A federal bankruptcy judge in Manhattan on March 1, 2010, agreed with the trustee trying to recoup money for victims of Bernard Madoff’s multibillion dollar Ponzi Scheme.
U.S. Bankruptcy Judge Burton Lifland ruled that trustee Irving Picard is correct in denying claims from investors who profited from Madoff’s scheme.
Picard argued that only the “net losers” — those who deposited more into their account than they took out — should be reimbursed, while “net winners” — those who made money on the fraud — should not recover anything. The recent ruling is a defeat for Madoff investors who withdrew more from their Madoff accounts than they put in.
Lifland wrote in his ruling, “while the court recognizes that the outcome of this dispute will inevitably be unpalatable to one party or another, notions of fairness and the need for practicality also support” Picard’s method of determining claims.
Lifland also said “the plain meaning and legislative history” of the law allowed Picard to deduct withdrawals from cash deposits in determining who gets what. “Because securities positions are in fact nonexistent, the trustee cannot discharge claims upon the false premise that customers’ securities positions are what the account statements purport them to be,” the judge ruled.
Picard’s methodology was backed by Madoff’s less fortunate victims, the so-called net losers, who stood to receive much less if the net-winners were included in the pool, as well as the Securities and Exchange Commission.
