Customers of Bernard Madoff’s brokerage, who have received just $333 million from the liquidator of the con man’s estate, will get a second payment of $1.5 billion to $2.4 billion, an amount some investors found disappointing.
Madoff trustee Irving Picard said he will ask a judge to approve the distribution, which would bring payments to as much as 50 percent of allowed claims. Part of $5 billion received in a settlement with the Jeffry Picower estate would be used for the payment, although “a large portion” would be held in reserve, he said in a statement today.
“I’m hearing from investors that they were expecting a larger distribution,” said Joseph Sarachek, managing director of claims trading at CRT Capital Group LLC, which buys and sells distressed debt including that of Madoff’s brokerage. “I think the trustee is doing a great job in moving the ball forward.”
Court challenges had been tying up the majority of the $9 billion that Picard has raised in the 3 1/2 years since Madoff’s 2008 arrest, mostly through settlements. Last month, a former Madoff customer, Adele Fox, dropped her challenge of the Picower estate’s forfeiture of $5 billion to Madoff’s estate and more than $2 billion to the U.S., and the U.S. Supreme Court refused to hear a challenge to Picard’s payment formula, freeing up part of a $2.3 billion customer fund.
In a lawsuit, Picard had accused the deceased Picower, among Madoff’s largest investors, of knowing of the fraud.
Prices for claims on the con man’s estate have climbed to about 65 cents on the dollar from the low 60s, as traders gain “a sense that things are being resolved,” Sarachek said.
Holding Picower money in reserve is necessary because some customers are demanding compensation for inflation or lost interest, or are appealing other settlements, Picard said in the statement.
Picard has charged around $273 million for his firm’s Madoff work. Madoff, who cost investors around $17 billion in lost principal, is serving a 150-year prison sentence.
The Madoff brokerage liquidation case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).