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Money stolen by Bernie Madoff is still being found

123 points by ryanlol 9y ago

pcurve 9y ago
I'm surprised at the recovery rate. $11.5 billion out of $25-$30 billion (But principle). There's another $5 billion+ sitting around. There was definitely enough money for this have gone on for decades longer. Lawyer fees have exceeded $1 billion so far, which I suppose is reasonable given the money returned.
- anovikov 9y ago
  What was the total amount on the client accounts (including the never existing, made-up interest, which obviously can't be returned), when the scam collapsed?
  - wmf 9y ago
    Either $50B or $64B according to https://en.wikipedia.org/wiki/Madoff_investment_scandal https://en.wikipedia.org/wiki/Madoff_investment_scandal
- danjayh 9y ago
  Read to the end. They're suing people who took their money out, reclaiming it into the bankruptcy trust, and disbursing it (even though these people didn't break any laws). The fund didn't actually have all of the money that they're confiscating for disbursement.
  - alexbeloi 9y ago
    If somebody robbed a bank and gave you the money, there would be an expectation that you would have to return that money, 'possession of stolen property' and all that. The fact that the money was given in the form of investment returns doesn't change that. I think we can all agree that each investor should get their principal investment back. I don't think there's a good argument for letting people keep the impossibly high returns on that principal.
    - cm2187 9y ago
      And if you sold a car to that bank robber without knowing it was a robber you would have to reverse the transaction?
      - alex_hitchins 9y ago
        Depends if the car was bought with stolen money or traded for stolen goods. If so, then I'd say yes.
        lotsofpulp 9y ago
        Should everyone expect every transaction to be subject to clawback? Employees have no guarantee their pay is final, vendors have no guarantee their pay for products delivered will be paid for, etc?
        Spooky23 9y ago
        The law generally renders those contracts null and void. You never technically hold title to stolen goods or things purchased with stolen goods.
        lotsofpulp 9y ago
        Is this for any contract? If someone steals $20 and buys some food, does the food merchant now have to return the $20 and suffer the loss? I've never heard of any situation like this. Usually, this type of liability is in events such as vehicle, house, land, or business purchases for which there is title insurance. But if the buyer does the due diligence, and they're not aware of any illegitimate funds being used, how much should they suffer? How much should the person who it was stolen from be liable?
        Spooky23 9y ago
        Yes. The title to the property never transfers away from the original victim. If I steal a pen and sell it to you for $1, the owner can compel you to return it, and you need to go after me for your dollar. Obviously in reality the hassle is often not worth it. This is one of the reasons that banks and companies are so obnoxious and seemingly overreactive to risk.
- scandox 9y ago
  Hasn't there always been an argument that due to the fact he didn't actually make investments per se that he may have lost a lot less money than many honest and legitimate investment brokers? I'm not really savvy about these things but if I invested in a bullish Hedge fund in 2006,2007,2008 would I not have lost everything? Whereas with Madoff I would have got back a significant fraction of my investment?
- conanbatt 9y ago
  This is very much like "Damages" shows it is. Who knows how the game of hiding billions plays out.
debt 9y ago
I mean if you haven't seen it yet, Wizard of Lies on HBO is a Soprano's-level of quality depiction of the whole Madoff thing.
- anujdeshpande 9y ago
  Also available on Netflix (in some places)! DeNiro plays the title character - loved the movie :D!
- saym 9y ago
  In addition to film, I highly recommend the book published by the whistleblower Harry Markopolos, "No One Would Listen".[0] He spent the better part of a decade trying to alert the SEC to what he found. It was certainly a risky endeavour given how much money was at stake. [0] https://duckduckgo.com/?q=harry+markopolos+no+one+would+listen&ia=products https://duckduckgo.com/?q=harry+markopolos+no+one+would+list...
- zsgoldberg 9y ago
  I enjoyed Wizard of Lies too, but let's all take a deep breath
- yoshyoshi 9y ago
  Yeah that movie really helped me understood a whole picture
sitepodmatt 9y ago
Paywall. Non paywall link?
- ironjunkie 9y ago
  open in incognito mode
cm2187 9y ago
Are the paying people for lost returns? One one side these returns were fictitious, but on the other if you invested $100 in the 70s, should your claim in 2018 be only $100?
- slededit 9y ago
  People will be lucky to get cents on the dollar. Lost returns isn't even in the ballpark.
  - cm2187 9y ago
    There still needs to be a way to allocate the recoveries. If investor A invested $100 in 1970 and investor B invested $100 in 2006 do they both get the same recovery?
    - quickthrower2 9y ago
      And do you get inflation? or the "fake" returns? What if there are a mix of real and fake returns?
    - x0x0 9y ago
      Unfortunately, they do. The conclusion was that, because for quite a period there were no investments, just a scam, that the law says money-in, money-out. In particular: > The accounting of "funds stolen" in this matter excludes inflation, interest, time invested, opportunity cost, and falsely reported balances. The interpretation of the laws do not consider time value of money when reimbursing lost funds. see https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Madoff_investment_scandal https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Mad...
      - sjwright 9y ago
        The key quote from that article: > "...no legitimate investments were made on the investors' behalf for at least the last 12 years..." It's unfortunate for the people who thought they were earning interest, but it wasn't earned; it was money stolen from other investors.
joering2 9y ago
Can someone explain me how Ponzi Scheme is different from Social Security System in USA, given of course the first is a scheme prohibited by US govt?
- abakker 9y ago
  Because it is the government, not a person and because the government explains how it works. They aren’t the same, because a scheme is supposed to be secret.
  - danjayh 9y ago
    That may be true, but the government still lies about what people will be able to take out, just like Madoff. Social security has a massive unfunded liability. This means that one of three things happen: * Benefits amounts are reduced for everyone (In my view, this is probably the fairest option) * Retirement age is increased for everyone (I personally hate this option, but think that it's the most likely) * Benefits become even more means tested than they already are (and they are, even though people claim they're not -- high income people get far less per dollar in than low income people) (In my view, this is probably the least fair option) If you're under 50ish and you're counting on Social Security, I think you're making a judgement error. Especially if you're in the upper income quintile. Everyone that's in the top 20-25% needs to be putting the maximum allowed amount into their 401(k) every. single. year. If you can't save around 18% of household income in a 401(k) or 403(b) due to the limits, save after tax (unless, of course, you plan on working until almost age 70). Personally, because I put a lot into my 401(k) I'll be much better off in retirement than I am now if I actually get Social Security and the pension that I've been promised by my megacorp, but since I'm 36 and all of the boomers are working on retiring, I'm pretty sure that both will be bankrupt.
    - joering2 9y ago
      Very good info thanks. You should not been downvoted. As far as I remember through reading Madoff depositions, some of his clients knew he is running ponzi, so previous post's claim that its a secret don't always apply.
cyphunk 9y ago
Irony of a dead system. MADOFF: Rich man looses money of old timey rich people, government scrambles to find and repair. MTGOX: e-BTC collude with hackers to hack MTGOX, FBI takes down e-BTC, FBI keeps money.
- celticninja 9y ago
  It was BTC-E and you are missing some important information. Btc-e collusion not yet proved, FBI still keep the money, BTC-E remain in business and arrange to refund users at their own expense. So the analogy would require the government to take Madoffs money while claiming he was defrauding users and Madoff continuing his scheme and returning to them the money the government had taken from him/them.
  - cyphunk 9y ago
    You are right, my comparison is absurd. bTCe work to return funds to their customers though, not those of mtgox. Nor should they need to, if indeed the accusation they colluded with MTGox hackers is false

