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Where did Madoff's missing billions go? Investigators face uphill task
One of the biggest mysteries of the Madoff affair is what happened to all the money. Federal investigators involved in tracking Madoff's missing billions are not even sure how much they are looking for. The amount ranges from estimated losses suffered by investors of $13bn to the $70bn which Madoff has accepted was attributable to his unlawful activities.
So far Irving Picard, the court-appointed trustee of Madoff's collapsed firm, has recovered just $1.2bn on behalf of investors. It is a small return for a six-month investigation that involved the US justice department, the financial regulator the Securities and Exchange Commission, Picard's office and the US marshals.
If Picard is to narrow the gap between asset recovery and escalating investor losses, it now seems likely that he will have to focus more on those who did business with Madoff rather than rely on tracking down his personal assets.
Although those assets give a fascinating insight into the fraudster's lifestyle they cover only a fraction of investors' losses.
The preliminary order of forfeiture filed in the US courts on Friday lists an apartment in Manhattan, a retreat in Long Island and a home in Florida, worth $22m in total, among the assets of Madoff and his wife, Ruth. Add to that two luxury yachts called Bull and two small boats called Little Bull and Sitting Bull. Throw in a couple of fur coats and crockery and cutlery valued at enough to fund an entire kitchen in most homes and the picture of their extravagant lifestyle is complete.
However, these account for a fraction of estimated investor losses in the fraud. There are a number of theories as to where the funds have gone. Madoff has said that he was facing redemption calls for $7bn of investments owing to the financial downturn this year. Some of that was paid, but it is unclear how much.
But sources close to the investigation recognise that if the trustee is going to make serious inroads into the gap then he will need to switch his attention to those who profited from their association with Madoff.
Auctioning off two season tickets in prime seats to watch the New York Mets baseball team may catch the headlines, but has little impact on the losses incurred by investors.
The investors' position is made more complex because many of them do not qualify for compensation from the government's investor protection scheme.
Picard has secured $235m from Banco Santander to settle claims brought by the trustee against one of its investment subsidiaries. "We hope that other entities against which we have claims will likewise come forward to settle those claims for the benefit of all Madoff's victims," he said.
Rumours persist that Madoff has billions of dollars deposited with overseas banks, but if this is true they are likely to prove almost impossible to track down.
Picard has filed a complaint in the US bankruptcy court against Cohmad Securities Corporation and a number of its principals, seeking to recover well over $100m allegedly paid to Cohmad in exchange for introducing clients to Madoff's firm. The complaint says 90% or more of the income to Cohmad and others came from referring customers to Madoff.
"Our investigation has yielded significant evidence that, in fact, a variety of other people helped Madoff prey on innocent victims," said David Sheehan, counsel for the trustee and a partner at Baker Hostetler, the court-appointed counsel for Picard.
http://www.guardian.co.uk/business/2...tigation-money
One of the biggest mysteries of the Madoff affair is what happened to all the money. Federal investigators involved in tracking Madoff's missing billions are not even sure how much they are looking for. The amount ranges from estimated losses suffered by investors of $13bn to the $70bn which Madoff has accepted was attributable to his unlawful activities.
So far Irving Picard, the court-appointed trustee of Madoff's collapsed firm, has recovered just $1.2bn on behalf of investors. It is a small return for a six-month investigation that involved the US justice department, the financial regulator the Securities and Exchange Commission, Picard's office and the US marshals.
If Picard is to narrow the gap between asset recovery and escalating investor losses, it now seems likely that he will have to focus more on those who did business with Madoff rather than rely on tracking down his personal assets.
Although those assets give a fascinating insight into the fraudster's lifestyle they cover only a fraction of investors' losses.
The preliminary order of forfeiture filed in the US courts on Friday lists an apartment in Manhattan, a retreat in Long Island and a home in Florida, worth $22m in total, among the assets of Madoff and his wife, Ruth. Add to that two luxury yachts called Bull and two small boats called Little Bull and Sitting Bull. Throw in a couple of fur coats and crockery and cutlery valued at enough to fund an entire kitchen in most homes and the picture of their extravagant lifestyle is complete.
However, these account for a fraction of estimated investor losses in the fraud. There are a number of theories as to where the funds have gone. Madoff has said that he was facing redemption calls for $7bn of investments owing to the financial downturn this year. Some of that was paid, but it is unclear how much.
But sources close to the investigation recognise that if the trustee is going to make serious inroads into the gap then he will need to switch his attention to those who profited from their association with Madoff.
Auctioning off two season tickets in prime seats to watch the New York Mets baseball team may catch the headlines, but has little impact on the losses incurred by investors.
The investors' position is made more complex because many of them do not qualify for compensation from the government's investor protection scheme.
Picard has secured $235m from Banco Santander to settle claims brought by the trustee against one of its investment subsidiaries. "We hope that other entities against which we have claims will likewise come forward to settle those claims for the benefit of all Madoff's victims," he said.
Rumours persist that Madoff has billions of dollars deposited with overseas banks, but if this is true they are likely to prove almost impossible to track down.
Picard has filed a complaint in the US bankruptcy court against Cohmad Securities Corporation and a number of its principals, seeking to recover well over $100m allegedly paid to Cohmad in exchange for introducing clients to Madoff's firm. The complaint says 90% or more of the income to Cohmad and others came from referring customers to Madoff.
"Our investigation has yielded significant evidence that, in fact, a variety of other people helped Madoff prey on innocent victims," said David Sheehan, counsel for the trustee and a partner at Baker Hostetler, the court-appointed counsel for Picard.
http://www.guardian.co.uk/business/2...tigation-money
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