At least 25,280 claimants who were the victims of Bernard Madoff’s Ponzi scheme can expect to receive payouts for almost $4B in losses they sustained from the fraud. For these investors, they’ve been waiting to get at least some of their money back for nearly eight years.
It was in December 2008 that Madoff’s $64.8B Ponzi scam was discovered. It turns out that the 78-year-old money manager was an equal opportunity fraudster, bilking retail investors, wealthy investors, institutional investors, celebrities, and others alike.
The nearly $4B in payouts is being overseen by Richard Breeden of the Madoff Victim Fund and is separate from the payouts issued by Irving Picard, who is the trustee in charge of compensating former customers of Bernard L. Madoff Investment Securities LLC.
With the Madoff Victim Fund, claims include those brought by “indirect” investors whose accounts were at the hedge funds and other entities known as “feeder funds.” These funds would send investors’ money to Madoff. Thousands of victims that lost $17.5B have been seeking to avail of this fund.
In other Ponzi scam news, investors who were bilked by another fraud mastermind, R. Allen Stanford, have arrived at a $35M settlement with a New York law firm. Some 18 investors had filed a complaint against Chadbourne & Parke for work conducted by Thomas Sjoblom, who also worked at the law firm Proskauer Rose.
The plaintiffs said that the two law firms ignored the fact that Stanford was selling fake high-yield CDs via his Stanford International Bank in the Bahamas. They are accusing both firms of obstructing the probe conducted by the SEC.
By settling, Chadbourne is not denying or admitting wrongdoing.
Former Stanford Ponzi scam investors are also suing Proskauer Rose and they are seeking $5B in damages, again related to Thomas Sjoblom allegedly assisting Stanford to perpetuate his $7.2B fraud. This is their second attempt to sue Proskauer. About 21,000 investors are hoping to recover at least some of their money.
The U.S. Court of Appeals for the Fifth Circuit threw out the original complaint in March after finding that, under Texas law, a lawyer is protected from liability if the alleged wrongdoing took place while defending a client. In this latest lawsuit, however, the investors are claiming that the 5th Circuit ruling left a small opening through which they may sue Proskauer under the Texas Securities Act.
The plaintiffs are also arguing that Sjoblom wasn’t litigating when he committed the alleged wrongdoing but was actually committing a crime. Therefore, they argued, Texas law does not protect the attorney from liability, which means that the firm is not immune either and should be liable for helping Stanford with his fraud, destroying evidence, obstructing justice, and other violations.
The plaintiffs pointed to a decision earlier this year by the SEC in which former Stanford Group Chief compliance officer Bernerd Young was told to pay about $1M in penalties and disgorgement. Young and Sjoblom worked closely together. According to investors, this ruling backs their own stance that Sjoblom stopped everyone from being able to access investment portfolio information related to the offshore bank.
Investors who lost money in the Stanford Ponzi fraud have been seeking to recover losses via different avenues and by targeting different defendants, including Stanford’s former attorneys and others, such as clearing broker Pershing LLC. Some have even sued a number of banks, including HSBC, TD Bank, Bank of Houston, and others for processing the billions of dollars in fake transactions.
Chadbourne Pays $35M in Stanford Ponzi Suit; Proskauer Faces New Class Action, The American Lawyer, May 2, 2016