As early as December former Madoff investors joined together and formed BernardMadoffVictims.org Coalition ("The Coalition"). Their mission statement explains that they are an activist and support group empowering victims to change the system that allowed this fraud to happen and allows them to unite in restitution.
They are doing just that.
With two upcoming hearings the defrauded victims wanted to get their thoughts relayed to their elected officials. On Tuesday, July 14, 2009, The Congressional Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises will hold a hearing entitled "SEC OVERSIGHT: CURRENT STATE AND AGENDA". On Wednesday, July 15, 2009, The Senate Subcommittee on Securities, Insurance, and Investment will be holding a hearing entitled "REGULATING HEDGE FUNDS AND OTHER PRIVATE INVESTMENT POOLS".
It's been seven months since the victims first heard that their savings were lost. During this time they have joined together and educated themselves on the laws that pertain to the situation. They are working to make sure that the public knows those laws so that in the future, no one will ever have to go through the devastation that they are feeling now. They feel that the financial sector, as it currently exists, is a poorly regulated and therefore a dangerous place for people to invest their money.
If customers received written confirmations of trades from a broker, as Madoff's victims did, according to SIPA and SIPC Rule 502 they are entitled to those securities even if no trades were ever made, as long as they were actual securities that could have been purchased. Further, under SIPA, "net equity" is defined as the value in a customer's account if the debtor had liquidated, by sale or purchase on the filing date, or in the case of Madoff customers, as of their November 30, 2008 account statement. This was confirmed by the 2nd Circuit Court of Appeals of New York in the New Times case.
However, based on the current actions of the trustee, Irving Picard, every American investor should pull their money out if it appreciates in value and open a new account with the principal and profits. Once that money appreciates in value, they should again do the same. He is only willing to pay SIPC insurance on the original money invested, totally disregarding any profits made (as reflected on the November 30th statement). Therefore, the insurance that is promised on every trade confirmation of a broker/dealer who is a member of the Securities Investor Protection Corporation ("SIPC") only applies to initial investments (less any money that may have been withdrawn). Mr. Picard is acting OUTSIDE the rules of the Securities Investor Protection Act ("SIPA") and is therefore acting illegally.
In the same statute, the enforcement of actions of Securities and Exchange Commission ("The Commission") is defined as follows: "In the event of the refusal of SIPC to commit its funds or otherwise to act for the protection of customers of any member of SIPC, the Commission may apply to the district court of the United States in which the principal office of SIPC is located for an order requiring SIPC to discharge its obligations under this chapter and for such other relief as the court may deem appropriate to carry out the purposes of this chapter."
This is not currently happening, in spite of numerous phone calls, letters, and meetings with the Commission by victims and their attorneys.
As a result, the members of the Coalition have written to the members of the subcommittees to ask their intervention to ensure that the Commission act in good faith according to the above law.
Some of the letters sent include these words from the victims:
"In the face of the massive losses of innocent Americans whose only mistake was assuming that the SEC was competent and honest, the SEC has allowed SIPC to further devastate investors by refusing to pay customer claims "promptly" as required by the statute and in accordance with their last statements from BLMIS, as required by Securities Investor Protection Act ("SIPA") definition of "net equity"."