123 points by ryanlol 9y ago

I'm surprised at the recovery rate. $11.5 billion out of $25-$30 billion (But principle). There's another $5 billion+ sitting around. There was definitely enough money for this have gone on for decades longer. Lawyer fees have exceeded $1 billion so far, which I suppose is reasonable given the money returned.

anovikov 9y ago
What was the total amount on the client accounts (including the never existing, made-up interest, which obviously can't be returned), when the scam collapsed?
- wmf 9y ago
  Either $50B or $64B according to https://en.wikipedia.org/wiki/Madoff_investment_scandal https://en.wikipedia.org/wiki/Madoff_investment_scandal
danjayh 9y ago
Read to the end. They're suing people who took their money out, reclaiming it into the bankruptcy trust, and disbursing it (even though these people didn't break any laws). The fund didn't actually have all of the money that they're confiscating for disbursement.
- alexbeloi 9y ago
  If somebody robbed a bank and gave you the money, there would be an expectation that you would have to return that money, 'possession of stolen property' and all that. The fact that the money was given in the form of investment returns doesn't change that. I think we can all agree that each investor should get their principal investment back. I don't think there's a good argument for letting people keep the impossibly high returns on that principal.
  - cm2187 9y ago
    And if you sold a car to that bank robber without knowing it was a robber you would have to reverse the transaction?
    - alex_hitchins 9y ago
      Depends if the car was bought with stolen money or traded for stolen goods. If so, then I'd say yes.
      - lotsofpulp 9y ago
        Should everyone expect every transaction to be subject to clawback? Employees have no guarantee their pay is final, vendors have no guarantee their pay for products delivered will be paid for, etc?
        Spooky23 9y ago
        The law generally renders those contracts null and void. You never technically hold title to stolen goods or things purchased with stolen goods.
        lotsofpulp 9y ago
        Is this for any contract? If someone steals $20 and buys some food, does the food merchant now have to return the $20 and suffer the loss? I've never heard of any situation like this. Usually, this type of liability is in events such as vehicle, house, land, or business purchases for which there is title insurance. But if the buyer does the due diligence, and they're not aware of any illegitimate funds being used, how much should they suffer? How much should the person who it was stolen from be liable?
        Spooky23 9y ago
        Yes. The title to the property never transfers away from the original victim. If I steal a pen and sell it to you for $1, the owner can compel you to return it, and you need to go after me for your dollar. Obviously in reality the hassle is often not worth it. This is one of the reasons that banks and companies are so obnoxious and seemingly overreactive to risk.
scandox 9y ago
Hasn't there always been an argument that due to the fact he didn't actually make investments per se that he may have lost a lot less money than many honest and legitimate investment brokers? I'm not really savvy about these things but if I invested in a bullish Hedge fund in 2006,2007,2008 would I not have lost everything? Whereas with Madoff I would have got back a significant fraction of my investment?
conanbatt 9y ago
This is very much like "Damages" shows it is. Who knows how the game of hiding billions plays out.

