Bloomberg Law
April 15, 2021, 7:06 PM

Madoff’s Case Provides Precedent for Future Ponzi Victim Payouts

Daniel Gill
Daniel Gill

Bernie Madoff, who died in prison Wednesday, perpetrated a historic Ponzi scheme that has shaped the way courts treat such fraud and efforts to recover damages for victims.

The case applied principles of bankruptcy law to establish that trustees can recover money from “net winner” investors of fraud schemes to pay “net losers” by comparing what they contributed to the scheme and what they received.

This method would override an alternative approach that calculated clawback amounts based on company earnings statements.

Those rulings, which originated in bankruptcy court after a clawback case for Madoff’s firm merged with Madoff’s personal bankruptcy ...

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