Today it is time for a post from the Annals of Securities Fraud. That is because Monday, December 11, 2023, marked the 15th anniversary of the arrest of Bernie Madoff in connection with one of the largest securities frauds in U.S. history. The scale of Madoff’s Ponzi scheme fraud is still, even after all of these years, just astonishing. Prosecutors estimated that the paper losses totaled nearly $65 billion, and have said they believe that the scheme defrauded as many as 37,000 people in 136 countries.  

What has been interesting in the scheme’s wake has been the efforts to recover funds to compensate Madoff’s victims. Irving Picard, the court-appointed trustee overseeing the liquidation of Madoff’s firm, has recovered approximately $14.6 billion. And perhaps even more interesting, Picard’s recovery efforts are continuing to this day, 15 years after Madoff’s arrest, as reported in David Thomas’s December 12, 2023 Reuters article, here.

According to the website established to document the recovery efforts, Picard was first appointed as trustee on December 15, 2008. Picard was asked to serve as trustee by the Securities Investor Protection Corporation (SIPC), and his fees, and the fees of his law firm, Baker & Hostetler, have been paid by the SIPC. (The SIPC is a fund Congress created in 1970 to assist investors with accounts at failed brokerage firms. The funds to pay the fees come from assessments paid by SIPC’s member broker-dealers.)  

The Reuters story reports that at the outset, Picard decided to target his efforts against “feeder funds” that funneled money to Madoff, and “net winners” – investors who took more money out of Madoff’s firm than they put in. According to the recovery initiative website, Picard’s efforts have secured recoveries and settlements totaling $14.6 billion. The largest chunk of that amount is related to the $7.2 billion recovery and settlement with the estate of Madoff’s longtime friend Jeffry Picower. The Reuters article quotes a commentator as saying that the trustee’s overall recoveries represent “a remarkable result.” To put these recoveries in context, the Reuters article reports that Picard estimates that the Madoff’s customers total losses amounted to $17.5 billion.

Nearly $13.7 billion of the recovered funds have been returned to Madoff customers. Just last Friday, December 8, 2023, the trustee moved the bankruptcy court for an allocation of $66 million in recovered amounts to the customer fund, and also sought approval for an interim pro rata distribution of more than $45 million.

The Reuters article reports that Picard’s recovery efforts are continuing, and that in recent years Picard has turned his efforts to trying to recover funds that were transferred overseas. The article quotes a source as saying that the trustee is still waging about 100 recovery lawsuits.

Picard has a pretty good case to make that he has done well by the Madoff customers. It is also true that Picard and done well for himself and his law firm. The Reuters article reports that during the time from Picard’s appointment as trustee he and his firm have been awarded more than $1.5 billion in fees. The Reuters article reports that Picard’s latest request to the U.S. bankruptcy court amounts to $37.9 million, reflecting more than 68,000 hours of work by 190 lawyers and other professionals from April through July 2023. The Reuters article also reports that from Picard’s appointment through November 2022, the fees awarded for the Madoff recovery efforts represented nearly 17% of Baker & Hosteler’s revenues during that period. As noted above, the fees were not paid out of the recoveries, but instead have been funded by the SIPC.

I have to say that all of these references to Bernie Madoff provoked for me a little bit of a walk down memory lane. The Madoff scandal broke fairly early in my tenure as an aspiring blogger. The unfolding of the scandal and its aftermath produced an almost limitless supply of blog fodder. There were so many things to write about – inspiring me to launch one 2009 post entitled “It’s a World, World, World, World Madoff” (which was, of course, an allusion to the classic 1963 comedy, It’s a Mad, Mad, Mad, Mad World. ) There were so many angles to work on the Madoff story – who can forget the supposed Brittany Spears connection? For a time, it was “All Madoff, All the Time” on my blog. It was of course a terrible time to have been a Madoff investor, but it was a great time to be a blogger.

I have to say it was really interesting in connection with writing this post to go back and read some of the old articles, about Madoff and otherwise. It occurs to me that over the years I have spent an absolute ton of time writing this blog. Can you imagine what I might have accomplished if I had spent that time instead doing something productive? It boggles the mind.