Bankruptcy Defeat

While Bernie Madoff was sentenced to 150 years in prison in June for masterminding the world’s longest and largest Ponzi scheme in history, many of his victims who lost fortunes in his “investments” aren’t happy with how the bankruptcy liquidation is being handled.  The bankruptcy trustee in the Madoff case has decided to reimburse claimants based on their cash deposits minus withdrawals instead of including the amounts on Madoff’s final account statements. Claimants are insisting that they are entitled to the profits promised by Madoff despite the fact that those profits were only a figment of Madoff’s imagination.

The bankruptcy trustee ruled that it would not make sense to reimburse claimants profits that were essentially imaginary and did not exist.  Claimants in the bankruptcy case are challenging the ruling and bankruptcy judge Burton Lifland will make the final decision about how much money, claimants will receive during the bankruptcy.  Each qualifying claimants may receive up to $500,000 each, which in some case won’t even cover the principal invested into the Madoff scams.

Unfortunately for the victims of Madoff’s scheme, recouping even a small fraction of their lost investment let alone some of the profits may be impossible in this bankruptcy case.  As the bankruptcy trustee accurately pointed out, since Madoff’s investor profits were illusionary, it is may not be logical that those profits should be reimbursed in bankruptcy.

On the other hand, if the bankruptcy judge treats the final statements as a promissory note, claimants may have a better chance at increasing the amount of money they are able to receive in this bankruptcy. However, the final decision will be made by the bankruptcy judge who has not announced when his decision will be made.