SIPC Joins Madoff Trustee In Petitioning U.S. Supreme Court To Overturn Roadblock To Recovery Of Fictitious Profits

WASHINGTON, March 17, 2015 /PRNewswire-USNewswire/ -- The Securities Investor Protection Corporation (SIPC) has joined Madoff Trustee Irving H. Picard, the Securities Investor Protection Act (SIPA) Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC, in filing a petition before the U.S. Supreme Court to overturn a December 2014 ruling by the U.S. Court of Appeals for the Second Circuit.  Under that earlier decision, the Trustee was barred from recovering fictitious profits paid to Madoff customers and then returning those funds to the victims from whom they were taken.

The lower court ruling blocks Trustee Picard from proceeding with nearly all cases to recover the phony profits, despite the fact that no securities were actually purchased or sold. Both parties, SIPC and Trustee Picard, argue that the ruling, if left intact, would unduly inhibit any future SIPA trustee from recovering payments made to customers who unwittingly may have profited from such a Ponzi scheme or other fraud.

SIPC President Stephen Harbeck said: "SIPC believes that the trustee has the authority, as a matter of law, to recover certain payments made by Madoff to customers, when no actual securities transactions ever took place.   The correct interpretation of the Bankruptcy Code and the Securities Investor Protection Act would allow the trustee to do the greatest good for the greatest number of Madoff's victims.  The guiding principle of bankruptcy is equitable distribution.  That is what the trustee seeks to accomplish, and SIPC supports this goal."

The total amount distributed in the Madoff liquidation proceeding to date exceeds $7.2 billion, covering more than 54 percent of the losses of allowed claimants. The overall figure of $7.2 billion includes $823.7 million in committed advances from the SIPC.

When additional settlements awaiting distribution are taken into account, the total recovery to date in the Madoff liquidation proceeding totals $10.551 billion.

ABOUT SIPC

The Securities Investor Protection Corporation (http://www.sipc.org) is the U.S. investor's first line of defense in the event of the failure of a brokerage firm owing customers cash and securities that are missing from customer accounts. SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds.

The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities - such as stocks or bonds -- that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims for customer cash and/or securities held in custody with the broker for up to a maximum of $500,000 per customer. This figure includes a maximum of $250,000 on claims for cash. From the time Congress created it in 1970 through December 2013, SIPC has advanced $2.1 billion in order to make possible the recovery of $133 billion in assets for an estimated 772,000 investors.

All non-media/investor inquiries of SIPC should be directed to [email protected] or (202) 371-8300.

SOURCE Securities Investor Protection Corporation, Washington, D.C.

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