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They way the money is being recovered, seems, from suing the investors whose money did not get stolen, and taking the early profits from them. That also includ

They way the money is being recovered, seems, from suing the investors whose money did not get stolen, and taking the early profits from them. That also included funds that invested into Madoff's scheme (knowingly or unknowingly that it was illegitimate at the time). "... Picard filed hundreds of lawsuits to “claw back” phony profits from a wide range of customers, including individuals, families and estates that invested with Madoff for years. The trustee also went after offshore “feeder funds” that collected cash from their own customers and funneled it to Madoff to tap his unusually consistent returns. …" is anybody else reading this differently? Because this was a Ponzi scheme, this seems to be the only way to 'make fair' so to speak. Are there other ways? This seems to be unfair to the investors who did not know the scheme was illegitimate. They lost opportunity to invest into somewhere else, it is not like any other investment was unprofitable at the time.

Nursie 8y ago
They did lose that opportunity. Shame for them, but in the end what happened here was a massive criminal action and it seems unlikely it can be repaired in such a way that everyone is recompensed, including for potential other uses of the money.
dd36 8y ago
Then they should do better due diligence. Their profits were literally stolen money.
selimthegrim 8y ago
Jeffry Picower, your number is being called.
bertil 8y ago
I was shocked reading it — truly horrified: I once hesitated to invest in what proved suspicious companies, and I definitely thought about the possibility of getting out. Experiencing claw-back after that because others were not as considerate… Wow. However, the article names people who definitely should have known better: people who know what are reasonable returns, but also what you need and can do to get unreasonable ones. People who absolutely could have decided this was fishy. There is a principle in banking around your level of expertise: you can’t invest too much if you are not knowledgeable enough. It’s a little unfair to the young aspiring investors, but it allows to put strict requirements on large institutions without hurting people who legitimately couldn’t have known. That decision does introduce a precedent and a new level of responsibility: if it is too good to be true, you are liable for it all. This might also introduce interesting trickle-down decisions: you could be on the hook for alerting authorities if you come across one of those because you have to check, and if you found something uninspiring, you can’t claim deniability. It’s uncomfortable at first, but as long as that responsibility is carried by reasonably large investors only, it makes sense. Whether it might have negative consequences (typically, gatekeeping the best opportunities) is debatable.
porpoisely 8y ago
You are correct. Since the profit or capital gain in a ponzi scheme is stolen money, the fair thing is to return everyone's principle as much as it is possible. Of course this will come as a relief to the late investors and it will be heartbreaking for the early investors whose profits are clawed back since those profits are stolen property. I do commiserate with the early investors who had to return their profits, but stolen property is stolen property whether they knew it was stolen or not. I can't imagine booking profits for years or decades and having to return all of it. As you noted, the opportunity costs are immense for these people.

Nursie 8y ago

They did lose that opportunity. Shame for them, but in the end what happened here was a massive criminal action and it seems unlikely it can be repaired in such a way that everyone is recompensed, including for potential other uses of the money.

dd36 8y ago

Then they should do better due diligence. Their profits were literally stolen money.

selimthegrim 8y ago

Jeffry Picower, your number is being called.

bertil 8y ago

I was shocked reading it — truly horrified: I once hesitated to invest in what proved suspicious companies, and I definitely thought about the possibility of getting out. Experiencing claw-back after that because others were not as considerate… Wow. However, the article names people who definitely should have known better: people who know what are reasonable returns, but also what you need and can do to get unreasonable ones. People who absolutely could have decided this was fishy. There is a principle in banking around your level of expertise: you can’t invest too much if you are not knowledgeable enough. It’s a little unfair to the young aspiring investors, but it allows to put strict requirements on large institutions without hurting people who legitimately couldn’t have known. That decision does introduce a precedent and a new level of responsibility: if it is too good to be true, you are liable for it all. This might also introduce interesting trickle-down decisions: you could be on the hook for alerting authorities if you come across one of those because you have to check, and if you found something uninspiring, you can’t claim deniability. It’s uncomfortable at first, but as long as that responsibility is carried by reasonably large investors only, it makes sense. Whether it might have negative consequences (typically, gatekeeping the best opportunities) is debatable.

porpoisely 8y ago

You are correct. Since the profit or capital gain in a ponzi scheme is stolen money, the fair thing is to return everyone's principle as much as it is possible. Of course this will come as a relief to the late investors and it will be heartbreaking for the early investors whose profits are clawed back since those profits are stolen property. I do commiserate with the early investors who had to return their profits, but stolen property is stolen property whether they knew it was stolen or not. I can't imagine booking profits for years or decades and having to return all of it. As you noted, the opportunity costs are immense for these people.