Business | Banking
Madoff victims may have to return six years of profits
Like some of Bernard Madoff's clients, a Florida restaurant owner was lucky enough to withdraw part of his investment before the money manager allegedly confessed to a $50 billion Ponzi scheme. Now he's worried he might be asked to give it back.
- Bloomberg
- Published: 23:42 December 23, 2008
New York: Like some of Bernard Madoff's clients, a Florida restaurant owner was lucky enough to withdraw part of his investment before the money manager allegedly confessed to a $50 billion Ponzi scheme. Now he's worried he might be asked to give it back.
The 53-year-old investor, who asked not to be identified to protect his stake, took out about $600,000 this year from his $1.5 million account, using some of it to pay down a mortgage.
He and other Madoff clients who withdrew funds as long as six years ago may be sued on behalf of other victims to return profits and even principal, securities and bankruptcy lawyers say.
"Right now there are Madoff winners and Madoff losers," said Lynn LoPucki, who teaches bank-ruptcy law at Harvard University.
"Before this is over there will be nothing but Madoff losers."
Stretching to 70s
Clients of Madoff had about $36 billion with his firm, according to a Bloom-berg tally that may include some double counting.
Before his arrest on December 11, Madoff, 70, confessed to employees that his "giant Ponzi scheme" may have cost as much as $50 billion, according to an FBI complaint.
His misconduct may have stretched back to at least the 1970s, two people familiar with the government's inquiry of Madoff said last week.
The Florida investor, who first gave his money to Madoff five years ago, said he had no hint of fraud and would go to jail rather than give up the amount he took out.
Irving Picard, the trustee appointed to liquidate Madoff's brokerage, Bernard L. Madoff Investment Securities LLC, holds the fate of the restaurant owner and other investors in his hands.
Picard, who didn't return a call seeking comment on plans to sue victims to recover funds, said in a court filing yesterday that "there has not been any showing or determination that there are sufficient funds" to satisfy victim claims.
A so-called clawback of paid-out funds in the Madoff liquidation could result in lawsuits against investors such as charities, hedge funds and individuals who redeemed profits and took out principal.
Nonprofit institutions such as the Carl and Ruth Shapiro Family Foundation, a foundation controlled by Democratic US Senator Frank Lautenberg of New Jersey, and Yeshiva University relied on funding from Madoff investments.
Lawyers and representatives of the Shapiro and Lautenberg foundations didn't return calls.
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