Bernie Madoff: Making Your Job Harder—The 2015 IA 35 for 35

Not all influences are good, and Madoff’s historic Ponzi scheme shattered investor confidence

We featured Madoff in 2009 after he pleaded guilty to orchestrating a global Ponzi scheme. (Portrait: Joel Kimmel) We featured Madoff in 2009 after he pleaded guilty to orchestrating a global Ponzi scheme. (Portrait: Joel Kimmel)

Five years after Bernie Madoff was sentenced to 150 years in prison for conducting the biggest Ponzi scheme in history, investor confidence still hasn’t fully recovered.

While Madoff managed to steal $65 billion over decades from investors, the total amount distributed in the Madoff liquidation proceeding to date exceeds $7.2 billion, covering more than 54% of the losses of allowed claimants. The overall figure of $7.2 billion includes $823.7 million in committed advances from the Securities Investor Protection Corp.

When additional settlements awaiting distribution are taken into account, SIPC says, the total recovery to date in the Madoff liquidation proceeding totals $10.551 billion.

The Madoff Victim Fund has received a total of 63,553 claims covering losses of $76.654 billion. Of the total, 21,822 claims are from U.S. residents, while 41,731 claims are from foreign nationals.

U.S. residents filed claims covering $30.7 billion in investment losses, while foreign nationals submitted claims covering losses of just under $46 billion.

The MVF notes that about 2,800 of the claims reviewed, or about 13%, involve a direct investment in a feeder fund that in turn invested in Madoff Securities. MVF defines direct feeder fund investments as being “one tier” away from Madoff. “Evaluating these direct feeder fund investments is a relatively straightforward process, as there should only be one set of account statements,” MVF states.

Nearly 11,600 of the reviewed claims, or 55% of the total, involved an initial investment that was two tiers away from Madoff (one investment fund or other product between the victim and the feeder fund with a direct account), MVF states.

Madoff sent an email to NBCNews in late January stating that the Securities Investor Protection Act (SIPA) trustees that are representing his victims have made “baseless and vindictive comments” about his now deceased sons, Mark and Andrew.

In his email, Madoff states that the trustee claimed that his sons should have known that he “was not executing any trades for my advisory clients,” and that he has “gone to great lengths to counter this claim by explaining that like all brokerage firms, we were required to have ‘Chinese Walls’ in place to avoid any conflict of interest between our different departments like the market making that Mark managed and the proprietary trading department that Andy managed from the investment advisory department managed by me.”

These departments, Madoff wrote, “were separated by two floors and staffed with entirely different personnel. These ‘Chinese Walls’ procedures were subject to bi-annual surprise inspections by the regulators.”

Madoff also wrote that the trustee “claimed that my sons should have known that their compensation was unrealistic. The fact that both were compensated at the same rate as the 100 traders that they managed, a rate of 25% of their trading profits, which is industry standard for market making and proprietary trading firms similar to Madoff, seemed to escape the trustee’s consideration.”

Madoff stated in the email that the trustee “claimed that my sons’ compensation in their ‘deferred compensation’ account was excessive. This, even though their compensation was based at the same rate as all my other employees’ ‘deferred compensation’ accounts, 25% or at the rate of the firm’s annual return on capital. Deferred compensation type accounts are common on Wall Street and subject to specific IRS rulings.”

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See the full 2015 IA 35 for 35 and the calendar for extended profiles of each honoree.

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