Federal law defines a “victim” as “any person” who suffered a “pecuniary loss” as a “direct result” of crime. For purposes of the MVF, you qualify as a victim if you lost your own money as a direct result of investments that were rendered worthless by the Madoff fraud.

You may have invested with Madoff Securities directly, or you may have invested with an investment partnership, family trust, investment company, managed fund of a bank, a “feeder fund,” or some other type of entity that in turn invested in Madoff Securities (directly or indirectly). It doesn’t matter how the money got into Madoff Securities – if it was actually your own money, it was actually invested in Madoff Securities¹, and you lost it due to the collapse of Madoff Securities, you are a victim.

¹ Losses on swap contracts or other derivative contracts that might have had their value measured by reference to Madoff Securities or its returns are not eligible for inclusion. Holders of such instruments may have suffered a pecuniary loss, but if there was no investment in Madoff Securities such losses were not the direct result of the Madoff criminality.

In plain English, the “victims” who lost their own money are the original, or “ultimate” investors who invested their own money such that it eventually ended up in Madoff Securities. A victim is someone who took funds out of any of their other assets and invested them either directly or indirectly with Madoff. The money may have been withdrawn from a savings or checking account, or could have come from the sale of other investment or non-investment assets. The money could also have come out of a 401(k) or other retirement savings vehicle. Victims used funds that belonged to them to make an investment with Madoff Securities, or with another entity that in turn invested in Madoff Securities, directly or indirectly.

In the bankruptcy, the so called “conduits” or other pooled investment vehicles that invested directly with Madoff Securities were treated as having allowed claims, while the persons who invested in those conduits were not recognized as having a claim. The MVF will work almost exactly the opposite. For purposes of the MVF, the ultimate investor, not the intermediary fund, has the claim.

Indirect investors often had their money placed with Madoff Securities through a series of intermediary entities. One group of investors may have placed their assets in Fund A, which invested in Fund B, which invested in Fund C, which invested in Madoff Securities. Other investors might have come in at the Fund B level, and still others at the Fund C level. All of these investors will be eligible victims if they can satisfy the other conditions to a recovery, most importantly proving the amount of their net loss.

In this context, the starting point for measuring a person’s pecuniary loss will be the aggregate of all deposits of cash that the person made into Madoff Securities. This is the amount that was actually stolen from you. Then, we must total up all withdrawals that were made from Madoff Securities, irrespective of whether the person thought they were withdrawing principal or only profits earned on the account. Unbeknownst to the investors, each withdrawal was simply a partial recovery of what was stolen from them, and the cash used to pay them was stolen from someone else.

In order to qualify for a recovery from MVF, you must have actually suffered a pecuniary loss, and you must be able to document that loss to the MVF’s satisfaction even if it means tracing funds through several investment intermediaries. Persons who withdrew more than they put in have already recovered the entire amount that was taken from them, and they are not eligible to recover more. We appreciate that there are many people who thought their account was worth far more than their actual cash investment, and therefore their perception of what they lost was much greater than the actual cash loss. Nonetheless, the law is clear that MVF can only pay claims based on the documented loss on a cash-in, cash-out basis.

Though “conduits” will generally not meet the definition of “victim” for purposes of MVF, to facilitate the administrative process of documenting losses, conduits will be allowed to submit claims on behalf of their underlying investors. Many times the investment funds and other “conduits” will have vital account information that will help their underlying investors, the real victims, establish the amount of their total loss. We will provide further guidance to conduits on applications on behalf of their investors. However, such an application does not change the fact that it is the investor, not the investment fund, who is the victim. MVF will most likely pay all victims directly, rather than through intermediaries.

No. As noted above all claims on the MVF must be based on a “cash-in, cash-out” analysis, not a measure of expectations such as the account statement value. We recognize that everyone who had money in Madoff Securities feels victimized, and even those who withdrew more than they put in believe they had a loss, because what they recovered was far less than what they thought their account contained. However, since the “profits” were never real, they have to be kept out of the measurement of loss.

To make a claim, you must be able to document how much you invested, how much you withdrew, and how much you have already received from any other source, as well as that the money really was yours, and not someone else’s in your custody. The MVF will help applicants in that process to the extent it can, but it is your responsibility to demonstrate the amount of your loss and you will not be eligible for a payment if you do not establish your loss.

