Victims of Bernie Madoff's multi-billion-dollar Ponzi scheme will begin receiving some of their money back today.
"This initial distribution is the first return of stolen funds to Madoff's defrauded customers," said Irving Picard, the trustee overseeing the liquidation of Madoff's firm in federal bankruptcy court.
More than 1,200 account holders will split the first $312 million. The initial payments were to have been mailed last week, but were held up in litigation.
The $312 million is a fraction of the $9 billion dollars Picard said he has recovered so far more, much of it from the estate of one investor, the late Jeffry Picower. The bulk of the recovered funds, however, remains tied up in litigation. Madoff victims lost a combined $17 billion, according to Picard's calculations.
"The need among many Madoff customers is urgent," Picard said. "We are working to expedite these distributions."
David Sheehan, counsel to Picard, said he cannot predict the timing of rulings on these appeals.
""I think it is likely that at the end of the day most, if not all, of the recovered funds will be distributed to Madoff victims," said Robert Mintz, former federal prosecutor and now a partner at the New Jersey firm McCarter and English LLP, who estimated that the 1230 investors who were mailed checks today are so far getting back about 4.6 cents on the dollar.
Mintz said that the courts have already decided that claims by victims should be limited to actual money invested rather than fictional paper profits that were lost when the scheme unraveled. In a separate ruling, the court limited the ability of Picard to recover fictional profits withdrawn by the owners of the New York Mets, which Mintz said could affect Picard's ability to recover money from Madoff investors who took out more money than they put in.
The trustee has filed hundreds of lawsuits against banks, funds and individual investors who profited from Madoff's fraud.
"What Picard has to do, which is not an easy process, is figure out who is deserving," said Annemarie McAvoy, a former federal prosecutor and now an adjunct professor at Fordham Law School. "This is a difficult process but it is a difficult situation to start with because it was an awful thing that Madoff did."
Madoff is serving a 150-year prison term in North Carolina. His firm, Bernard L. Madoff Investment Securities LLC, used a Ponzi scheme in which funds from new investors were used to pay off old investors. The company also generated account statements for investors that Picard has called "fictitious." Picard has calculated losses by comparing how much money the victims invested versus how much money they withdrew from their accounts.
McAvoy said it is unlikely investors will get all of their money back.
"They almost never get the full amount," she said. "But at least the victims get something."