Maximum Payout in Cash is $100,000
By JAMES DORAN
Last updated: 6:31 am
December 24, 2008
December 24, 2008
Burned investors in Bernard Madoff‘s alleged $50 billion Ponzi scheme were dealt a setback yesterday when a bankruptcy judge ruled the maximum cash compensation victims are eligible for is $100,000 from the outfit liquidating his now-defunct firm.
The ruling by US Bankruptcy Court Judge Burton Lifland approves a plan laid out by the Securities Investor Protection Corp., the receiver of Madoff’s now-defunct brokerage, under which victims of Madoff’s alleged scam are entitled to no more than $500,000 worth of securities from the SIPC. The $100,000 cash figure is included in the $500,000 maximum investors can get.
“Those are the statutory rules of the SIPC,” said Steve Harbeck, chief executive of the SIPC, which has a total budget of $1.6 billion to use toward compensating investors who’ve lost money on stocks.
For the biggest losers in the Madoff scandal, $100,000 in cash is less than a drop in the ocean. Fairfield Greenwich, the investment firm run by Madoff chum Walter Noel, lost $7.5 billion in the scandal, while garmento Carl Shapiro lost $545 million between his personal fortune and charities.
The ruling means anyone seeking more compensation will have to pursue separate lawsuits or join any class-action claims that arise out of the scandal.
Lifland also OK’d SIPC’s plan to restrict claims to those investors who can prove they sent money to Madoff in the 12 months prior to his Dec. 11 arrest.
Harbeck, meanwhile, said SIPC will start mailing claim forms to the thousands of customers he believes are eligible for SIPC compensation.
“We will really be able to get this thing moving now,” he said.
SIPC’s analysis thus far has revealed that Madoff’s alleged misdeeds went beyond a traditional Ponzi scheme.
“We are dealing with something of a hybrid here,” he said.
In a regular Ponzi scheme, one investment scam is used as a carrot to attract client funds. Some of the money is kept by the fraudster while some is used to pay off earlier investors expecting a return.
In this case, Harbeck said Madoff effectively designed a new Ponzi scheme for each customer, making it very difficult to trace funds.
“Each person had their own investment portfolio,” Harbeck said, adding that each portfolio appeared to be a new scam. “But it is really too early to tell how the operation worked at this stage.”