Madoff victims win $7.2 billion from Picower estate

By Aaron Smith, staff writer


NEW YORK (CNNMoney) -- It's a landmark day for victims of Bernard Madoff's Ponzi scheme. A bankruptcy court judge approved the trustee's request to dole out billions of dollars in seized assets to the victims.

Judge Burton Lifland ruled on Thursday that Irving Picard, the court-appointed trustee in the recovery of assets stolen by Madoff, should free up cash to compensate victims.

This applies specifically to the $7.2 billion estate of Jeffry Picower, a philanthropist and Madoff associate who died of a heart attack in 2009. On Dec. 17, 2010, Picard reached a deal with Picower's widow Barbara, who agreed to turn over the money her husband received from the Madoff scheme so it could be returned to victims. This is the largest forfeiture in U.S. history.

"It was totally appropriate and correct and very beneficial to the victims," Picard told CNNMoney.

Picard claimed in court filings that Picower was a key beneficiary of Madoff's scheme. The trustee said Picower had withdrawn $7.8 billion from Madoff's firm since the 1970s, even though he only invested $619 million. Picower "knew or should have known that [he] was profiting from fraud, because of the highly implausible high rates of return" on his accounts, the trustee said.

Barbara Picower has denied that her late husband knew anything about the scheme.

Many victims have received compensation through the Securities Investor Protection Corp., which insured $783 million of the damages to investors. But with the court's ruling, this is the first time that victims will receive money from seized assets.

The trustee has verified nearly $6 billion worth of claims from 2,372 victims. More than 10,000 claims have been denied, in some cases because the victims withdrew more from Madoff than they invested, and in other cases because they invested through feeder funds.

The trustee has sued at least 400 investors, who withdrew more money from Madoff than they invested.

Madoff pleaded guilty in March 2009 to orchestrating the most massive Ponzi scheme in history. He used his Manhattan investment firm as a front for the pyramid-style scam.

He stole money from investors while claiming to be investing it in the markets. He would provide the stolen money to his more mature investors, like Picower, while fraudulently claiming that the returns were legitimate.

Madoff is serving a 150-year sentence in a medium security federal prison in Butner, N.C. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,131.97 100.83 0.59%
Nasdaq 4,552.76 33.86 0.75%
S&P 500 1,998.98 14.85 0.75%
Treasuries 2.59 -0.00 -0.08%
Data as of 6:24pm ET
Company Price Change % Change
Apple Inc 100.86 -0.77 -0.76%
Bank of America Corp... 16.71 -0.03 -0.18%
Yahoo! Inc 42.71 0.16 0.38%
Alcoa Inc 16.16 -0.23 -1.40%
Facebook Inc 76.08 1.50 2.01%
Data as of 4:02pm ET

Sections

Anheuser-Busch, one of the NFL's biggest sponsors, says it is disappointed with how the league has handled recent controversies. More

Scotland's independence vote is too close to call but those who want to keep Britain united won this year's campaign funding race by some distance. More

The FBI's new facial recognition system lets local police easily identify you. It will one day spot you from your iris, voice and the way you walk. More

Y Combinator president Sam Altman is teaching a startup class at Stanford with Silicon Valley heavy hitters as guest lecturers. Bonus: All the videos will be available for free online. More

What do all 401K millionaires have in common? Christine Romans explains what it takes to be a member of the club. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.