1. Any person who knowingly participated in, benefitted from, or acted in a willfully blind manner relating to the fraud;

2. Any person who was an officer, director or employee of Madoff Securities at any time during the Madoff Ponzi scheme through and including December 11, 2008;

3. Any person who is a member of the Madoff family;

4. Any person who has forfeited cash or property to the DOJ in connection with the Madoff Ponzi scheme;

5. Any person who is a defendant in any state or federal criminal action relating to Madoff or Madoff Securities;

6. Any affiliates, assigns, heirs, distributees, spouses, parents, children or relatives of any of the foregoing, as the Department may determine, or entities controlled by, or under common control with any such persons;

7. Any person who is otherwise prohibited from receiving payments in the United States, including all prohibited persons under regulations of the Office of Foreign Assets Control. Other persons may be eligible, but will have their recoveries reduced under the offset program of the United States Treasury Department.

8. The Special Master, his immediate family, and any employee or consultant of RCB Fund Services LLC or Richard C. Breeden & Company LLC.

For “indirect investors” who were denied coverage by SIPC or participation in the bankruptcy, the bankruptcy trustee did not establish your net loss. Therefore, you will be responsible for proving your loss to the MVF. In many cases, the investment vehicle(s) through which your investment was made should be able to assist with documenting deposits and withdrawals, as they have had to do this in order to redistribute bankruptcy payouts and for many other purposes. You may have to provide other records such as investment statements, K-1s, bank statements, tax returns, copies of checks or wires, conduit payout reports, or other materials.

We will do everything we can reasonably do to help, but it is your responsibility to establish the amount of your loss. We will publish further guidance on this to assist claimants.

The trustee is currently holding approximately $4.5 billion in cash that has not yet been distributed, but will ultimately go solely to holders of “allowed” claims in the Madoff Securities bankruptcy. Thus, all of the current eligible creditors in the bankruptcy are likely to receive very substantial future payouts from the cash that is already being held in the bankruptcy estate’s reserves. Once this cash is distributed to recipients, the amount of their collateral recoveries that would be deducted from payments from the MVF will go up. Therefore, to avoid overpaying, in calculating losses we will take account of both the cash allowed claimants have already received, and their share of cash that will be distributed in the future.

This is complicated by the fact that a portion of the cash being held by the trustee will go to entities that are not today eligible creditors, but who may become eligible in the future. We may establish a deadline for attribution of cash to such “deemed determined” accounts or to other allowed claims. This will not affect you if you do not currently hold an allowed claim in the bankruptcy.

Another portion of the cash is being held until the courts determine whether the group of customers in the bankruptcy can increase their actual claim of loss by some “time value of money” component. The Bankruptcy Court has decided against including any “time value of money,” and this decision is being appealed. Thus, as of today, the trustee cannot tell the holders of allowed claims exactly what they will receive, even though under any scenario the future payouts to those with allowed bankruptcy claims will be very significant.

Since the “time value” of money issue inflates the amount of all allowed claims in the bankruptcy, but not any disallowed claims that are eligible for the MVF, MVF will ignore that factor in determining both eligible losses and each victim’s share of undistributed cash currently held by the Trustee. We hope that the appellate process for the bankruptcy proceedings will be completed prior to the MVF distribution, but if not the Department will make such adjustments to claim amounts as it determines to be appropriate.

No. As noted, the Bankruptcy Court’s decision not to include a “time value” enhancement of claims for purposes of the bankruptcy is being appealed. However, under the forfeiture laws and applicable DOJ regulations, there is no right to recover an “interest” component as part of damage calculations, and MVF will not allow any such element in the computation of claims.

In thinking about “fairness,” it is worth remembering that thousands of victims lost their entire investment and have not recovered a penny to date. There isn’t enough money available to make everyone whole, so our goal is to help all victims recover a portion of their actual cash losses. The overall process can never put people in the same position as they would have been in if they had made decisions to invest in legitimate investments rather than investing in what turned out to be a Ponzi scheme. However, even if all the damage of this fraud cannot be erased, we hope to enable all victims to recover a minimum portion of their actual cash losses.

Generally no, except for assets invested in Madoff Securites that belonged to the conduit itself, and not to its underlying investors. However, though the investment fund may not be a “victim” (except as to its own funds), investment funds will be eligible to file a claim on behalf of their investors. This will be particularly helpful to assist investors document the magnitude of their investment in Madoff Securities and their net loss. These claims on behalf of a fund’s investors can be made as a supplement to a claim filed by the investor, and can also be made if the investor does not file an individual claim directly with the MVF.

To the extent a conduit or other investment vehicle’s investors themselves make claims to the MVF, those claims will receive priority over the claim made on their behalf by the fund, which will become a backup or supplemental source of information supporting the investor’s claim. In addition, any money distributed by the MVF to investors who came into Madoff Securities through investment funds or similar entities will in most cases be paid directly to those investors, rather than to an intermediary. We will provide further guidance to conduits on applications on behalf of their investors.

