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Madoff Victim Fund

Plan of Distribution/Frequently Asked Questions

Updated: November 18, 2013

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On November 18, 2013, the United States Attorney for the Southern District of New York and the Asset Forfeiture and Money Laundering Section of the Department of Justice announced that victims of the fraud perpetrated through Bernard L. Madoff Investment Securities may now begin submitting claims to the Madoff Victim Fund. The Madoff Victim Fund consists of approximately $4 billion gathered to date through various criminal and civil forfeiture actions brought by the United States Attorney’s Office for the Southern District of New York.

As described below, literally thousands of victims of the fraud will be eligible for a direct recovery for the first time in the Madoff proceedings. The Madoff Victim Fund will receive and evaluate all claims, and then make recommendations to officials at the Department of Justice. The Department’s officials will act on those recommendations in light of the regulations that govern payments of remission. The Department of Justice retains the discretion to amend or modify the standards of eligibility or other conditions of this program, and DOJ will make all final decisions.

At the outset of this important process, the Madoff Victim Fund and the United States Attorney’s Office want to provide as much transparency as possible into the new standards governing who will be eligible to recover. We also want to highlight the significant differences between the eligibility standards and processes that MVF will utilize and the process currently being administered in the Madoff Securities bankruptcy proceedings. The questions and answers set forth below are intended to provide victims with detailed guidance for understanding who is eligible, how claims will be reviewed, the process that will be followed and other important issues. We will amend these FAQs as necessary in the future to provide the best possible clarity surrounding the process.

Who is eligible to recover from the Madoff Victim Fund?

Q1. What governs my ability to participate in payments by the Madoff Victim Fund?
Any person’s eligibility to make a claim for remission to the MVF depends entirely on the decisions regarding eligibility that will be made by the U.S. Department of Justice (the “Department” or “DOJ”). As described in other FAQs on this website, the Attorney General of the United States has the authority to make decisions regarding the “remission” of assets forfeited to the United States. The Attorney General has in turn delegated this authority to the Chief of the Asset Forfeiture and Money Laundering Section (“AFMLS”) within the Criminal Division of the Department. DOJ retains the sole discretion to make changes in eligibility to participate in the MVF at any time, and to evaluate each claim in light of its particular facts and circumstances. Thus, these FAQs may be revised at any time as appropriate to reflect decisions of the Department.
Q2. Who is eligible to receive payments from the MVF?
To be eligible to participate in payments from the MVF, a person must be a “victim” of the fraud perpetrated through Bernard L. Madoff Investment Securities LLC (“Madoff Securities”). Any person who is not a victim of the Madoff fraud is not eligible to receive a payment of remission.
Q3. Who qualifies as a victim?

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.

Q4. When you say a victim is anyone who lost their own money in Madoff's fraud, what exactly do you mean by "their own money"?
“Your own money” means funds that ultimately belong to you, not to someone managing the funds on your behalf. At MVF, we will look to the ultimate investor, rather than to intermediate vehicles (even though intermediate vehicles may have had legal title to assets under their management) if such intermediate vehicles are stakeholders for the actual investors who placed funds with them. Thus, in general investors in feeder funds are the ones who lost their own money, not the feeder funds who were managing investments on behalf of those investors.

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.

Q5. I understand that a victim is anyone who lost their own money, whether they invested directly or indirectly. But how do you define who "lost" money?
To complete a claim to the MVF, you must be able to document that you suffered a “pecuniary loss” on your investments. If Madoff Securities had been a legitimate firm making real investments, the value of your account as shown on its most recent statement before the failure would be the measuring point to demonstrate the amount of loss that occurred. In such a case where actual investments were made, the amount of loss would be the cash deposited in the account plus the net profits earned, minus withdrawals. However, with a Ponzi scheme real investments and real profits did not exist.

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.

Q6. Are direct account holders of Madoff Securities automatically victims?
Generally, yes – but not automatically. Individuals who held accounts directly with Madoff Securities will generally meet the MVF eligibility standards as victims as long as they lost their own money in the fraud, and have not fully recovered their losses. However, “conduits,” “feeder funds,” or other indirect investment vehicles that had direct accounts with Madoff Securities may not meet the eligibility standards if the invested funds belonged to underlying investors rather than to the conduit itself. You are not a victim unless you lost your own money, not someone else’s.

