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Christmas came early this year for the true anti-Semite
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<blockquote data-quote="newworker" data-source="post: 448506" data-attributes="member: 14856"><p><strong>Madoff investors may have to give back any profits made</strong></p><p></p><p>Investors May Have to Surrender Gains</p><p></p><p>Investors are unlikely to get back much of the money they invested with Bernard Madoff, and those who took out money in recent years may have to give it back.</p><p></p><p>It is a complicated situation. And certain investors may be able to offset some of their losses through tax moves and through the organization that steps in when brokerage firms fail.</p><p></p><p>As investigators figure out how the money disappeared, the ramifications for investors are large. If the money were stolen from a brokerage, as much as $500,000 per client should be covered by the Securities Investor Protection Corp., a nonprofit funded by the securities industry. However, SIPC doesn't cover investment losses, and many of Bernard L. Madoff Investment Securities LLC's clients had millions of dollars invested with the firm, far above the SIPC limit.</p><p></p><p>The alleged deception by Mr. Madoff far exceeds the scale of past hedge-fund frauds, including the high-profile, $400 million scheme by Connecticut hedge-fund company Bayou Group LLC. Bayou's co-founder Samuel Israel III went on the lam on the day he was to report to prison for a 20-year sentence earlier this year.</p><p></p><p>Though dramatically smaller in scale, Bayou is being discussed in connection to the Madoff scandal. That is because the federal bankruptcy court overseeing the Bayou case decided this year that investors who had pulled their money out of Bayou in some cases years before Bayou's fraud was detected had to reach into their pockets to give back profits, and even some of their initial investments, to help offset losses by other investors who got snared in the scheme.</p><p></p><p>That decision was based on a legal notion called fraudulent conveyance, which concerns the illegal transfer of property with the intent to commit fraud. The concept could be mixed news for Madoff's investors, depending on their situation.</p><p></p><p>"I'm sure there are some people who are thinking their lives are over, but the good news is that because Madoff is thought to have run a Ponzi scheme, investors could get money back from other Madoff investors who already took money out," said Brad Alford, who runs Atlanta-based investment adviser Alpha Capital Management LLC.</p><p></p><p>The Bayou precedent, and the fact that hedge funds are involved, is just part of the reason that investors who thought they made money with Mr. Madoff in the past could find themselves on the hook to return money. Bankruptcy-receivership practices make all investors vulnerable.</p><p></p><p>"The concepts blur in a Ponzi scheme where one person's principal is another person's profits," said Jay Gould, a former SEC investment-management attorney who now runs the hedge-fund practice at Pillsbury Winthrop Shaw and Pittman LLP in San Francisco. "It's the receiver's job to go back and collect as many assets as possible, from whatever sources, including investors who withdrew assets from the scheme -- whether those assets were characterized as principal or profit."</p><p></p><p>Still, it is doubtful, given the alleged scope and structure of Mr. Madoff's scheme, that investors who feel they have lost everything will find much relief. "They probably won't see much of that money ever again," Mr. Gould said.</p><p></p><p>One Bayou investor Mr. Alford knows got out of Bayou almost two years before that firm filed for bankruptcy. Given how much time had passed, the investor was stunned to learn that he had to return part of his original Bayou investment as well as all of the profits he thought he had made -- profits that ended up being fabricated -- Mr. Alford said.</p><p></p><p>If the same holds true with Mr. Madoff's case, people who pulled money to pay for home mortgages, retirements or children's college bills could end up trapped.</p></blockquote><p></p>
[QUOTE="newworker, post: 448506, member: 14856"] [B]Madoff investors may have to give back any profits made[/B] Investors May Have to Surrender Gains Investors are unlikely to get back much of the money they invested with Bernard Madoff, and those who took out money in recent years may have to give it back. It is a complicated situation. And certain investors may be able to offset some of their losses through tax moves and through the organization that steps in when brokerage firms fail. As investigators figure out how the money disappeared, the ramifications for investors are large. If the money were stolen from a brokerage, as much as $500,000 per client should be covered by the Securities Investor Protection Corp., a nonprofit funded by the securities industry. However, SIPC doesn't cover investment losses, and many of Bernard L. Madoff Investment Securities LLC's clients had millions of dollars invested with the firm, far above the SIPC limit. The alleged deception by Mr. Madoff far exceeds the scale of past hedge-fund frauds, including the high-profile, $400 million scheme by Connecticut hedge-fund company Bayou Group LLC. Bayou's co-founder Samuel Israel III went on the lam on the day he was to report to prison for a 20-year sentence earlier this year. Though dramatically smaller in scale, Bayou is being discussed in connection to the Madoff scandal. That is because the federal bankruptcy court overseeing the Bayou case decided this year that investors who had pulled their money out of Bayou in some cases years before Bayou's fraud was detected had to reach into their pockets to give back profits, and even some of their initial investments, to help offset losses by other investors who got snared in the scheme. That decision was based on a legal notion called fraudulent conveyance, which concerns the illegal transfer of property with the intent to commit fraud. The concept could be mixed news for Madoff's investors, depending on their situation. "I'm sure there are some people who are thinking their lives are over, but the good news is that because Madoff is thought to have run a Ponzi scheme, investors could get money back from other Madoff investors who already took money out," said Brad Alford, who runs Atlanta-based investment adviser Alpha Capital Management LLC. The Bayou precedent, and the fact that hedge funds are involved, is just part of the reason that investors who thought they made money with Mr. Madoff in the past could find themselves on the hook to return money. Bankruptcy-receivership practices make all investors vulnerable. "The concepts blur in a Ponzi scheme where one person's principal is another person's profits," said Jay Gould, a former SEC investment-management attorney who now runs the hedge-fund practice at Pillsbury Winthrop Shaw and Pittman LLP in San Francisco. "It's the receiver's job to go back and collect as many assets as possible, from whatever sources, including investors who withdrew assets from the scheme -- whether those assets were characterized as principal or profit." Still, it is doubtful, given the alleged scope and structure of Mr. Madoff's scheme, that investors who feel they have lost everything will find much relief. "They probably won't see much of that money ever again," Mr. Gould said. One Bayou investor Mr. Alford knows got out of Bayou almost two years before that firm filed for bankruptcy. Given how much time had passed, the investor was stunned to learn that he had to return part of his original Bayou investment as well as all of the profits he thought he had made -- profits that ended up being fabricated -- Mr. Alford said. If the same holds true with Mr. Madoff's case, people who pulled money to pay for home mortgages, retirements or children's college bills could end up trapped. [/QUOTE]
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