That is the way it works in the bankruptcy and under SIPA, but not in remission proceedings. If someone stole your money, you are eligible to seek reimbursement out of forfeited assets that were recovered by the Department of Justice. But the invested assets that were lost must have belonged to you. If you held legal title to investments in Madoff Securities, as an intermediary or otherwise, but you were not the ultimate investor, then it is the investor, not the intermediary, who is generally the eligible victim under the Plan.

Of course, investment funds have whatever powers they have to collect assets of the fund, and we aren’t changing that. Investment funds are free to pursue actions to recover the assets of the fund under all applicable domestic or foreign laws, including the Bankruptcy Code. But the money held in the MVF is forfeited assets that belong to the United States of America. Therefore, these are not Madoff Securities “assets” that normal creditors, customers, administrators, liquidators or others can pursue, or that foreign entities have jurisdiction over. The purpose of the MVF is to serve as the vehicle through which the United States Department of Justice will help actual victims recover their losses.

As noted above, these two programs exist to pursue different objectives. The forfeiture program is designed to help all persons who suffered a pecuniary loss as a direct result of criminal activity. It is a very broad program designed to help the victims of crime recover a portion of their pecuniary losses resulting from the criminal activity giving rise to the forfeiture of assets. The MVF and similar forfeiture programs are an integral part of the Department’s efforts to deter criminal activity by taking away its profits. Beyond deterring crime, the program also provides a measure of “justice,” or fairness, to the victims of crime when it does take place. The ultimate policy objectives of the forfeiture laws are promoting law enforcement and providing recoveries for crime victims.

By contrast, the Bankruptcy Code and the Securities Investor Protection Act (or “SIPA”) (which overlays the Bankruptcy Code in the case of Madoff Securities) are narrower sets of laws designed to establish the relative priorities of “customers” and “creditors.” Bankruptcy proceedings are enormously important to the U.S. economy, but the goals of bankruptcy are commercial. The two programs have different objectives, and so they may have different results.

The law doesn’t allow that. Some persons who are eligible to receive distributions in the bankruptcy may not have suffered a loss (such as claims purchasers), or otherwise may not meet the definition of a “victim” of Madoff’s crime. Other people who had substantial net losses were not eligible to have a claim in the Madoff Securities bankruptcy because they invested indirectly, but are eligible for payments from the MVF. Many people will receive payouts from both programs, but some individuals or entities will be eligible to receive payments from one program but not the other.

Beyond the legal requirements, it wouldn’t be at all fair to simply pay more money to the small group of approximately 1,000 remaining bankruptcy creditors without paying anything to the much larger group of victims who also lost their investments, but have either received nothing, or far less than the holders of allowed bankruptcy claims.

A total of 16,519 persons or entities submitted claims in the bankruptcy. Of these, 2,512 received an “allowed claim,” and just over 14,000 claimants, or roughly 85% of the total, had their claims denied. To date almost 1,500 of the allowed claims have been paid in full, while approximately 1,000 allowed claims have already received distributions in the bankruptcy ranging from a minimum of 43% to a maximum of 100% of their losses. Considerably more cash remains in the bankruptcy estate which will be distributed solely to the small group of holders of allowed claims. By contrast, none of the persons whose claims were denied in the bankruptcy have received anything in direct distributions in the bankruptcy, and many of those have not received anything in indirect distributions either. While we won’t know the number of eligible claimants until the process is further along, far more victims will now be eligible to recover for their losses. So, we believe that MVF may be able to help thousands of new claimants who to date have been completely left out of recoveries for losses that were just as devastating to them as the losses suffered by those with allowed bankruptcy claims.

To be clear, neither the MVF nor the Department of Justice believe that the denial of claims in the Madoff Securities bankruptcy proceedings was wrong or contrary to law, or even unfair. As we have said, the Bankruptcy Code and SIPA are clear about who is a “customer” or “creditor” of the firm, and the courts have applied those statutory definitions in the case of Madoff Securities. But the MVF must apply the forfeiture laws, which define “victims” more broadly in order to do justice to the people directly harmed by crime, even if they didn’t have a direct relationship with the criminals.

At MVF, our mission is to help all “victims” of Madoff’s crimes, not just those who had direct accounts at Madoff Securities. Investors who lost their own money either directly or indirectly due to the fraud at Madoff Securities will be entitled to seek a recovery from the MVF.

No, this is one of the many ways that the Bankruptcy Code and SIPA are different from the forfeiture laws. In the bankruptcy, the eligible claimant is the person or entity who actually had an account at Madoff Securities, which is generally the last person or entity that held funds prior to giving them to Madoff. That is true even if that person was simply transferring money that actually belonged to others. In the remission proceeding, any person who used their own funds to make an investment that ended up in Madoff Securities is our “victim.”

