The trustee unwinding Bernard Madoff’s fraud has recovered more than $10 billion for victims five years after the biggest Ponzi scheme collapsed, including $543 million yesterday from Madoff’s bank, JPMorgan Chase & Co.
Irving Picard, the trustee, has recovered 59 percent of the $17 billion in principal lost by thousands of investors in Madoff’s investment advisory business. Picard said yesterday in a statement that the JPMorgan agreement resolves his claims the bank facilitated Madoff’s fraud for years by ignoring signs of fraud.
The settlement of the three-year-old lawsuit was made possible by the trustee’s team “uncovering and documenting the facts about JPMorgan’s relationship with Madoff,” Picard said in the statement.
Madoff’s JPMorgan account was used to perpetuate the fraud, according to Picard. Madoff deposited money from new customers into the account instead of investing it in securities, and made withdrawals to pay back earlier investors. Picard alleged JPMorgan ignored signs of wrongdoing to benefit financially from the con man’s business.
Picard is pursuing claims totaling about $3.5 billion from UBS AG, HSBC Holdings Plc and UniCredit SpA, which the trustee has also accused of benefiting from Madoff’s fraud. The banks have denied the claims.
Criminal Allegations
Picard’s $10 billion milestone comes as New York-based JPMorgan said yesterday it agreed to pay another $1.7 billion to the U.S. to resolve criminal allegations, and $350 million in a related case by the Office of the Comptroller of the Currency.
The parallel efforts by the trustee and federal investigators have resulted in a total recovery for victims of almost $14 billion, or 82 percent of the lost principal. Picard has distributed about $4.9 billion to victims, with billions more held in reserve until various legal issues are resolved.
“In the very early days of this effort, getting back a few pennies on the dollar was a goal,” Picard said in an interview last month, around the five-year anniversary of Madoff’s arrest on Dec. 11, 2008. Since then, Picard said, his team “has recovered far more than pocket change.”
Madoff, 75, pleaded guilty to fraud in 2009 and is serving a 150-year sentence at a federal prison in North Carolina. At least seven others pleaded guilty, including his brother Peter Madoff, who is serving a 10-year term.