NEW YORK-Investigators have jumped a major hurdle in recouping the money stolen by Ponzi mastermind Bernard Madoff. In squeezing out the largest forfeiture settlement in US history, the government is about halfway done recovering the stolen assets of history's largest Ponzi scheme. Preet Bharara, US Attorney for the Southern District of New York, Irving Picard, the court-appointed trustee in the asset recovery process, and other federal investigators reached a $7.2 billion settlement with the widow of Jeffry Picower, Madoff's biggest beneficiary. Picower, who died of a heart attack last year, withdrew $7.8 billion from Madoff's investment firm since the 1970s, even though he only deposited $619 million, according to the trustee. The feds went after Picower's widow, Barbara, for $7.2 billion. The settlement, combined with the $2.6 billion that was already recovered from other sources, means that investigators are nearly halfway to recovering $20 billion in stolen assets.
The investigators have been busy in the two years since Madoff's arrest, scouring the earth for his assets, including his $7 million Manhattan penthouse, his homes in France and Florida, his yacht named The Bull, and his gem-studded watches. The US Marshals have put many of the items on the auction block. All of this has added up to billions of dollars that will be used to compensate the victims. The trustee has acknowledged nearly $5.9 billion worth of claims from 2,363 claimants. A portion of that money -$768 million-will be covered by insurance from the Securities Investor Protection Corp. The rest of it will be covered by seized assets. The majority of the $20 billion in losses has not yet been recognised by the trustee. According to SIPC President Stephen Harbeck, most of those outstanding losses were suffered by hedge funds that withdrew money they had invested with Madoff's firm. The losses will not be recognised until they pay back the money they withdrew, he said. Madoff ruined thousands, including his son. Picard aggressively ramped up litigation in recent weeks, filing lawsuits against the Madoff family members for tens of millions of dollars, including Madoff's son Mark, who killed himself last week on the second anniversary of his father's arrest.
The trustee has also sued at least 400 investors who, like Picower, withdrew more than they deposited into Madoff's firm. But unlike Picower, some of those investors wound up destitute once the firm collapsed at the end of 2008. With the understanding that many of the investors did not know they were benefiting from a Ponzi scheme, the trustee said he might drop some of the suits in "hardship" cases. Madoff was able to fool feeder funds and individuals by masquerading as a Wall Street wizard, even though his investment firm was nothing more than a front for a pyramid-style scam. Instead of investing the money, he stole it. In order to keep this going, he needed a constant stream of fresh victims so he could make payments to more mature investors, while fraudulently presenting these payments as legitimate returns. Eventually, the funds dried up and his scam collapsed. Madoff was arrested on December 12, 2008, and pleaded guilty the following March. He is currently languishing in a medium security federal prison in Butner, NC, where he is serving a 150-year sentence.
(CNNMoney.com)