A federal bankruptcy court has approved plans to issue $1.18B to investors who lost money in Bernard Madoff’s multibillion-dollar Ponzi scam. This means that immediate distribution of the funds can take place to those whose claims for repayment have been approved by Madoff trustee Irving Picard.
This is the sixth distribution to date in the over $20B investment fraud run by Madoff, who is spending the rest of his life behind bars for his crimes. This latest round will bring the amount paid to his victims to about $91.13B. Another $320M is being held for investors whose claims are still pending or in litigation.
According to Securities Investor Protection Corp CEO Stephen Harbeck, ex-Madoff customers who invested up to $1.16M will get all of their lost funds back while those who invested more will get about 61 cents for every dollar.
Madoff, who ran his Ponzi scam for decades, used new investors’ money to pay earlier investors. He never conducted any securities trades but instead used a lot of the money to fund his lavish lifestyle. It wasn’t until 2008 that the scheme was uncovered. Thousands of retail investors, charities, celebrities, and others were among those who suffered devastating losses.
In other Madoff Ponzi scam-related news, a Washington State jury ruled that Ernst & Young is guilty of negligence because of the way it audited a feeder fund that sent money to Madoff’s company. The fund was overseen by FutureSelect Portfolio Management.
Ernst & Young audited for funds run by Rye Investment Management, which is a Tremont Group Holdings Inc. unit, and FutureSelect sued Ernst & Young in 2010 after losing over $195M in the Madoff Ponzi scam because it had invested in the Rye funds. Tremont, which is an OppenheimerFunds Inc, affiliate, already has settled charges against in this case. The terms of its settlement are confidential.
The jury, which sided with FutureSelect, said there were damages of $20.3M and Ernst & Young was liable for half that amount. However, prejudgment interest could cause FutureSelect’s award to reach $25M. T
Meantime, Ernst and Young maintains that investors’ losses were not its fault and that no audit of a fund advised by Madoff could have detected his Ponzi scam.
This is the first time in a trial that an auditor has been found liable for its auditing of a Madoff feeder fund. Madoff, whose Bernard L. Madoff Investment Securities Inc. was considered a premier money manager by the rich and famous, committed what has been called the largest financial fraud in U.S. history. Many investors trusted him to take care of their finances.
Anyone can become the victim of a Ponzi scam, even one that is not as large scale as the one run by Madoff. Here are several suggestions so that you do not become a victim of a Ponzi scam:
· Make sure there is a third-party custodian, such as a brokerage firm, and you are not just working with a financial adviser.
· Check that an independent auditor works with your adviser.
· If your adviser has recently moved to a different accounting firm, find out why.
· Perform background checks on your adviser, including reviewing whether there have been past sanctions, client complaints, or disciplinary actions against him/her.
· Make sure any professional and academic credentials of your adviser are legitimate.
· Be sure to understand your adviser’s investment strategy so you know exactly what’s happening to your money.
· If you can’t withdraw your money, this may be a red flag indicating that something is wrong.
Please contact The SSEK Partners Group today if you suspect you or someone you love has been the victim of a Ponzi scam or another type of securities fraud.
Court approves $1.18B distribution for Madoff victims, USA Today, November 18, 2015
Jury finds Ernst & Young liable over investor’s Madoff losses, Reuters, November 13, 2015