Madoff Judge Sides With Picard: Net Winners Are Losers

A federal bankruptcy judge ruled today that Bernie Madoff victims’ losses will be calculated by how much money they lost over the course of their investments, rather than what their balance was at the time the Ponzi scheme collapsed.

This argument that “net winners” deserve no reimbursement is the position taken by Irving Picard (pictured), the trustee overseeing disbursement of funds to victims.

“In this way, the Net Investment Method brings the greatest number of investors closest to their positions prior to Madoff’s scheme in an effort to make them whole,” the judge said. The full Reuters report, via The New York Times, is here.

It comes as no surprise that those investors who made more than they lost over time, but who had balances with Madoff at the end, were not pleased with the result.

A press release issued on some of their behalf shortly after the opinion was released stating that the judge’s decision meant the Securities Investor Protection Corporation “can avoid its statutory obligation to replace up to $500,000 in securities of thousands of Madoff victims.”

The argument over how to calculate victims’ losses began shortly after the scheme’s collapse, though both sides only fully laid out their positions to the court on February 3. Today’s decision will almost certainly be appealed.

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