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More than three years after Bernard Madoff pleaded guilty to 11 felony counts of defrauding investors of an estimated $65 billion, victims of his investment Ponzi scheme are still receiving compensation.
The Securities Investor Protection Corp., or SIPC, announced that it paid $2.5 billion in a second distribution to nearly 1,100 accounts. This latest payment, in addition to an earlier one, represents more than 50 percent of the total Madoff accounts with allowed claims. Direct clients of Madoff's investment firm lost approximately $17.3 billion in principal, according to SIPC. The reason $65 million is publicized as the total loss is because it includes the false profits Madoff recorded.
SIPC is funded by the securities industry and covers brokerage account losses, so it's in its best interest to make itself out as the hero, but the organization has been criticized for not doing enough for the scam victims. SIPC covers each account up to a maximum of $500,000 and says that every Madoff account holder has gotten some money back. Liquidation trustee attorney Irving H. Picard has been overseeing the distribution of funds. So far, according to SIPC, Picard has recovered more than $9 billion.
Many victims of Madoff's scam say they lost their life savings and the amounts covered by SIPC aren't enough. Certainly they won't recover any more than principal; the false returns were never meant to materialize. The hard lesson for investors is to remember that in any investment, losses are possible. And while Madoff fooled a lot of smart people, you can never do enough homework before trusting your money to an investor.
Do you believe victims of the Madoff scam have a valid argument that they deserve more in compensation for losses?
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