Back to top

Analyst Blog

Recently, victims of the fraudulent Ponzi scheme of Bernie Madoff suffered a big blow as the U.S. Supreme Court turned down the appeal seeking to recoup more money for them. Irving Picard, the trustee liquidating the Bernard L. Madoff Investment Securities LLC, had requested the apex court to hear his challenge to a ruling given by the Second Circuit Court of Appeals last year.

Rebuffing the petition, this latest Supreme Court decree defends an earlier verdict by a lower US court that rejected Mr Picard’s appeal to prosecute the banks as accomplices in the fraud.

With the Supreme Court verdict, banks such as HSBC Holdings plc (HSBC - Analyst Report), UBS AG (UBS - Analyst Report) and UniCredit SpA breathed a sigh of relief, having been exonerated from over $10 billion legal claims stemming from the Bernard Madoff Ponzi scheme. Nevertheless, according to Picard’s spokeswoman, with due respect to the apex court verdict, the trustee’s $3.5 billion bankruptcy claim still remains alive against these international banks.

Notably, the trustee had also filed a suit against JPMorgan Chase & Co. (JPM - Analyst Report) for helping the fraudster. However, JPMorgan’s name was withdrawn from the case after it reached a $325 million settlement with Picard in Jan 2014.

Madoff’’s fraudulent Ponzi scheme came to the limelight in the height of the 2008 financial crisis. Labeled as the largest financial fraud in the history of U.S., it robbed $17.0 billion out of the gullible investors. Madoff, the former chairman of Nasdaq stock exchange, pleaded guilty and was sentenced to 150 years in prison. He was responsible for ruining the hard-earned savings of countless customers who directly invested in Madoff Investment Securities, as well as those who invested in feeder funds that was later siphoned off to Madoff Investment Securities.

Mr Picard, who is playing the trustee on behalf of the Securities Investor Protection Corporation, has so far recovered $9.8 billion in lawsuits and settlements, and made four distributions totaling $5.2 billion to investors, as part of the liquidation process.

Currently, JPMorgan carries a Zacks Rank #4 (Sell), while both HSBC and UBS has a Zacks Rank #3 (Hold). One better-ranked major global bank is The Royal Bank of Scotland Group plc (RBS - Snapshot Report), sporting a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.