Unwinding the biggest Ponzi scheme in U.S. history hasn’t been cheap.
Six years after Bernard Madoff’s fraud collapsed, the cost of liquidating his defunct investment-advisory firm to repay thousands of victims has topped $1 billion, though the con man’s former customers aren’t footing the bill.
The fees, paid by the industry-backed Securities Investor Protection Corp., or SIPC, which is managing the case, have financed a team of lawyers who this week surpassed $10 billion in recoveries for victims, or almost 60 percent of the principal that vanished after Madoff’s arrest in December 2008.
“No one would have anticipated this recovery six years ago, and not a nickel of the fees has come out of the customer fund,” said Stephen Harbeck, SIPC’s president. “It’s a remarkable achievement.”
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Irving Picard, the bankruptcy lawyer who’s leading the effort as trustee for Madoff’s company, included the new fee total in an interim report posted Thursday on his website. A bankruptcy judge in Manhattan regularly approves the fees, sometimes over the objections of victims’ groups.
The victims, who lost $17.5 billion in principal, have been paid back almost $6 billion by Picard since he started distributing the recovered funds. Billions more are being held in reserve until lawsuits by victims seeking larger payouts are resolved.
The fraud, which prosecutors said started as early as the 1960s, involved millions of pages of fake trades and account documents that were used to convince customers they owned securities in the biggest U.S. companies. Their final account statements included about $47 billion in fake profit.
Madoff, 76, pleaded guilty to fraud in 2009 and is serving a 150-year sentence at a federal prison in North Carolina. At least seven other people have pleaded guilty to roles in the scheme, including his brother Peter Madoff, who is serving a 10-year term.
A federal jury in Manhattan in March found five former Madoff employees guilty of aiding his fraud for decades by creating fake trading documents and account statements.