Bernard L. Madoff’s investors were mailed checks totaling about $2.5 billion, almost four years after the Ponzi scheme operator was arrested.
Traders said anticipation of the payment, which many investors see as the last for a while, has spurred sales of Madoff claims in recent weeks.
Irving H. Picard, who is liquidating the con man’s firm, said checks for the second distribution from a customer fund were mailed yesterday to people with approved claims. He has previously paid investors $336 million from the fund, now standing at $7.3 billion, according to his website. The Securities Investor Protection Corp., which hired Picard and pays his fees, compensated investors for $803 million in losses after the Madoff brokerage collapsed.
“While this progress is extremely gratifying, we will not cease our work” of returning money to its rightful owners, Picard said in a statement. The three payments satisfy half of the current Madoff accounts whose claims he has allowed, he said. The average check mailed yesterday was for about $2 million, according to Picard.
Prices of larger claims have climbed steadily to 70 cents on the dollar from 67 cents in July, said Joseph Sarachek, managing director of claims trading at CRT Capital Group LLC, which buys and sells distressed debt. One $80 million claim, which he tried to buy, traded for 70 cents, he said.
Trading has been the most active ever, with 50 sales since July 18, as claim holders anticipate a long wait before a third payment from the Madoff customer fund, according to Sarachek.
Reflecting the latest payment, which will return 33 cents on the dollar to claim holders, prices will fall as far as the low to mid 30s, “based on uncertainty about the next distribution,” he calculated. From that price, he said he sees little risk that values will fall much as the liquidation grinds on, recommending the claims for hedge funds and other buyers of distressed debt.
“It will likely last three to five more years, providing hedge fund investors with a safe haven for funds,” he said.
Court challenges until July had tied up most of the $9.1 billion that Picard has raised since Madoff’s 2008 arrest, mostly through settlements. That was more than half the estimated $17.3 billion lost in Madoff’s Ponzi scheme.
Meanwhile, SIPC has spent $621 million to fund the liquidation proceeding, it said in a statement today. Picard and his law firm have charged SIPC more than $300 million in fees, according to court filings.
The trustee’s next hurdle is an appeal of rulings in four lawsuits against banks that barred him from demanding a total of about $30 billion on behalf of the con man’s investors. The banks, including UniCredit SpA (UCG), JPMorgan Chase & Co., UBS AG (UBSN) and HSBC Holdings Plc (HSBA), oppose his appeal. The court set a proposed date of Nov. 19 to consider the case.
Madoff is serving a 150-year prison sentence after pleading guilty to fraud.
The Madoff liquidation case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities Inc., 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The criminal case is U.S. v. Madoff, 09-cr- 00213, U.S. District Court, Southern District of New York (Manhattan).
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