A Bankruptcy Judge sided with Madoff Trustee Irving Picard today and sustained his decision to deny recovery for those Madoff victims who took out more than they took in. I understand the logic, but it’s going to cause real hardship and even destitution for those people who have been living on their “investment returns” from Bernie. No easy, just answer here, I fear.
A bankruptcy judge on Monday ruled that certain investors in Bernard Madoff’s Ponzi scheme aren’t entitled to recoveries from the fraud.
The ruling, by U.S. Bankruptcy Judge Burton Lifland in Manhattan, affirmed the view of a trustee who is recovering assets for victims of the multibillion-dollar fraud, Irving Picard. Mr. Picard has said that investors who withdrew more money from Mr. Madoff’s investment firm than they put in—making them “net winners” from the fraud—shouldn’t be entitled to recovered funds.
Lawyers for the so-called net winners said they would appeal. That sets up a showdown later this year in the Second Circuit Court of Appeals. At a hearing last month, Judge Lifland said that application of a prior legal ruling cited by both sides was unclear and would need to be resolved by the higher court.
The ultimate decision will determine how the pot of money being collected in the aftermath of the fraud is divvied up. A lawyer for Mr. Picard previously said the trustee might be able to recover as much as $10 billion for investors, or about half the amount they collectively lost from the fraud, and far more than the $1.5 billion currently recovered.