Written by Teresa Zink for HB Litigation Conferences LLC

Paccione said there is plenty we don’t yet know about Madoff’s scheme. 

We don’t know when the Ponzi scheme started.  “We don’t know if it was from the initiation of Mr. Madoff’s operations or – as is often the case – if there was a series of bad investments and losses; and attempts to try and cover up those losses by then engaging in a Ponzi scheme.”  We know that it has been operating for at least 13 years, said Paccione.

Some have questioned whether, if no securities were ever purchased, will SIPC cover those claims?  “Fortunately, at least in this circuit, the case law is pretty clear that SIPC will be required to repay for those bogus investments,” said Paccione.  “You really look at the investors’ state of mind.  Did they intend to open up an account?  Did they believe that there were trades going on?  If so, under the case law – some of it is back in the 1970s from the Second Circuit – it’s pretty clear that it doesn’t matter whether or not securities were purchased for SIPC purposes.”

We don’t know where all the money went or who else conspired.  “Clearly, some of it went to pay off redeeming investors.  Some of it went to pay off operations.  Some of it may be in places yet to be discovered,” said Paccione.

Finally we don’t know why he did it.  “That’s really a question that some analyst will have to figure out.  It’s mind-boggling to me that someone so respected and revered would have done what he did.”

(See next post.)

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