How much did Madoff scheme cost?

Madoff's claim to have defrauded investors out of $50 billion may have been exaggerated, attorneys say, and it could take years to unravel the true cost.

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NEW YORK (CNN) -- The Bernard Madoff scandal will certainly end up as the most expensive Ponzi scheme in U.S. history, but the $50 billion price tag claimed by the disgraced financier may end up as fictitious as the returns that he had promised investors.

Madoff, charged in December with defrauding investors by as much as $50 billion, may have calculated the figure based on double-digit returns he had promised but never delivered.

"Taking Bernard Madoff's word for the total number is probably not an accurate way of accounting for the losses," said Jonathan Levitt, an attorney representing individuals who lost money in the Madoff scandal.

"I don't think there's any way to know the total amount yet," said Greg Blue, an attorney with Morgenstern, Jacobs & Blue. "Everything we've heard is that his books and records are in disarray. There's no official tally yet."

The task for investigators poring over Madoff's muddled books is to figure out the scope of the losses.

A Ponzi, or pyramid scheme, is an investment fraud in which high profits are promised to investors from fictitious sources. Early investors, and those who take early returns, are paid off with funds raised from later ones.

Say an investor put $100,000 with Madoff in 1990 and saw that figure rise on paper to $1 million this year. Is the investor out his $100,000 principal or a total figure that never actually existed? For example, Yeshiva University announced this week that of its $110 million in Madoff investment losses, only $14 million came from principal.

These questions are complicated distributions taken by many investors on their investments. For example, if an investor withdrew 10 percent per year in returns, and made back all his principal, could he be accused of profiting from the Madoff's system of repaying old money with new, and subject to lawsuits from other defrauded investors?

A further question that some may be asking would involve the "opportunity cost." An investment placed with Madoff could have been made elsewhere and realized actual returns.

A court-appointed trustee, Irving Picard of the law firm Baker and Hostetler, is currently working through Madoff's investments for the eventual distribution to defrauded investors.

Madoff complied with a court order to supply a list of his assets to the Securities and Exchange Commission by Dec. 31, 2008.

Attorney Levitt said the process of untangling Madoff's web of financial dealings could take years and a team of 500 accountants, lawyers and researchers.

"I think the accounting will cost hundreds of millions of dollars," Levitt said. "The taxpayer is going to foot the bill." To top of page

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