Special Master Richard C. Breeden
Letter from the Special Master
November 18, 2013

The Madoff Victim Fund (the "MVF"), which I administer on behalf of the U.S. Attorney's Office for the Southern District of New York and the Department of Justice, today announced that it will begin accepting claims. Our program is broad and inclusive, and will vastly expand the number of investor victims who will be eligible for direct recoveries. This program will also recognize billions in investor losses that have previously not been acknowledged. The new program is described in detail in the Frequently Asked Questions section of our website. Claim forms are also available for immediate download.

MVF will offer direct recoveries to approximately 11,000 investors whose assets came into Madoff Securities indirectly through feeder funds, investment partnerships, bank commingled funds, family trusts or other pooled investment accounts. As a result, we expect approximately 12,000 direct and indirect investors will be eligible for a recovery, compared to approximately 1,000 remaining claimants in the bankruptcy proceedings. In addition to this enormous expansion of the number of eligible claimants, each investor victim will generally have his or her loss measured individually, and not as part of a group. This will allow more than a thousand victims to recoup individual losses, even though they invested through a pool that had net withdrawals and was declared an ineligible claimant in bankruptcy.

If you suffered a net loss of money that belonged to you as a result of the collapse of Madoff Securities,
and you can document your loss, you will generally be eligible to recover.
1

This important program to help victims is made possible by the success of the U.S. Attorney's Office in winning more than $7 billion in asset forfeitures from persons involved in the fraud at Madoff Securities. More than $5 billion of those forfeited assets were turned over to the Madoff Securities bankruptcy estate several years ago for distribution to creditors. The remaining $2.35 billion, and any forfeited assets recovered in the future, will be distributed through the MVF. The broader eligibility standards under forfeiture laws allow us to help thousands of victims who would not otherwise have a recovery.

Paying Victims, not Intermediaries. Madoff Securities utilized several hundred "feeder funds" and other pooled investment intermediaries to raise cash. While many of these pools were family entities with relatively small investments, several of these pools funneled billions of dollars into Madoff Securities. However, the funds in these pools ultimately belonged to thousands of investors, not to the pool or its managers. Under the MVF program, these underlying or "ultimate" investors will be eligible to recover their net losses. At the same time, the feeder funds and other pools themselves will not generally have a claim. MVF gives eligibility to the person whose funds were lost, not to the manager of such funds. MVF also intends to pay the victims directly to avoid any potential diversion of recoveries and to prevent funds from being affected by insolvency proceedings or litigation involving the feeder fund entities.

If your own money was invested through someone else's fund, and you can establish your actual loss,
then you will have a claim on MVF if you satisfy all other eligibility requirements.

Net Loss Is Required. MVF will use a "cash-in, cash-out" methodology to measure your loss. We start with all your cash investments in Madoff Securities and then subtract all your withdrawals. The resulting "net investment" will be your claim, less all recoveries you have already received, including payments from the SIPC or the bankruptcy trustee.

If over the years you withdrew 100% or more of the money you actually invested, you are not eligible to receive anything under MVF. These investors have fewer resources for the future than they thought they would have, since the "profits" in their account statements didn't actually exist. However, as in other DOJ cases involving Ponzi-style frauds, MVF will only reimburse you if you lost money that you actually invested.

You Must File a Claim. In order to participate in the Program, you must file a claim and document your loss. The website contains three different claims forms that can be downloaded and filed at any time. They are:

FORM DIR2
Direct Investors
FORM IND
Indirect Investors
FORM PV3
Pooled Vehicles
If you cannot tell which form to use, please click here for more information.

The bar date for making claims is February 28, 2014. Unlike direct investors, the "cash-in, cash-out" net loss of for each investor through a pooled fund was never determined in the bankruptcy. Since this can require lengthy documentation and analysis for some accounts, we urge indirect investors to file as quickly as possible. Since the burden of proof of loss is on the claimant, you may also wish to consider using advisors or accountants to help document your loss. PLEASE DO NOT DELAY STARTING THE PROCESS.

Today's announcement brings fairness and justice for thousands of victims a giant step closer to reality. MVF must still collect and evaluate thousands of claims to make sure every victim has a chance to recover, but that process will now move forward full force.

Richard C. Breeden


1 Exclusions exist for members of the Madoff family, other criminal defendants, individuals who have forfeited assets and other categories that are not generally applicable. The detailed information in the FAQs shown on this website qualifies the descriptions in this letter.

2 MVF will send a "prepopulated" Form DIR to each person with an allowed bankruptcy claim and unrecovered losses. For those investors, we will rely on determinations of "net investment loss" already made by the SIPA trustee without redoing that work. However, it is still your responsibility to verify and update all claim and recovery information pertaining to you. Therefore, even direct investors with allowed claims must complete the claim form we will send to them.

3 Pooled vehicles are generally ineligible claimants. However, a pooled vehicle may file a claim for any proprietary funds that did not belong to investors. In addition, all pooled vehicles may file a claim "on behalf of" each of their individual investors. Because some pooled entities may have the best records showing net investment totals for their investors, we encourage them to file available information to assist documentation of investor claims.


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