and deliver record-breaking results which benefit the defrauded victims of Madoff’s decades-long Ponzi scheme. Our ongoing focus is never on past recoveries, but always on future ones that will lead to further distributions to victims at the earliest possible opportunity.”
 
To date, the SIPA trustee has allowed 2,608 claims related to 2,255 accounts and the proposed distribution will be paid on claims related to 953 accounts. If the eighth pro rata interim distribution is approved by the Bankruptcy Court, when combined with SIPC advances and the amounts from the prior seven pro rata interim distributions, 1,333 accounts will be fully satisfied (all accounts with allowed claims of up to USD1,253,018.77), leaving 922 accounts partially satisfied and entitled to participate in future distributions.
 
The eighth pro rata interim distribution will result in the return of 1.729 per cent of the allowed claim amount for each individual account, unless the allowed claim has been fully satisfied. The average payment amount to those 953 BLMIS accounts will be USD263,998.40. The smallest payment totals USD271.80 and the largest payment is USD42,320,519.04.
 
As of 14 December 2016 and since his appointment on 15 December 2008, the SIPA trustee has recovered or reached agreements to recover approximately USD11.486 billion. These outcomes exceed similar efforts related to prior Ponzi scheme recoveries, in terms of dollars and percentage of stolen funds recovered.

Like this article? Sign up to our free newsletter

FEATURED

MOST RECENT

FURTHER READING