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Madoff sons' estates settle with bankruptcy trustee

Tuesday, 27 June, 2017

The estates of the deceased sons of fraudster Bernard Madoff have agreed to pay USD23 million to victims of his crimes.

The deal settles eight years of litigation, brought by Madoff's trustee in bankruptcy to recover assets the two men accumulated from their father's fraudulent investment empire before its collapse.

Bernard Madoff ran a successful investment trust for many years, making large sums for private clients and businesses who subscribed to his fund. However, after the financial crisis of 2008, which saw the collapse of Lehman Brothers and other prestige institutions, it was discovered that he had been running a so-called "Ponzi scheme," in which investments put into the business by new clients were used to pay profits to existing clients. This worked as long as markets held up, but the rapid fall in asset prices in 2008 forced the Madoff funds into liquidation, owing USD17.5 billion.

Ever since then, his trustee in bankruptcy, Irving Picard of the New York law firm Baker & Hostetler LLP, has been trying to recover funds from investors who made a profit from the Madoff funds at the expense of those who lost out.

Bernard Madoff's two sons Mark and Andrew Madoff, who worked with him at the firm and amassed large fortunes, were first on Picard's list of targets. Both denied any knowledge of their father's fraudulent practices, claiming that they ran the market-making side of the business and conducting genuine trading activity. However, Mark committed suicide in 2010 and Andrew died of cancer in 2014. So, for the last few years, Picard has been pursuing their estates, finally resulting in this week's settlement.

Their estates will transfer all cash and business interests to the trustee. Mark Madoff's family will be left with USD1.75 million and Andrew's family with USD2 million. Further litigation against their mother – Bernard Madoff's widow – is pending.

The settlement takes the amount recovered by Picard to over USD11.5 billion, much of it from banks and offshore "feeder funds" that subscribed heavily to Madoff's business, many of them in the Cayman Islands and British Virgin Islands.