Eight years after Bernard Madoff was sentenced to 150 years in prison for defrauding investors in a $65 billion Ponzi scam, thousands of his victims have still not seen any of the money that they lost. These investors’ claims are being handled by Madoff Victim Fund administrator Richard Breedon, whose firm RCB Fund Services was retained by the federal government to give $4B back to them.
Breeden had estimated last year that up to 40,000 victims would get their first recovery checks by the end of 2016. That didn’t happen. Now, he has stated that the initial distribution will happen this year and will be larger than what would have gone out previously. Claims processes and inadequate paperwork by some investors were some of the reasons cited for the delay.
It is Breedon’s job to recommend to the federal government which claims to reject or pay. His fund accepts recovery claims from all of types of investors who entrusted their money to Madoff, including feeder funds. Breedon’s fees come out of investors’ recovery.
Meantime, according to the US Justice Department, through 2016, Breedon received $38.8M in fees for his services regarding these matters. Disclosure of this payment came about because Bloomberg News submitted a Freedom of Information Act filing regarding his billings.
The victim’s compensation fund that Breeden is handling was established in 2012 after the federal government took $2.4B from the estate of one of Madoff’s investors, Jeffry Picower. In 2013, the fund gained another $1.7B in the wake of a forfeiture deal with JPMorgan Chase & Co. (JPM) The bank, which was used by Madoff, has been accused of ignoring his Ponzi scam.
Fortunately, there are other Madoff investors who have begun to see some of their money. Since 2009, Irving Picard, who is tasked with supervising the liquidation of Madoff’s firm, has issued over $9B to victims. He also filed a number of lawsuits to get back assets to help facilitate the return of investors’ funds. However, his fund is subject to different US laws than the one that Breeden is in charge of.
Picard only deals with claims from investors who had direct accounts with Madoff. Earlier this year, he distributed $252M to customers who had 953 accounts at Madoff’s firm. He too has made a lot in fees. InvestmentNews reports that in 2015, he told ABC News that his firm could collect up to $1B by the time recovery efforts are complete. The fees to Picard don’t come out of investors’ funds but, rather, from the Securities Investor Protection Corp.
Madoff defrauded investors from all walks of life, including ordinary investors, high net worth investors, celebrities and other famous folk, feeder funds, and institutions. A list of his victims was posted online by the Wall Street Journal (see below). Over the weekend, HBO premiered The Wizard of Lies, a movie on Madoff and his Ponzi fraud starring Robert De Niro and Michelle Pfeiffer. His family claims that they did not know he had been bilking investors for all those years.
Madoff fund has paid zero to fraud victims so far, USA Today, May 23, 2017
Madoff Client List, Wall Street Journal (PDF)