debt 9y ago

I mean if you haven't seen it yet, Wizard of Lies on HBO is a Soprano's-level of quality depiction of the whole Madoff thing.

anujdeshpande 9y ago
Also available on Netflix (in some places)! DeNiro plays the title character - loved the movie :D!
saym 9y ago
In addition to film, I highly recommend the book published by the whistleblower Harry Markopolos, "No One Would Listen".[0] He spent the better part of a decade trying to alert the SEC to what he found. It was certainly a risky endeavour given how much money was at stake. [0] https://duckduckgo.com/?q=harry+markopolos+no+one+would+listen&ia=products https://duckduckgo.com/?q=harry+markopolos+no+one+would+list...
zsgoldberg 9y ago
I enjoyed Wizard of Lies too, but let's all take a deep breath
yoshyoshi 9y ago
Yeah that movie really helped me understood a whole picture

sitepodmatt 9y ago

Paywall. Non paywall link?

ironjunkie 9y ago
open in incognito mode

cm2187 9y ago

Are the paying people for lost returns? One one side these returns were fictitious, but on the other if you invested $100 in the 70s, should your claim in 2018 be only $100?

slededit 9y ago
People will be lucky to get cents on the dollar. Lost returns isn't even in the ballpark.
- cm2187 9y ago
  There still needs to be a way to allocate the recoveries. If investor A invested $100 in 1970 and investor B invested $100 in 2006 do they both get the same recovery?
  - quickthrower2 9y ago
    And do you get inflation? or the "fake" returns? What if there are a mix of real and fake returns?
  - x0x0 9y ago
    Unfortunately, they do. The conclusion was that, because for quite a period there were no investments, just a scam, that the law says money-in, money-out. In particular: > The accounting of "funds stolen" in this matter excludes inflation, interest, time invested, opportunity cost, and falsely reported balances. The interpretation of the laws do not consider time value of money when reimbursing lost funds. see https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Madoff_investment_scandal https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Mad...
    - sjwright 9y ago
      The key quote from that article: > "...no legitimate investments were made on the investors' behalf for at least the last 12 years..." It's unfortunate for the people who thought they were earning interest, but it wasn't earned; it was money stolen from other investors.

joering2 9y ago

Can someone explain me how Ponzi Scheme is different from Social Security System in USA, given of course the first is a scheme prohibited by US govt?

abakker 9y ago
Because it is the government, not a person and because the government explains how it works. They aren’t the same, because a scheme is supposed to be secret.
- danjayh 9y ago
  That may be true, but the government still lies about what people will be able to take out, just like Madoff. Social security has a massive unfunded liability. This means that one of three things happen: * Benefits amounts are reduced for everyone (In my view, this is probably the fairest option) * Retirement age is increased for everyone (I personally hate this option, but think that it's the most likely) * Benefits become even more means tested than they already are (and they are, even though people claim they're not -- high income people get far less per dollar in than low income people) (In my view, this is probably the least fair option) If you're under 50ish and you're counting on Social Security, I think you're making a judgement error. Especially if you're in the upper income quintile. Everyone that's in the top 20-25% needs to be putting the maximum allowed amount into their 401(k) every. single. year. If you can't save around 18% of household income in a 401(k) or 403(b) due to the limits, save after tax (unless, of course, you plan on working until almost age 70). Personally, because I put a lot into my 401(k) I'll be much better off in retirement than I am now if I actually get Social Security and the pension that I've been promised by my megacorp, but since I'm 36 and all of the boomers are working on retiring, I'm pretty sure that both will be bankrupt.
  - joering2 9y ago
    Very good info thanks. You should not been downvoted. As far as I remember through reading Madoff depositions, some of his clients knew he is running ponzi, so previous post's claim that its a secret don't always apply.

cyphunk 9y ago

Irony of a dead system. MADOFF: Rich man looses money of old timey rich people, government scrambles to find and repair. MTGOX: e-BTC collude with hackers to hack MTGOX, FBI takes down e-BTC, FBI keeps money.

celticninja 9y ago
It was BTC-E and you are missing some important information. Btc-e collusion not yet proved, FBI still keep the money, BTC-E remain in business and arrange to refund users at their own expense. So the analogy would require the government to take Madoffs money while claiming he was defrauding users and Madoff continuing his scheme and returning to them the money the government had taken from him/them.
- cyphunk 9y ago
  You are right, my comparison is absurd. bTCe work to return funds to their customers though, not those of mtgox. Nor should they need to, if indeed the accusation they colluded with MTGox hackers is false