Duped Investors Seek Over $40bn from $4bn Bernard Madoff Victim Fund

Convicted fraudster Bernard Madoff's customers are looking to recover over $40bn from a federal fund constituted to compensate victims of his $65bn Ponzi scheme.

Richard Breeden, the "special master" overseeing the US justice department's $4.05bn (£2.4bn, €2.9bn) Madoff Victim Fund, has received more than 51,700 claims from 119 countries, including Kazakhstan, Madagascar and Vietnam, at the close of the claim period on 30 April.

That was more than three times the number of claims filed during the Madoff bankruptcy proceedings.

Breeden said that some 78% of claimants reported losses of $500,000 (£296,736 / €346,458) or less.

The US accounted for 58% of claimed losses and 38% of claimants. Germany, Italy and France threw up the next most claimants.

Breeden is permitting "indirect" investors who had accounts at so-called "feeder funds" -- hedge funds, banks and other entities that invested with Madoff -- to try and recoup losses.

In contrast, New York lawyer Irving Picard, the court-appointed bankruptcy trustee tasked with reimbursing victims who invested in Bernard L Madoff Investment Securities, has allowed only direct investors to recoup money.

Breeden said a different law allows him to pay off a wider range of victims than Picard.

He expects to reject a "substantial" number of claims on grounds that they are ineligible, duplicative or inflated. He also said that it was too early to provide a timeframe for payouts.

"The volume was surprisingly large," Breeden, a former US Securities and Exchange Commission (SEC) chairman told Reuters.

"Other than the Gobi desert and the polar icecaps, few places on Earth seem to have escaped the scourge of this fraud. This fraud was of epic, and truly global, proportions," he told AFP.

"Our first distribution will go to people who have recovered very little or nothing," he said. "Our message is, there is hope here. Help is coming, if you meet the eligibility standards."

Picard has recouped $9.8bn, roughly 56% of the $17.5bn in principal he said was lost by those who submitted claims, and has distributed nearly $6bn. Picard accepted 2,518 of the 16,519 claims he received.

About $1.7bn of Breeden's fund came from JPMorgan, which was Madoff's main bank over two decades, and $2.2bn came of the estate of Jeffry Picower, a Florida investor who benefited from Madoff's ploy.

Picower's estate also paid $5bn to Picard.

Madoff pleaded guilty in 2009, following his arrest in December 2008, and was sentenced to 150 years in prison for controlling the biggest Ponzi fraud ever detected.