Victims of the epic Madoff Ponzi scheme could get back another $349 million under a proposal submitted to the bankruptcy court Tuesday by trustee Irving H. Picard. The proposed distribution, the fourth since the scandal broke, brings the total payout to nearly $6 billion.
More importantly, Picard says if the payment is approved, more than half of Madoff's direct victims —everyone with claims of $925,000 or less — will have recovered their entire principal. It is a recovery Picard could hardly have imagined when he was appointed to recover assets a week after the scheme collapsed in 2008.
"I certainly would have hoped for it," said Picard in an interview with CNBC. "It was a goal."
Picard estimates Madoff clients lost $17.5 billion in the scam, based on the amounts they invested minus their withdrawals. But because their statements also showed fictitious "returns" on their investments, the victims' losses on paper were more than $65 billion, most of which they have no hope of getting back.
In all, Picard says his team has recovered nearly $9.8 billion, or around 56 cents on the dollar of actual losses. In addition, the Securities Investor Protection Corporation (SIPC), which insures U.S. brokerage accounts, has paid nearly $812 million.
"We look forward to continuing to work with the Trustee to make funds available to victims as soon as possible," said SIPC President Stephen P. Harbeck in a statement. "We hope that trend continues, and even accelerates, as the remaining legal disputes are resolved."
A separate fund made up of criminal forfeitures, and administered by the Justice Department, has amassed another $4 billion, to be paid primarily to people who invested with Madoff indirectly through feeder funds.
The latest distribution is due in large part to a $2.6 billion civil and criminal settlement announced in January between U.S. authorities and JPMorgan Chase, which was Madoff's primary banker.
--- Scott Cohn, CNBC