The Securities and Exchange Commission wants the US Supreme Court to leave standing the U.S. Court of Appeals for the Second Circuit’s decision upholding Irving Picard’s “net equity” approach to compensating victims of Bernard Madoff’s Ponzi scam. Picard is the Securities Investor Protection Act trustee of Bernard L. Madoff Investment Securities LLC. Madoff defrauded investors in a multibillion-dollar Ponzi scam.
SIPA lets investors get back their “net equity,” and Picard’s formula for compensation is to calculate a victim’s net losses-how much they put in, minus how much they got from the failed brokerage firm. He then gives these net losers a portion of the available money. Investors that have net gains-meaning they took out more funds than they invested-must wait until the net losers are fully paid. It is these clients with net gains that are appealing the Second Circuit’s decision and contending that their losses should instead be calculated from the last account statement issued by Madoff’s financial firm.
The SEC disagrees with them. In fact, the Commission doesn’t believe that these Madoff investors should be allowed to appeal a decision that won’t let them receive payment for bogus Ponzi profits that were noted on account statements. In its opposition brief to the nation’s highest court, the SEC said the Second Circuit ruling was “correct” and doesn’t conflict with past decisions. It also said that considering the circumstances and the “relevant statutory language,” the “net equity” approach “was legally sound.”
Shepherd Smith Edwards and Kantas Founder and Ponzi Fraud Attorney William Shepherd, however, is not siding with the SEC in regards to Picard’s approach: “This calculation of losses that makes gainers repay losers is outrageous! These people invested in good faith and are not the perpetrators of any fraud. They were persuaded to take money from the bank or from another legitimate advisor to place the money with Madoff. Thus, they were defrauded into giving up annual earnings of – say – 6% with claims of earning perhaps 9%. Meanwhile, the regulators dropped the ball while for years the fictitious returns were reported. The only possible ‘claw-back’ from these innocent investors should be the excess earnings from the fictitious practices, not all the money they received over many years. State securities statutes and other damages models prescribe a reasonable rate of return to victims of investment fraud. Virtually all claims for losses involve paying pre-judgment interest of some type to victims. Robbing Madoff investor-victims of the time-value of their money just so the insurance company did not have to pay so much is simply preposterous!”
Picard has paid investors approximately $330 million since Madoff’s infamous Ponzi scam fell apart almost four years ago. Although his website says he has raised about $9 billion, most of the funds are tied up in court challenges.
Our Ponzi scheme lawyers represent investors throughout the US.
High Court Shouldn’t Hear Madoff Investor Appeal, SEC Say, Bloomberg, May 25, 2012
SEC Opposes High Court Review Of Ruling Affirming ‘Net Equity’ Method, Bloomberg/BNA, May 29, 2012 https://www.madoff.com/
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Former Bernard L. Madoff Investment Securities LLC Employee Faces SEC Charges for Creating Fake Trades to Enable Ponzi Scam, Stockbroker Fraud Blog, November 23, 2011
Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme, Stockbroker Fraud Blog, November 11, 2011
Alleged Ponzi-Like Real Estate Investment Scam that Defrauded Victims of $9M Leads to SEC Charges Against New Jersey Man, Institutional Investor Securities Blog, May 24, 2011