Monday, June 8, 2009

Madoff Victims Want More

A group of Madoff victims have filed suit to change the way losses are being calculated in the fraud. Currently, losses are calculated as the difference between the total amount paid into the scheme and the total amount withdrawn. However, this group of victims believes that the current calculation is unfair. Via the NYT:
The customers say that, by law, they should be given credit for the full value of the securities shown on the last account statements they received before Mr. Madoff’s arrest in mid-December, even though they were bogus and none of the trades were ever made. According to court filings, those account balances add up to more than $64 billion.
The calculation of losses is especially relevant when considering eligibility requirements for SIPC compensation:

Customers who qualify are eligible for up to $500,000 in immediate compensation from SIPC. Those whose eligible losses exceed that amount would divide up the assets recovered by the trustee.

Thousands of long-term investors, including elderly people who lived for decades on withdrawals from their Madoff accounts, do not qualify for SIPC payments because they withdrew considerably more over time than they originally entrusted to Mr. Madoff, Barry Lax, a lawyer for the plaintiffs, said.
Aside from the fact that many of these individuals are undergoing serious hardships because of their losses, I don't see any possible justification for the calculation of losses based on fictitious gains. The bottom line: why should we give taxpayer dollars to individuals who profited from Madoff's Ponzi scheme?

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