Ponzi Schemes
11:46 am
Wed September 25, 2013

Feeder Fund Investors May Get Madoff Payout

Bernard Madoff's 2009 mug shot.
Bernard Madoff's 2009 mug shot.
Credit US Department of Justice

People who lost money in the Bernard Madoff Ponzi scheme after investing in feeder funds could get a share in more than $2 billion recovered by the government. So far, feeder fund investors have been shut out of compensation.

The Madoff trustee, Irving Picard, has so far been reimbursing people who are defined as customers of Madoff -- those who invested in the main fund run by the fraudulent manager. People who invested in funds that subsequently reinvested in Madoff were not regarded as customers under financial rules, so they've been out of luck.

Richard Breeden, the special master appointed to oversee distribution of $2 billion that was forfeited to the government, says he has a wider brief to make restitution not just to customers, but to victims of Madoff, a term that could encompass feeder fund investors. The forfeiture was made as part of the government's criminal case against Madoff.

Breeden was appointed last December to oversee its distribution, but he hasn't yet set a date for making payouts. Bernard Madoff is currently serving a 150 year prison term for orchestrating the massive Ponzi scheme.