Madoff’s market making operation being sold

Trustees handling Bernard L. Madoff Securities LLC, the New York investment advisory firm accused of perpetrating a massive Ponzi scheme for decades, is in the process of selling the market-making operation connected with the firm, trustee Irving Picard said today at the first meeting of creditors in the case.
So far, 2,450 claims have been received seeking to collect money lost by the firm, and the final number of claims is expected to be at least twice that amount, Mr. Picard said at the meeting in New York. He is a New York-based partner at Baker & Hostetler LLP, a Cleveland-based law firm. Some $650 million in assets has been recovered, but it is not yet clear what the total amount of valid claims will be, h Mr. Picard e said.
Claims must be filed by July 2 to be considered, he said.
Bernard Madoff, principal of the firm, was arrested Dec. 11 after reportedly telling family members that his firm had been operating a Ponzi scheme for years. At the time, he claimed that as much as $50 billion was lost as markets declined, preventing him from continuing to pay investors.
Apart from the $650 million recovered from banks, “The one asset that’s available that we are working on is selling the market-making operation,” Mr. Picard told the creditors. “That appears to have some value, and we’re in the process of getting some bids.”
In the next couple of weeks, the trustee expects to ask for approval from the bankruptcy court to sell it, Mr. Picard said. The trustee has been able to go back as far as the mid-1990s reviewing the firms’ records, he said.
There are fewer than 60 employees left of the original 175 to 180 employees, Mr. Picard said. In addition, artwork has been recovered that will be liquidated, he said.
Each account will be reimbursed up to $500,000 from the Securities Investor Protection Corp. of Washington, Mr. Picard said. Lost assets exceeding that amount will be reimbursed on a proportional basis based on what is recovered, he said. There had been speculation that the accounts only be reimbursed would up to $100,000 under SIPC rules, because the accounts contained no securities.
Mr. Picard stressed that administrative costs do not come out of customer property, contrary to reports in the press. “That goes for my fees, the fees of my law firm or the fees of any other consultant that we may require to help us do our work in this case,” he said.
Customers with more than one account, such as an individual account or an individual retirement account, are entitled to file claims for each account Mr. Picard he said.
But David Sheehan, a partner with Baker & Hostetler, made it clear that “claw-backs,” under which money that was paid to investors is returned, might be necessary when funds are distributed to “share the pain.” The claw-backs could apply to investors who received more money from the Madoff firm than they invested.
In certain instances, “we will be seeking to recover false profits from those who’ve received them in substantial dollar amounts over the course of many years,” Mr. Sheehan said. “Those false profits — you have to think of it this way — is your money,” he told the creditors. “There wasn’t any other money. There wasn’t any stock bought or sold. There was no profit to be had on selling that stock. It was all just made up,” Mr. Sheehan said.
But creditors at the meeting clearly saw it differently. “These claw-backs are making criminals out of innocent people,” one woman commented.
The creditors also implored Mr. Picard to ask Congress for help in the matter. “There were numerous congressmen that were extremely friendly with Mr. Madoff,” another woman said. “Yet they’re not speaking out on our behalf.”
“There’s nothing we can do about that, unfortunately,” Mr. Picard said. “We have enough work to do without getting involved,” he said, suggesting that they write to their congressional representatives.