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.

Q7. I invested my money quite some time ago, and my claim in the bankruptcy was denied because I withdrew more money than I originally deposited. But I never withdrew the principal of my investment, only the profits credited to the account. I feel that I "lost" my investment yet the trustee determined I was a "net winner" and I have not received any recovery. Will I be an eligible victim alongside the indirect investors?

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.

Q8. Will everyone who suffered a loss be eligible?
Generally yes, but certain persons are disqualified from participating in the MVF even if they suffered a loss. For example, members of the Madoff family are disqualified, as are all employees of Madoff Securities, and the Department also may disqualify any person who received remuneration, such as fees or commissions, from handling or directing investments to Madoff Securities. Set forth below is a list of the major disqualified persons, although the Department retains the discretion to modify these categories prior to action by the Ruling Official, and in all cases reviews claims on a case-by-case basis. Disqualified persons or entities generally include:

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.

How will the Madoff Victim Fund work?

Q9. How do I submit a claim?

Claim forms are available on the MVF Website. Note that there are three different forms, depending on whether you held an account directly at Madoff Securities, invested through an intermediary, or are filing a claim on behalf of a pooled investment vehicle. Instructions for submitting a claim, including where to send it and what documentation must be provided, are included on the form itself. If you have an allowed bankruptcy claim with unrecovered losses, MVF will send you a claim form that is already filled out with information from the bankruptcy proceedings.

Q10. Is there a deadline for submitting my claim? (amended)
Yes. All claims must be mailed to the Madoff Victim Fund and postmarked no later than April 30, 2014.
Q11. How do I establish the amount of my loss?
It is your responsibility to establish to the satisfaction of the Ruling Official within the Department that you suffered a specific, net loss. For “direct investors” who have an allowed claim in the bankruptcy process, the MVF will work from the documentation you submitted, and you will not need to re-submit it. MVF will send these investors a claim form that already contains the information submitted in the bankruptcy. Investors will then need to verify the accuracy of the information, and also add certain additional information, such as information about any recoveries already received.

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.

Q12. Do I get to include lost profits in my loss?
No. Madoff Securities was a Ponzi scheme, not a real investment. Any “profits” credited to an account did not really exist. Whatever you put into Madoff Securities was stolen from you in Madoff’s fraud, and whatever you got back was a partial recovery. Anyone who received more cash than they put in received money stolen from other people, and is not a “victim” under the MVF’s Plan. Without exception you must have suffered a pecuniary loss in order to be eligible to receive a payment of remission.
Q13. Will you deduct payments I have received from the bankruptcy trustee or SIPC in calculating my loss? Does my eligible claim on the MVF get reduced by my share of the cash the trustee is holding, but hasn't yet distributed?
Yes and yes. There is a limited amount of money to compensate an enormous group of victims, some of whom have not yet received a penny. So, no double dipping will be allowed, and no one is eligible to recover more than his or her actual “net loss” on a cash-in, cash-out basis. Similarly, if you received payments indirectly from the bankruptcy, via distributions by a feeder fund or other conduit, those recoveries also reduce your eligible loss.

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.

Q14. I suffered a pecuniary loss based on the cash in, cash out computation. But my money could have been invested in other things during all the time it was in Madoff Securities. Can I include some element of the lost time value of my money in my calculation of loss?

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.

Q15. I am the administrator, liquidator, or principal of an investment fund that combined multiple investors' money and then invested in Madoff Securities. Are such funds that invested in Madoff Securities victims?

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.

Q16. Under the law that governs my pooled investment vehicle, the fund was responsible for investment decisions, and the fund has the power to collect assets of the fund. Doesn't that mean the fund should receive any payments from the MVF?

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.

Q17. Who does not qualify as a "victim"?

If a person or entity did not suffer a monetary loss as a result of the collapse of Madoff Securities, it is not a “victim” for purposes of MVF. For example, a person who lost money because a Madoff investor could not complete a gift or a contractual obligation is not a “victim,” as any loss they suffered came about indirectly rather than directly. Under DOJ regulations, a general creditor is also not a victim. And someone who was not an investor prior to the collapse of Madoff Securities but later purchased a claim is not a victim (although, as described below, the MVF will recognize some claims purchasers in a different way). There are many other examples of people who are not victims, and this question will be reviewed in every individual case depending on the facts.

