Madoff Con Reaches Global Proportions

NEW YORK (TheStreet) -- Bernard Madoff's Ponzi scheme may have defrauded investors from every continent on the planet, except Antarctica.

The U.S. Department of Justice unit in charge of the Madoff victim fund said Tuesday the fund has received more than 51,700 requests from investors in 119 different countries claiming losses of more than $40 billion.

The massive tally is much larger than the initial $18 billion in losses claimed during a bankruptcy court case recovering money for cheated Madoff investors.

"Other than the Gobi desert and the polar icecaps, few places on earth seem to have escaped the scourge of this fraud," Richard Breeden, who's in charge of the Justice Department effort to process claims, said in a public statement. "This fraud was of epic, and truly global, proportions."

The fund had the ability to grow into a billion-dollar operation in large part because of the unbelievable gains Madoff claimed while managing the scheme.

In 1999, financial analyst Harry Markopolos informed the Securities and Exchange Commission that he believed it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver.

Others were also skeptical that Madoff could increase his fund's volume at the pace he claimed, considering his accounting firm was comprised of three people with only one active accountant.

The funds ultimate demise came in 2008 when Madoff confided to a senior employee that he could not meet $7 billion in redemptions and soon thereafter admitted he was a fraud, according to Bloomberg.

Investor fraud claims have not yet been reviewed to eliminate ineligible, duplicate or overstated claims, which the victim fund expects to be substantial.

The fund said it plans to distribute just over $4 billion assets forfeited in the Madoff case, but has only enough to pay back investors 10 cents on the dollar. Officials further said they received more than three times as many claims as filed in the bankruptcy proceedings, with a majority of the claims amounting to around $500,000

"Seventy-five percent of the people who filed claims with us have not yet gotten one dollar back in the last five years... We have had a literal avalanche of claims and related paperwork," Breeden said in a radio interview.

Investors across the globe don't know when they will see their money again. As for Madoff, he is serving a 150-year sentence in a North Carolina prison.

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

 

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