“If an investor put money directly into Madoff but redeemed some or all of his investment before Madoff’s arrest, would Irving Picard, the trustee in charge of gathering assets for pro-rata distribution to bilked investors, come after him for the money he already took out? Short answer: yes, if the investor had gains. And it’s even conceivable that the investor might have to cough up principal….”

More  here on the coming wave of litigation from the Madoff fraud.

Comment:

The Madoff case, as you know, puzzles me. From what I’ve read so far, everyone knew fraud was being perpetrated…and no one did anything. Now everyone, from “little people” who lost their retirement through their pensions funds to fund of funds managers and their clients, is expecting the SIPC to kick in and pay for the losses, or to recover them through litigation.  It seems to me that if a fund manager deliberately looked the other way, they were guilty of fraud; they should be the ones held accountable by their investors. But now that the government is involved, expect this to become a racket.

And on that gloomy note, why did Irving Picard, the court appointed trustee, need $28 million to adminster the estate of Madoff? That’s a lot of money. And he was asking for it within a fortnight of the breaking of the story.