In today's earlier post, I referred to the general consensus that many withdrawals by clients from Madoff's accounts in the last six years are subject to seizure, as being fraudulently conveyed by Madoff to those investors.
Apparently, due to recent rulings in the Bayou fund fraud of a few years ago, investors cashing out of a Ponzi-type scheme are not really withdrawing their profits, but, according to a court ruling, taking stolen funds.
Here's what I don't understand. Suppose you invest $5MM with Madoff. And suppose by the time you do, he's totally running a Ponzi scheme. There just isn't really anywhere near the oft-quoted "$50B" in the various accounts.
If you are sent account statements over a period of years stating that you now have, say, $10MM in your account with Madoff, and you choose to take your original stake off the table, and play with 'house' money, how are you fraudulently taking other people's money?
After all, you did give Madoff $5MM. You are certainly entitled to recover your original investment, aren't you?
I can see where withdrawals above the original investment could be seized for pro rata distribution. But not the original investment. That was your money. If you were fortunate enough to take it back, and sufficient funds were available to allow that, how did you take it from anyone else?
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