Q18. What if the money I invested in an investment intermediary wasn't 100% invested in Madoff Securities?

You are still an eligible “victim” to the extent that you were the original source of money that was invested in Madoff Securities. For example, if you invested $100,000 in a fund which put 50% of all investments into Madoff Securities, and you didn’t make any withdrawals, you may be eligible to claim a $50,000 loss. However, all such “mixed” investments will create significantly greater issues in documenting the level of your cash that went into Madoff Securities, and determining the source of any withdrawals of cash that you received over time. Whether your investment was 100% in Madoff Securities or only partial, you are eligible to make a claim. But, if you cannot document your loss you will not be eligible.

Q19. Am I the "ultimate" investor and a qualifying victim if I am the beneficiary of a defined benefit pension or health care plan regulated under ERISA and that plan invested in Madoff Securities?

No. Because such plans are already regulated comprehensively by ERISA, the MVF will consider certain categories of ERISA plans to be the qualifying victim even though in general intermediary investment partnerships or funds are not eligible as victims. Here the plan sponsor is typically liable to make up any deficit between plan assets and guaranteed benefits, so that plan beneficiaries may not have suffered if a pension fund lost money in Madoff Securities. This is a special rule for ERISA plans only.

Q20. How will distributions be made?

The exact mechanics are still being developed. However, we currently intend to approach the process in phases once the claims process is complete. MVF already has the data on allowed bankruptcy claims and distributions to date on those claims. To supplement this bankruptcy claims data, we must determine the eligible losses of indirect investors and other victims whose claims were denied in the bankruptcy, but who file claims with the MVF. In addition to reviewing claims received directly from individuals or entities that do not have an allowed claim in the bankruptcy, we will also consider claims on behalf of indirect investors made by pooled vehicles. For all the victims who do not have allowed claims in the bankruptcy, MVF will determine the amount of their eligible losses (net of any recoveries to date, and in the case of claims on behalf of investors by conduits, after removing payouts they may have received directly).

We currently expect that we will make an initial round of payments to bring all victims up to some minimum baseline percentage recovery of loss, such as 25%, before making any payments to victims who have already received more than that amount. We will then make further rounds of payment with an objective of leveling out recoveries among all eligible victims until MVF’s resources are fully distributed.

Q21. Does that mean that if I have recovered funds in the bankruptcy I might not get paid as fast as others?

Yes, that may well be how the process will work. Because the funds available are limited, the MVF will focus on making sure that all victims have received a minimum level of recovery – such as 25% of their loss – before cash is distributed to victims who have already received (or will receive, once the estate’s cash is paid out) 50, 60, 70, or 80% of their losses. How this is implemented will not be finalized until the claims process is completed.

Q22. Will the MVF withhold taxes from distributions?

No, the MVF will not withhold any taxes from the distribution you may receive. It will be your responsibility to determine and pay any federal, state or other taxes you may owe on recoveries you receive from the MVF.

Q23. In cases where the victim has died, will the Estate or heirs be eligible for distributions from the MVF?

Yes. If the decedent would have met the MVF eligibility standards, the MVF will accept claims from, and make distributions to, a court-appointed executor or administrator of the decedent’s Estate. The court-appointed executor or administrator will be required to provide documentary evidence of his/her appointment and will be responsible for making further distributions to the decedent’s beneficiaries or heirs.

Q24. Will adjustments be made in measuring the size of my net loss?

Yes. The starting point in measuring your loss is all the cash you invested in Madoff Securities, less any cash you received back. This establishes the cash that was taken from you, less your recoveries during the years of the fraud.

Once your original “net loss” is known, the Department’s regulations require all “collateral recoveries” you have already received, or that you will receive in the future, to be deducted from a claim for remission. Collateral recoveries include any payments you received from SIPC, all bankruptcy distributions (directly or through an intermediary) on all accounts you held, insurance or class action recoveries, or any other form of compensation you have received. You will have to certify under penalties of perjury the completeness and the accuracy of the disclosure of your recoveries to date. As noted below, in the case of any victim holding an allowed claim in the bankruptcy, the unrecovered net loss will also be adjusted for such a victim’s share of undistributed cash being held by the bankruptcy trustee.

