A group of investors that were victimized in the Bernard Madoff Ponzi scam has won the right to appeal directly to a federal court about a bankruptcy ruling that prevents them from factoring in the amount of time they invested with the financial fraudster as interest that they want back. According to the US Court of Appeals in New York, the plaintiffs met the criteria for a “direct appeal” so that they won’t have to go through the district court first.
U.S. Bankruptcy Judge Burton R. Lifland had said that “time-based” calculations might not be fair to creditors who are last in line for payments and that this could give a windfall to claims by traders even though they weren’t victims of Madoff’s scam. Lifland recently passed way.
Madoff’s victims want bankruptcy trustee Irving Picard to put aside about $1.4 billion to pay back interest they say they are owed. They believe that factoring in time when equating damages allows for inflation to be considered.
Picard is working to repay thousands of investors that lost $17 billion in the fraudsters’ investment advisory business when the Ponzi scam failed in 2008. So far, he has gotten back over $10 billion via securities fraud settlements and lawsuits, with $4.9 billion handed over to investors. In 2011, Picard won an appeals ruling affirming his request to calculate losses according to cash that investors invested while subtracting money that was withdrawn instead of using the total found on final account statements of investors (which factored in bogus profits from fake trading).
Meantime, five ex-Madoff employees, accused of helping him run his Ponzi scam, are still on trial. The defendants include Daniel Bonventre, who is the ex-operations chief; Joann Crupi, who managed big accounts; Annette Bongiorno, who was in charge of the investment advisory unit; and Jerome O’Hara and George Perez, both computer programmers. The latter two are accused of writing code so that millions of bogus trade confirmation account statements were printed. All of them allegedly got rich from Madoff’s Ponzi scam. Six of their former colleagues are testifying against them.
The US government says that the five defendants used the fake statements and confirmations to deceive customers into thinking their funds were used to purchase securities when actually no investment trading was happening. The trial started in October.
Madoff, who pleaded guilty to fraud, is behind bars for 150 years. At least seven others have also pleaded guilty for their role in the Madoff Ponzi scam.
Ponzi scams inevitably collapse when fraudsters are no longer able to draw in new investors to pay previous investors or when too many of the participants want their money back at the same time. Madoff’s Ponzi scam impacted not just regular retail investors but also the incredibly wealthy and famous.
Contact our Ponzi fraud lawyers if you want to know whether you have grounds for a securities case.
Madoff Victims Win Right to Direct Appeal Over Interest, Bloomberg, January 23, 2014
Judge: No interest on Madoff victims' money, Newsday, September 10, 2013
More Blog Posts:
Family Pleads Guilty to $10M Massachusetts Ponzi Scam, Stockbroker Fraud Blog, January 22, 2014
US Supreme Court Hears Oral Argument on the Impact of SLUSA on the Stanford Ponzi Scams, Institutional Investor Securities Blog, October 17, 2013
SEC Goes After Alleged Ponzi Scammers, Stockbroker Fraud Blog, November 15, 2013