Again, there are many differences between forfeiture law and proceedings under the Bankruptcy Code as amended by SIPA. In the bankruptcy proceeding, all investors in a single investment fund were denied any recovery if the pool as a whole had more withdrawals than investments. Such a fund was not deemed to have any loss, and the bankruptcy analysis focuses on the fund itself. So, individual investors with net losses who invested in Madoff Securities through a fund that had net withdrawals could not recover anything because of the withdrawals of other people.

Under the MVF program each investor victim will generally have his or her loss measured individually, and not as part of a group. However, MVF will combine every account that an individual investor had with Madoff Securities, and measure whether in total the individual victim invested more into Madoff Securities than he or she withdrew. If an investor had interests in more than one account, some of which had net losses and some of which had net withdrawals, the claim must reflect all those accounts, not simply the accounts that showed a net loss. This analysis will not reduce the investments of one investor by the withdrawals of another. However, it will allow consolidation of multiple accounts owned by the same individual or any other person where the MVF determines that there is a “unity of interest” among related accounts or individuals.

It will depend on the facts. As described above, MVF will focus on the magnitude of the loss of each “ultimate investor” in a pooled investment vehicle or fund, including a family pooled account. Thus, in almost all cases we will look to your total investment into Madoff Securities, less your personal withdrawals. You may have a claim, while your brother (or your parents) may not have a claim. The principle here will be to treat victims individually, unless the MVF determines that there is a “unity of interest” among different people or accounts. Where such a common identity exists, then all withdrawals must be offset against all deposits in determining whether there was a loss.

With investments in a family group, the facts will be important. In some situations, all the money that was invested may have come from parents or a family business, and simply been credited to different family members. In that situation, the MVF may look to the aggregate deposits and aggregate withdrawals of the entire group. In other situations, individual family members may have used their own investable assets to participate in an investment in Madoff Securities alongside other members of their family (and perhaps friends or business associates). In that situation, those family members with their own net investment loss may be able to recover even if other family members had net withdrawals. In all cases, the Department will make a final determination whether or not to aggregate the investments and withdrawals of multiple related individuals in its discretion based on all the facts.

Your net loss will be calculated using the same cash in, cash out methodology that will be used for all victims. Then, your claim will be reduced by all “collateral recoveries” described elsewhere in these FAQs.

No, it doesn’t mean that at all. Neither the MVF nor the Department is involved in any transactions you may have entered into, or any obligations you may have, to pay money to other people. If you have an obligation to pay someone in the event you receive a distribution from MVF, that is between you and such person.

Exactly.

Yes. If you have a valid claim and are eligible to receive a distribution, but you previously sold your right to a distribution from the MVF to someone else and you acknowledge that obligation, you can ask the MVF to send any payments you would otherwise have received to that other person directly. MVF’s willingness to accommodate any such request will be subject to the Department’s review of all the facts and circumstances, and to limitations it may establish. For example, any such transaction must have occurred prior to November 1, 2013, and both the original victim and the proposed payee must meet all other qualification standards and not be an ineligible person. Thus, both Office of Foreign Assets Control and Treasury Offset Programlimitations will be applied. Further, both parties must acknowledge that the proposed payee is the current “owner” of all rights to such funds, and is not a nominee of an undisclosed principal. There may be other conditions to such “ratification” payments.

The claim will equal the victim’s original net loss reduced by collateral recoveries, which will include any SIPC payment, all distributions by the bankruptcy trustee (whether before or after the sale of the claim), and including any undistributed assets of the trustee that may be attributed to the victim’s claim. In addition, collateral recoveries will include any insurance and class action recoveries and any other form of compensation on the claim.

We will resolve any such situation, if it arises, on a case by case basis, working with all parties to minimize administrative burdens and unnecessary litigation. In appropriate circumstances we may either go ahead and pay the victim who denies a sale took place, hold the payment in escrow if there is pending litigation between two (or more) parties regarding the entitlement to the payment, or deny both claimants. The Department will resolve all such situations in its sole discretion. However, the Department will under no circumstances initiate or participate in litigation regarding who is entitled to payment. Because the forfeiture laws and regulations expressly prohibit the sale or transfer of a victim’s claim, the Department will treat all such disputes as what they are: disagreements among private parties concerning contracts to which the United States is not a party. The Government has no interest in involving itself in private contract disputes.

If you are an eligible victim under the Plan, you are free to make a claim no matter what the trustee or administrator of your investment program did. But the amount of your claim to the MVF may be reduced by any money you may have received from the investment fund. A sale of rights by an investment fund in which you invested should not affect your eligibility, as the investment fund did not have a claim on the MVF to sell other than for its own proprietary funds. Claims with respect to underlying investors didn’t belong to the investment fund, so it couldn’t sell them.