Differences Between the Madoff Victim Fund and the Bankruptcy Process

Q25. My claims in the bankruptcy proceedings relating to Madoff Securities were denied by the bankruptcy trustee because I invested in Madoff Securities indirectly rather than directly, even though Madoff's fraud caused me to lose my investments. Will I have any opportunity to make a claim on the MVF?

Yes. The laws Congress has enacted governing remission of forfeited assets are expressly intended to help the “victims” of criminal activity. The definition of victim does not depend on whether you were a “direct” or “indirect” investor, even though that is a critical distinction in the bankruptcy proceedings. For purposes of the Department and the MVF, if you were a “victim” of Madoff’s crimes as explained in the answer to Question 3 above, you are eligible to recover from the MVF. This means that the nearly 11,000 “indirect investors” (sometimes referred to as “third party investors” in the bankruptcy) whose claims were denied in the bankruptcy proceedings will be just as eligible as “direct investors,” although all victims must be able to satisfy all other requirements to receive payments from the MVF, such as proving that you suffered a loss, and the specific amount.


The fact that you were denied eligibility as a customer in the bankruptcy does not prevent you from making a claim as a victim on the MVF. At the same time, the fact that you were granted eligibility in the bankruptcy does not make you automatically eligible for the MVF. They are completely separate programs. One is focused on victims of crime, while the other is focused on priorities among a defined set of customers and creditors.
Q26. Why are these two programs separate?

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.

Q27. Why can't you just pay the same people being paid in the bankruptcy, or give the money in the MVF to the bankruptcy trustee?

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.

Q28. But in the bankruptcy, only people who held accounts "directly" at Madoff Securities were deemed to be eligible customers. Is that the rule here?

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.”

Q29. In the bankruptcy proceeding my claim was denied because other family members in our common account withdrew more money than they invested. I never withdrew any money yet I was told I did not have a net loss. Will MVF follow the same procedures?

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.

Q30. I invested through a small group of family and friends. I made an investment and never withdrew anything, but my brother withdrew more than he and I together invested. My claim was denied in the bankruptcy and so far I have not recovered anything for my losses. Will MVF combine my account with my brother's as happened in the bankruptcy?

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.

Claims That Were Bought or Sold in the Bankruptcy Proceeding

Q31. At some point over the last four years, I sold my bankruptcy claim to someone else. Did I lose my eligibility as a victim?

No. You were free to sell, transfer, or assign your claim in the bankruptcy. Since your eligibility to apply for remission is not part of a bankruptcy claim, it was not transferred if all you did was sell your rights in the bankruptcy. However, in calculating the amount of your remission claim, your original net loss will be reduced by all other collateral recoveries you received or will receive in the future. These other collateral recoveries will include all SIPC payments and bankruptcy distributions you received directly or indirectly, as well as any future distributions of the trustee and any amounts of undistributed assets of the trustee that may be attributed to your claim, and all insurance and class action recoveries or any other form of compensation you have received or will receive.

Q32. What if I expressly sold my right to participate in any distribution by the DOJ? Am I still the victim?
Yes, you are still the victim. A victim is the person or entity that suffered a pecuniary loss as a direct result of the criminality that gave rise to the forfeiture of assets in this case. That status cannot be purchased or transferred; indeed, the forfeiture laws and regulations forbid it. You are either a victim or you are not.
Q33. How will my losses be calculated if I sold my claim to participate in distributions by the DOJ?

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.

Q34. So if I sold my right to participate in payments from MVF, does that mean I don't have to honor that obligation?

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.

Q35. So, I am the victim, but I may owe any money I receive from the MVF to someone else if I expressly sold them my rights?


Q36. If I acknowledge that I sold my rights to a distribution from the MVF, could MVF just pay the purchaser directly rather than paying me?

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.

Q37. I am a claims purchaser. The investor victim whose claim I purchased acknowledged that she sold her remission claim to me. She subsequently requested that payment be made directly to me. How will the MVF calculate the amount of the remission claim?

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.

Q38. What if I think I own my claim, and someone else says it was sold to them?

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.

Q39. What if an investment fund through which I invested sold its rights to distributions from the MVF?

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.

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