$2.5B in Investor Money from Madoff Ponzi Scam Went Unclaimed

According to Fortune and Bloomberg, victims of Bernard Madoff’s Ponzi Scam were able to recover 57 cents for every dollar they invested in his fake funds because there were investors who never filed claims for $2.5B of the $20B lost in the fraud.

Seeing as the deadline to file claims to recover losses from Madoff’s scheme passed nearly seven years ago, it would be too late for any of these parties to try to get that money back now.

Fortune says no one even knows where this $2.5B is, as the Madoff’s trustee only sought to recover money from claims made. Bloomberg believes that almost half of this money is owned by feeder funds that invested with Madoff. The media outlet said that a couple of Caribbean-based hedge funds are the likely investors. Bloomberg speculated that the funds may have figured that whatever they recovered on the $1.2B would have been much smaller than what they might have had to give back had they stepped forward. The owners of the other $1.3B remain unknown, but could be individual investors who had reasons for not coming forward and filing their own claims.

To date, trustee Irving Picard has paid direct investors about $9.2B. There are tens of thousands of others who, unable to file directly with Picard because they’d invested in the feeder funds, are still waiting to get some money back.

Bloomberg reported that feeder funds that have suffered from investing with Madoff include Harley International Ltd. and Vizcaya Partners. Picard sued Harley for the return of $1.07B that it withdrew from Madoff two years prior to his arrest—the remaining $1B it kept with the Ponzi mastermind was lost. Harley ignored the lawsuit and Picard was awarded a default judgment for the entire amount. Picard accused Harley of knowing (or, if not, he said, then the company should have known), about the fraud. Harley also failed to file a claim for the $1B it did lose.

Vizcaya Partners is another feeder fund that could have filed a claim—for $147M—but failed to submit one. It also disregarded a lawsuit brought by Picard seeking to recover $180M that the fund withdrew from Madoff’s investment firm months before the Ponzi scam began to unravel. Vizcaya and Picard settled the lawsuit for $25M.

Contact our securities law firm if you believe your losses are a result of a Ponzi scam or another type of fraud. The SSEK Partners Group represents high net worth individual clients and institutional investors.

The Mystery Madoff Victims Who Left $2.5 Billion on the Table, Bloomberg, March 4, 2016

Here’s How Much Madoff Money Was Left Up For Grabs, Fortune, March 4, 2016

The Madoff Recovery Initiative