Alleged Madoff Victims May Be Vulnerable To Other Victims' Claims
Professor Joseph A. Grundfest is quoted in the Los Angeles Times in a story about how some of the victims of the Bernie Madoff Ponzi scheme might be forced to return earnings from the fraudulant investment fund even though they lost most of their money in the scheme. The Los Angeles Times writes:
Santa Monica retiree Bob Braslau considers himself a victim of accused fraud mastermind Bernard L. Madoff.
But the court-appointed bankruptcy trustee, he fears, might consider him a beneficiary.
Braslau was among the thousands who lost money when the Madoff fund collapsed amid allegations that it was a $50-billion Ponzi scheme. But because Braslau had taken out some proceeds over the years, he could be forced to return those earnings if a court determines they weren't real investment returns, simply money from other victims.
Joe Grundfest, a Stanford University securities law professor, predicted complex and controversial legal actions among the Madoff victims, including charitable foundations with considerable assets that could be tapped and thousands who counted on the fund's proceeds to support them in old age.
"You can imagine that litigation of that sort gives rise to many potential problems and appearances of harshness," said Grundfest, raising the prospect of charities that used investment proceeds for humanitarian causes being hit with demands for the return of money already spent. "It's going to be hotly litigated."