On the Road to Recovery: Victims of the Madoff Fraud

Josephine Wang, General Counsel, Securities Investor Protection Corp.

In 2008, triggered by the financial crisis, two financial companies fell from power and grace, and were placed in liquidation under the Securities Investor Protection Act (“SIPA”). The failure of one, Lehman Brothers Inc. (“LBI”), occurred in a climate of excessive risk-taking and then, an inability to obtain credit when needed. The failure of the other, Bernard L. Madoff Investment Securities LLC (“BLMIS”), was fueled by the financial crisis which caused investors to need the cash, or the cash that they thought could be generated from the sale of securities, that they wrongly believed to be in their brokerage accounts. Too many customers seeking the return of cash and not enough money coming in with which to pay earlier investors would cause a scheme of historic proportions to unravel. The gig was up. The promised returns were make-believe. Bernard Madoff (“Madoff”) was a fraud.