<p>According to WNBC-4 news, only half of Bernie Madoff’s list of investors actually lost money in the Ponzi scheme; the other half withdrew money previously greater than their initial investments…</p>
<p>Which poses a question that I had asked earlier this year…Are the investment gains withdrawn earlier (acquired, in essence, by the Ponzi scheme itself) subject to the lawsuit filed by those who lost everything? in other words, were those who were “lucky”/“smart” enough to withdraw their gains really benefitted based on the others who had not? And should they be held accountable, even though they had no idea that the gains were acquired illegally?</p>
<p>Hope I am making sense…I have questioned this from the beginning…</p>
<p>I thought I heard that the answer is “yes”, they have to give back their gains (that were ill-gotten but they didn’t know were ill-gotten.) However, I don’t know what kind of energy there will be to potentially bankrupt a few more old people (if, for example, the Madoff gains are all they have) Satisfying to show pictures of Madoff’s houses and talk about how they’re being sold. Not so satisfying to show pictures of normal investor’s homes and talk about how they’re being sold because they were purchased with the gains.</p>
<p>Not even sure how they could possibly navigate this;</p>
<p>For example, someone bought a house…diversified portfolio: some Madoff money, some Fidelity, TRowe, Putnam, stock portfolio…how would they figure it all out? Sounds like a bookeeping nightmare…</p>
<p>Even if they do give back the gains, it would likely never make it to the losers and instead would be used up by the court trustee.</p>
<p>Many years ago my parents lost money in a real estate investment that went BK, there were assets sold and money turned over to the courts, the trustee used every penny trying to find more, once the funds to pay him were gone, he stopped and most people got nothing.</p>
<p>This is an interesting conundrum. Aren’t these people profiting from a crime? If they gave back $ would the US govt. owe them any taxes they paid on these ficticious “gains”? Obvious happy ending here would be if everyone got back the amount of $ they put in (no gains or losses), but I’m thinking this will never happen.</p>
<p>The term is “clawback” and it’s a provision in bankruptcy law that the trustee can recover money that was distributed as part of a fraud and share it among the victims. So far the trustee, Irving Picard, seems to be going after people who took profits who should have known they were fraud, such as long-term investors of Madoff’s who netted billions over 20 years. Picard hasn’t yet detailed how he will deal with those who unknowingly profited.</p>
<p>I believe I read somewhere that capital gains taxes would be recalculated and refunds given for any of these gains.</p>
<p>A charity which I support, and shall remain nameless here, was forced to return the “profits”. This created a huge problem for us since operating costs in research depended on the money. </p>
<p>On the other hand, a family member very close to my heart was defrauded by Mr. Madoff. I hope that he gets something back. (He was only in for two years and accepted because of his connection to Madoff, not because he had several million to invest).</p>
<p>Yes, the claw-back provision in bankruptcy law is based on the principle of attraction - i.e., those that received pay-outs furthered the fraud because by receiving payments that attracted others to the fraud. </p>
<p>This fraud likely started in the late 80’s. Redemptive parties from the past will likely be lucky.</p>