In December 2008, the world learned about Bernard Madoff’s unprecedented fraud, a Ponzi scheme that spanned decades and defrauded customers of approximately $20 billion.
On the day the news broke, I received a call from the Securities Investor Protection Corporation (“SIPC”) and was asked to serve as SIPA Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (“BLMIS”).
A Ponzi scheme the size and duration of Bernard Madoff’s was only possible if he went global. The magnitude of his financial fraud still holds the world record, with approximately $17.5 billion in losses. Four years of investigation has revealed that Madoff’s Ponzi scheme is unprecedented in its global reach - our work reconstructing the fraud has taken us into more than 30 jurisdictions to date.
As of May 6, 2013:
Required reserve for deemed determined claims: Approximately $2.783 billion
Required 3 percent reserve ordered by Bankruptcy Court for issue of time-based damages: Approximately $1.358 billion
Other reserves, including reserve for deferred payments and unallocated funds: approximately $1.9 million
As of May 6, 2013:
Third pro rata interim distribution of 4.721%: $507.7M
Second pro rata interim distribution of 33.556%: $3.637B
First pro rata interim distribution of 4.602%: $501.2M
Amount of SIPC advances reimbursed to SIPC on fully satisfied accounts: $102.81M
In the Bernard L. Madoff Investment Securities LLC (BLMIS) liquidation, the Securities Investor Protection Corporation (SIPC) has made cash advances – up to a maximum of $500,000 – available to the court-appointed Securities Investor Protection Act (SIPA) Trustee to distribute to customers with allowed claims, as a way to expedite financial relief to these customers. As of May 6, 2013, SIPC has committed approximately $807.7 million to the BLMIS liquidation for this purpose. SIPC-committed advances will continue to increase as claims that are currently in litigation are allowed as a result of settlements or the conclusion of litigation.
According to the provisions of SIPA, SIPC is reimbursed for its advances to customers once each respective customer claim is fully satisfied. As of the third pro rata distribution in the BLMIS liquidation proceeding, SIPC received $102.81 million in reimbursement from the Customer Fund for advances paid on fully satisfied accounts.
*In this instance, the term "subrogation" refers to the reimbursement to SIPC of cash advances made to BLMIS customers, once the respective allowed customer claim has been fully satisfied.
All amounts approximate
