NEW YORK — Investors wiped out by the Bernard Madoff scandal got more bad news Friday: Investigators have confirmed suspicions that the monthly statements showing that the financier was making stock trades for them were pure fiction.
"We have no evidence to indicate securities were purchased for customer accounts" in the past 13 years, said court-appointed trustee Irving Picard at a packed, town-hall style meeting at U.S. Bankruptcy Court in lower Manhattan. "This is a case where we're going to be looking at cash in and cash out" — the shorthand definition of a Ponzi scheme.
Picard, who is overseeing the liquidation of Bernard L. Madoff Investment Securities LLC, called the meeting to give the investors a progress report on his efforts to unravel the alleged fraud.
Madoff was arrested in December after investigators said he confessed to his sons that he had swindled investors of $50 billion in a Ponzi scheme. The 70-year-old former Nasdaq chairman remains confined to his Manhattan apartment under house arrest.
The trustee so far has recovered an estimated $950 million in assets — including works of art at Madoff's midtown office — that would be used to help cover claims likely to reach into the billions. He also hopes to raise money by selling a legitimate trading arm of the business, which still has 40 employees.
A lawyer working for Picard also warned that the trustee would seek to recover — or "claw back" — phony profits earned by some investors so they can be redistributed to others. "There wasn't any stock bought or sold," said the attorney, David Sheehan. "It was all just made up. ... You got somebody else's money."
Picard said that about 2,400 people have filed claims — a total expected to rise sharply before the July 2 deadline. Picard has won permission from a bankruptcy court judge for $28.1 million to cover expenses tied to the liquidation of Madoff's investment firm.