Irving Picard, the trustee appointed by the Securities Investor Protection Corporation (SIPC) to protect the interests of the victims of the Bernie Madoff Ponzi scheme has announced a settlement with Plaza Investments International by which Plaza will pay 140 million dollars to be applied to the losses suffered by Madoff’s victims. Plaza is one of a number of feeder funds that invested millions of dollars of their clients’ funds with Madoff without properly investigating what Madoff did with the money. It is also alleged that Plaza, as did other feeder funds failed to recognize indications that what Madoff was doing was a scam. Madoff, who is now serving a 150 year prison sentence was found guilty of stealing approximately 20 billion dollars from individual investors, celebrities and other investment managers who, such as Plaza invested their clients’ funds with him. Madoff’s scheme was a classic Ponzi scheme by which he never invested anything, but just used the money received from new investors to pay off earlier investors. This latest settlement brings the total amount recovered on behalf of Madoff’s victims to 10.874 billion dollars.
Bernie Madoff has actually indicated that it was his victims own fault that they lost the money they invested with him. He went on to explain that if they had done their proper research, they would have realized that it was impossible to do what he said he was doing with the money. Although to hear these words coming from a man who financially ruined so many people is offensive, there is a bit of truth to what he says and a lesson to all of us. You should never invest in anything that you do not completely understand. Only put your money into investments that you are familiar with and never let your investment adviser also be the custodian of your funds. Madoff did both functions which made it easier for him to cheat his victims as there was no one to oversee or regulate his actions.