Bernard Madoff Victims Coalition
Victims Helping Victims
Madoff Indirect Investors Seek Recognition With National Coalition of Indirect Ponzi Victims
March 31, 2009 (Denver, CO) – To date, media coverage of the Bernard L. Madoff Investment Securities, LLC (“BLMIS” or “Madoff”) fraud victims has focused only on the estimated 8,000 “direct investors” who invested directly in BLMIS, or a few selected brokerage firms, and who knew that their funds were invested with BLMIS. There are likely just as many “indirect investors”, with at least as much money invested in hedge funds, which invested in Madoff “feeder funds,” which in turn invested in BLMIS. Most of these “indirect investors“ had never heard of Bernard Madoff until the Ponzi scheme was disclosed.
The direct investors are recognized as “customers” and under the Securities Investor Protection Corporation (SIPC) statute are entitled to claim up to $500,000 for each of their Madoff accounts. Indirect investors, however, are not currently recognized as “customers” by SIPC and, therefore, are not entitled to SIPC coverage.
Similarly, the Internal Revenue Service (IRS) has recently issued releases that clarify the tax treatment for and presented “safe harbor” guidelines for “qualified investors” in Ponzi schemes, but do not recognize indirect investors as “qualified.”
To gain recognition and restitution, a group of indirect investors in Denver, CO has begun reaching out to the thousands of other indirect investors throughout the country to form the National Coalition of Indirect Ponzi Victims.
The Coalition’s goal is to obtain retroactive recognition and relief from SIPC and the IRS and to put indirect investors on equal footing with the direct investors. The group believes that their money was stolen in the same manner as the direct investors, that their economic loss is the same as the direct investors, and that for SIPC and the IRS to not recognize that fact is “form over substance.”
Typical members of the Coalition are hard working, responsible, thrift oriented and prudent individuals who invested most, and in some cases all, of their life and retirement savings in a hedge fund that delivered reliable, but not outrageous returns. Coalition victims include doctors, lawyers, farmers, small business owners, engineers, and business executives. The profiles of these investors are nothing like the “fat cat” hedge fund investors sometimes portrayed by the media.
The younger Coalition victims have little or no savings left and must begin anew to save for retirement, education of their children, charitable contributions and other worthwhile pursuits. The retired Coalition victims, many in their 70s and 80s, went from a comfortable retirement based on years of savings, prudent and responsible living, to trying to get by on Social Security. Many are afraid they will have to sell their homes, land, and other possessions just to make ends meet. For most of the older victims it is impossible to re-enter the work force, or if they do, it is in jobs with much lower pay than in their more productive years.
The Coalition is endeavoring to obtain congressional intervention to modify the SIPC and IRS statutes and regulations so that Indirect Investors will be eligible for financial relief. The National Coalition of Indirect Ponzi Victims is actively seeking other indirect investors. To join this group and fight for equal recognition, register for the Coalition at http://www.BernardMadoffVictims.org. Additional information is available at IndirectInvestors@bernardmadoffvictims.org, or by contacting Suzanne Webel at 303.485.2162.