I believe this is in addition to the $10B already recovered (mostly from one elderly women who gave it back voluntarily).
But in any event, the amount being claimed in these lawsuits dwarfs the actual losses from the scheme, and is substantially larger than even the paper profits. So the question is: what happens if these lawsuits are successful? Who gets the money? Suppose you’ve already reimbursed everyone their actual losses, do you sue people to give back their paper profits so that you can give other people their paper profits? If yes, why, and if not, what about all the people who’ve already been sued?
And what happens to the lawsuits for damages if you’ve recovered the money and there’s no longer any “damage”?
[If I had to guess, I would assume he is not going to make all the money back, but it seems possible.]
The clawback lawsuits are to get money from those people who, wittingly or not, pulled more out of the Ponzi scheme than they’ve put in. For example, suppose you put in $100,000 in the scheme in 1995, and pulled out $10k a year for the next 13 years - you could be facing a clawback lawsuit for the $30,000 you’ve pulled out in excess of the money you put in. People in this position are called “net-winners”, as they have netted more than they put in.
That $30k would then go to a person (defined as a “net-loser”) who, say, put in $100,000 in 1995 but only pulled out $70k in the intervening 13 years.
There is no reimbursement of “paper profits” as there were no profits to begin with. This issue, too, has been settled by the courts.
A ponzi scheme by definition did not make profits - it handed out new contributions to previous contributors and called them “profits”. Thus, the goal is to take bake the fake profits so as many people as possible recover at least a portion of what they put in.
Just curious - how deep can this go? If the contributor died, can they demand the money back from his heirs? From the charities he left it to? Surely at a certain point a deal must be marked as “final”. I assume the legal basis is that people should have known there was something wrong so therefore they are somewhat complicit. That’s a difficult argument to make with an heir. I recall reading something about stolen propety and the statute of limitations on reclaiming it.
As a general rule, it only goes back to those people or institutions that had accounts with Madoff. If md2000 invested with the JohnT Hedge Fund who then put your investment in their Madoff account (with the named Madoff account being JohnT Hedge Fund), JohnT Hedge Fund is the entity that will get settlement funds - not md2000. Assuming, of course, that my hedge fund put more money in than what we took out.
We would then have to work it out between ourselves, which would likely end up in a lawsuit. OTOH, md2000 would not be sued by the government in case you’re a net-winner as you’re not a direct Madoff investor.
Yes, but once you die your business affairs are wrapped up. At a certain point, IIRC, it is legally too late for someone to pop up and say “hey wait a moment, I am the late Mr. Moneybag’s biological son and I should get 50% of what his other son inherited.”
Does the same apply to things like stolen money, Madoff payouts, etc.? At a certain point is the estate’s business wrapped up? What would have happened if the old lady kicked off before returning 10 billion? (IIRC, was that her money from Madoff or her late husband’s?)
But John T is right, there are several people finding the hard way that just because they committed further transactions (tax payments, charity donations, etc.) does not absolve them of some of the obligation they personally have to the Madoff fund. And, it does not give them the right to demand anything from those third parties.
However, I suspect the JohnT Hedge fund or similar investment is the entity owning the “lost” Madoff investment, and so beneficiary of the refund. If the fund is essentially a mutual fund, each investor owns a proportional share of the results, gain or loss. However, as pointed out, sorting that mess out is up to the fund managers, not the Madoff recovery team. They just give it to the fund (which likely will consume most of it as management fees etc. )
What’s more interesting is what happens if John T Hedge took out its “profit” from the Madoff “investments” before the collapse and is now being clawed back. Can they go after 3rd parties to whom they disbursed the profits?
Now for the fun part. Income tax refunds would be due from the IRS, no? Although the income was taxable at the time, and would be regardless of the legality of the source of income (hi Al Capone!) should not the recipients who actually returned ill gotten gains from the scheme not be due tax refunds? At what point does the IRS say, “Chuck U Farley, generally we only allow amended returns for going back 3 years”. But this is not a general case here, it’s extraordinary. So what’s the Dope?
The point of my OP was to contrast the $90B to the $20B & $65B. Since, as you say, there were no real profits, it would be impossible for the excess that was removed to exceed the amount that was lost. So it shouldn’t be possible for the $90B to be higher than the $20B. And yet, it is.
Of course those are civil lawsuits where one can expect to find requests (for want of a better word) for damages that go beyond the financial loss. I might have lost $1 million, but will sue for $5 million because of pain, suffering, and other damages caused by the scheme.
But this raises a new question… at what point can I safely consider my money to be… well… mine?
Like many Americans, for example, I have a 401(k), an IRA or some other long-term investment vehicle. I’m sure that over the years that I’ve been investing, at least some of the funds that I invested in have come up winners.
For example, let’s say that I had $50,000 ($10,000 of it in gains) from a 401(k) when I left a job in 2004. I since rolled that 401(k) into an IRA (effectively, selling my stake in the fund and purchasing it again with my IRA institution).
Do I have to worry that when I retire in 2040, there is the possibility that the $10K might be subject to clawback because of financial shenanigans on the part of the 401(k) institution?
In short, when can I rest easy and say that what I’ve earned through investment is mine and that I can spend it without having to worry about possible clawback?
You would not be filing an amended return for the year in which you received the money. Money received under an apparent claim of right, but repaid in a subsequent tax year is still taxable in the year received.
However, there is a provision in the tax code that allows you to claim a deduction or credit in the year in which you repaid the money. If the amount you repaid is $3000 or less, you can take a deduction (the type of deduction depends on the original type of income). If the amount is more than $3000, you can either take the above deduction or you can recompute your taxes for the previous year and take a credit in the current year for the taxes you overpaid in the previous year.
The deduction or credit arises in the year you repaid the amount, so the statute of limitations starts running in the year you repaid.
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