MVF Commences Distribution 8

September 2022 Update

Setting a New MVF Record for Total Payouts

In its eighth major distribution, MVF is bringing participating victims to a recovery of 88.35% from all sources. That represents a 7% increase from the prior payment level set in D7. With the D8 distribution, MVF has now provided financial assistance to 40,454 victims of the Madoff fraud, making cumulative payments of $4,078,153,159. That is almost $30 million more than our total assets of $4,050,000,000 when we began making payouts. This was made possible because the Department of Justice (“DOJ”) has continued to recover additional forfeited assets for payment to victims.

MVF was created in 2013 to distribute funds forfeited to the United States to victims of the Madoff fraud. Since the claim filing deadline in spring of 2014, DOJ has approved 42,719 claims from Madoff victims. As part of this process, MVF evaluated over 68,000 initial claims to determine eligibility and to compute losses. MVF traced billions in cash that flowed into Madoff through more than 1,200 investment firms or intermediaries back to the ultimate victims whose money was stolen. Indeed, in many cases cash from investors flowed through three or more different intermediaries on its way to Madoff, and each step had to be verified.

Tracing the cash of Madoff’s investors was a complex and difficult task, but it enabled MVF to identify the “ultimate” victims of Madoff’s crimes and to calculate their losses from the fraud. The MVF Plan of Distribution recognizes that the investors whose money was stolen were the direct victims of the fraud, not the intermediaries that served as conduits of the victims’ money. From the outset, MVF has made our payments directly to victims based on the losses investors documented to us, rather than allowing any of the intermediaries, or courts overseeing them, to determine who should be paid, and how much. Our Plan of Distribution limits recoveries to people who lost their own funds that were invested in Madoff when it collapsed, without limiting eligibility based on the path that investments took to reach Madoff. That enabled MVF to eliminate the very great disparities in recoveries that previously existed where some victims had received very large recoveries, and thousands had received little or nothing.

MVF’s total direct payments to 40,454 victims now exceed $4.078 billion.

Resolving Issues of “Collateral Recoveries”

In applying percentage recovery levels to each victim, DOJ regulations require MVF to reduce remission payments by amounts a victim has already received from other sources (“collateral recoveries”). This is a fundamental principle that MVF will not pay for “losses” that victims have already recovered. MVF’s reserves are finite, so double payments for some former investors would correspondingly reduce payments to all others. Thus, DOJ’s regulations on collateral recoveries prevent inequities that would occur if some victims were overpaid, and others underpaid.

MVF started with a relatively small amount of funds given the vast scale of victim losses. Therefore, the MVF Plan of Distribution structured the payment process so that MVF used its funds to build on the recoveries, if any, that victims had already received or that they had reasonably available. In practice, roughly half of the 40,000-plus victims receiving payments from MVF had little if any recoveries from any outside source other than MVF. For those victims, we have provided either 100%, or virtually all, of their recoveries. For the other half of victims who have been paid by MVF, we have generally provided a significant majority of total recoveries, though in varying proportions depending on what each victim had previously received. Importantly, however, MVF brings each eligible victim to a minimum recovery percentage from all sources except where in a limited number of cases we have had to adjust for pending litigation and uncertain collateral recoveries.

DOJ regulations also require MVF to reduce payments to victims by the recoveries that were “reasonably available” to them, even if not received. Where an investment intermediary through which a victim invested has undistributed cash received as a Madoff recovery, the victim’s share of that cash is also included in his or her collateral recovery total.

In some cases, potential future recoveries are also included in collateral recoveries. Even today, nearly 14 years after discovery of the fraud, there are numerous court cases seeking recoveries of billions of dollars. Money obtained through these actions could ultimately be available to pass through to certain former investors in Madoff or investors in specific intermediaries. Therefore, large and reasonably likely future recoveries must be considered in determining final payments.

DOJ has recently addressed certain categories of petitions involving these issues of potential future recoveries. These decisions required careful balancing of the interests of petitioners who invested through specific channels and the interests of all other petitioners. These and other decisions have helped clear the way for MVF’s final payouts.

Completing the Remission Process

When MVF was created, DOJ allocated $2.35 billion in assets forfeited from people or entities related to the Madoff fraud to the MVF remission program. Several years later, additional assets were forfeited, adding just over $1.7 billion in additional recoveries. This brought MVF’s assets to $4,050,000,000. DOJ has subsequently been able to increase MVF assets further. With D8, MVF’s actual distributions to 40,000-plus victims are now roughly 174% of total funds at the outset of the MVF process. Without the additional recoveries, we would not have been able to reach our current 88.35% baseline recovery.

With the completion of these payouts in D8, MVF has moved far down the path to completing our distribution process. After D8, MVF expects to have roughly $200 million in remaining funds. Much of this amount is reserved until specific petitions or requests for reconsideration with contingencies are resolved. In a remission proceeding of this size and scale, the details of final payouts depend on resolving every outstanding issue so that final victim dispositions can be made.

There is one new factor that every petitioner should note. In the past, checks that expired uncashed would be voided and reissued in the next distribution in most cases. After D8, there will be a different process due to the necessity of making a final distribution of MVF’s remaining assets. Therefore, if you receive a D8 check, you must cash it to be eligible to receive a final payment when D9 occurs.

Looking to the Future

We knew at the outset of this process that we would be able to provide at least modest assistance to thousands of victims who were not eligible for recoveries from other sources. As the process unfolded, we have been able to reach far more people with far more dollars than originally anticipated. In part that is due to continued recoveries by DOJ, and in part it is due to the impact of payouts by other programs that we can then supplement, rather than supplant. It also reflects the careful work of our entire team to identify victims and quantify their losses from investing in Madoff. After paying out nearly $4.1 billion and exceeding an 88% recovery level, we are now intensely focused on finishing our work of helping Madoff’s victims through our final payments. We will continue to work as hard as possible to deliver the maximum recoveries to all victims.

Respectfully,

Richard C. Breeden
Special Master, Madoff Victim Fund

Click here to view the Press Release from the U.S. Department of Justice announcing the eighth MVF distribution.

Click here to view the Press Release from The United States Attorney’s Office for the Southern District of New York.