The court trustee liquidating what's billed as the legitimate portion of Bernard Madoff's financial business has reached a sale agreement expected to generate at least $15 million for the convicted scam artist's thousands of victims.
The deal, with Boston-based broker-dealer Castor Pollux Securities, leaves open the possibility that the Manhattan business that matches stock buyers and sellers could go to a higher bidder before the deal is finalized, trustee Irving Picard said in a statement Friday night.
The sale price — with just a $500,000 payment at closing and the rest paid from future profits — represents just a fraction of the $700 million Madoff pegged as its market value in a December statement of his assets. But that figure had been dismissed as highly exaggerated by some experts.
Picard said the deal reflected the fact that the business has been closed, staffed with just a skeleton crew of employees, since Madoff's Dec. 11 arrest for running a massive Ponzi scheme that victimized investors around the world.
Madoff, 70, pleaded guilty to securities fraud, perjury, money laundering and other criminal charges on March 12. He was ordered jailed pending a June sentencing at which he faces a maximum 150-year prison term.
"The structure of this transaction enables the Madoff victims to participate in future value derived from the assets acquired by Castor Pollux," said Picard, adding that efforts to sell the business faced "many challenges."
The business, based in Madoff's midtown Manhattan headquarters, was managed by Madoff's brother and two sons. It operated on a different floor in the office building where Madoff ran the multi-billion-dollar Ponzi scheme that bilked celebrities, charities, financial firms and average investors by using money from new clients to pay earlier ones.
During a Feb. 20 meeting with Madoff victims, Picard said investigators had concluded the trading business was legitimate and should be sold to the highest bidder. The trustee has recovered roughly $1 billion in other Madoff assets so far.
Under the terms of the deal, Castor Pollux would take over office equipment and data of the business. The bulk of the sale price would be generated by anticipated trading revenue through 2012.
Picard said the sale agreement is subject to the completion of a court-approved overbid process, which is expected to occur in mid-April. It is also subject to receipt of financing, other contingencies and bankruptcy court approval, the trustee said.
The remaining employees of the Madoff business were fired on Friday, but Castor Pollux said in a statement that it intended to rehire some if the deal is finalized. The company stressed that the business and its employees have been extensively investigated by numerous federal agencies.
"It has cutting edge technology and many honest and very talented employees," said Castor Pollux President Darin Oliver. "We look forward to leveraging these capabilities into a strong and vital market making business in the years to come."
During his guilty plea, Madoff described the investment advisory business as "the vehicle of my wrongdoing." But he also insisted "the other businesses my firm engaged in, proprietary trading and market making, were legitimate, profitable and successful in all respects."
In November, Madoff notified 4,800 investors that their money had grown in value to nearly $65 billion, a sum investigators say was fictitious. Authorities have estimated that the amount investors likely entrusted to Madoff was probably closer to $17 billion — money he admitted he never invested.
Contributing: The Associated Press.