Irving H. Picard, liquidator for the Madoff investment firm, recently mailed out an additional $2.5 billion in checks to certain investors in the largest Ponzi scheme on record. This payment comes more than four years after Bernard L. Madoff was sentenced to prison for his involvement as mastermind of the fraudulent pyramid-style scheme. The average payment mailed to more than 1,200 defrauded investors with approved claims was approximately $2 million.
Uncertainty regarding when the next payment from the fund will occur has caused a run on sales and volatility in price of the distressed debt. While larger claims were trading at 67 cents on the dollar back in July 2012, the anticipation of the recent payment has pushed trading up on these claims to 70 cents. However, it is expected that claims to the Madoff funds will soon be trading at just above 30 cents on the dollar. This is in large part due to the fact that traders believe it could be years before another payment to investors is approved by the court.
Of the approximately $17.3 billion lost in the scheme, the liquidator has successfully recovered more than $9 billion, primarily through settlements. The recent $2.5 billion payment raises the total amount recovered by the burned investors to roughly $3.63 billion. Picard has indicated that the litigation has delayed further distributions. In the meantime, he is appealing certain court decisions that have limited the claims asserted against certain banks, including JP Morgan Chase & Co. (“Madoff Investors Get $2.5 Billion After Almost Four Years,” Bloomberg BusinessWeek, September 20, 2012).