Some of the investors who lost money when Bernie Madoff' $50 billion Ponzi scheme imploded may still have turned a profit after all. Investors who withdrew money from their accounts may have taken out more money than they originally invested, even they lost whatever was left in their accounts when the scheme finally went bust:
The issue came to the forefront this week as about 8,000 former Madoff clients began to receive letters inviting them to apply for up to $500,000 in aid from the Securities Investor Protection Corp.
Lawyers for investors have been warning clients to do some tough math before they apply for any funds set aside for the victims, and figure out whether they were a winner or loser in the scheme. [AP]
Madoff investors who made a profit face an ethical quandry. It appears that the "returns" on their investment were not ROI, but rather, the proceeds of a Ponzi scheme. Investigators believe that Madoff didn't invest the money, but rather that he he paid old investors out of the money that he collected from new clients. Madoff's scheme was a giant financial chain letter.
This situation raises interesting ethical questions. One man quoted in the AP story came out ahead, even though Madoff held on to the final $1 million in his account. Should this guy be eligible for compensation under the new program that's being set up to help Madoff's victims? After all, he already profited from a crime by accepting money that Maddoff stole from his other clients. Yet, he did lose a million dollars through no fault of his own.
Here's a legal question for you guys. Is there any way that the authorities could come after Madoff "investors" in an attempt to retrieve the money? After all, these profits were the proceeds of a crime.