SIPC Doles Out $9.1b to Defrauded Madoff Customers

Jack Humphrey, Regulatory journalist
September 21, 2012 /

The Securities Investor Protection Corporation has mailed nearly $2.5 billion in checks to victims in the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS).

Trustee Irving H. Picard and his attorneys initiated the distribution of compensation for Madoff customers.

SIPC President Stephen Harbeck said: “Trustee Picard has been tireless in his efforts to recover monies and distribute them in a fair and equitable way to all customers with allowed claims at the failed BLMIS brokerage. In doing so, he has been able to satisfy more than half of the BLMIS accounts with allowed claims.”

The SIPC is the U.S. investor’s first line of defense in the event of the failure of a brokerage firm owing customers cash and securities that are missing from customer accounts. SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds.

Approximately $17.3 billion in principal is estimated to have been lost in the Ponzi scheme by direct BLMIS customers who filed claims. When combined with the funds already returned to BLMIS customers, the second interim distribution satisfies more than 50 percent of the total Madoff accounts with allowed claims. Nearly 1,100 accounts were covered by the second distribution.

The Trustee’s recovery of more than $9.147 billion has been made possible through advances provided by SIPC, which is funded by the securities industry. To date, SIPC has advanced over $800 million to pay customer claims and an additional $621 million to fund the liquidation proceeding.

No monies recovered by the Trustee have been used to pay any administrative expenses. All recoveries made by the Trustee benefit customers.

Harbeck said: “We are pleased that SIPC has played an important role in making possible the recoveries. SIPC will continue to work with the Trustee to achieve the maximum recovery for customers.”

 

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