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Originally published January 7, 2014 at 4:49 PM | Page modified January 7, 2014 at 6:13 PM

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Madoff trustee tops $10B in recovered funds with JPMorgan deal

With Tuesday’s settlement with JPMorgan Chase, trustee Irving Picard has recovered 59 percent of the $17 billion in principal lost by thousands of investors in Bernard Madoff’s investment-advisory business.

Bloomberg News

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The trustee unwinding Bernard Madoff’s fraud has recovered more than $10 billion for victims five years after the biggest Ponzi scheme collapsed, including $543 million of a $1.7 billion settlement Tuesday from Madoff’s bank, JPMorgan Chase.

Irving Picard has retrieved 59 percent of the $17 billion in principal lost by thousands of investors in Madoff’s investment-advisory business. Picard said Tuesday in a statement that the JPMorgan agreement resolves his claims that the bank facilitated Madoff’s fraud for years by ignoring signs of fraud.

The settlement of the 3-year-old lawsuit was made possible by the trustee’s team “uncovering and documenting the facts about JPMorgan’s relationship with Madoff,” Picard said in the statement.

Madoff’s JPMorgan account was used to perpetuate the fraud, according to Picard. Madoff deposited money from new customers into the account instead of investing it in securities, and made withdrawals to pay back earlier investors.

Picard alleged JPMorgan ignored signs of wrongdoing to benefit financially from the con man’s business.

The trustee is pursuing claims totaling about $3.5 billion from UBS, HSBC Holdings and Unicredit, which he has also accused of benefiting from Madoff’s fraud. The banks have denied the claims.

Picard’s $10 billion milestone comes as New York-based JPMorgan said Tuesday it agreed to pay an additional 1.7 billion to the U.S. to resolve criminal allegations, and $350 million in a related case by the Office of the Comptroller of the Currency.

The parallel efforts by the trustee and federal investigators have resulted in a total recovery for victims of almost $14 billion, or 82 percent of the lost principal. Picard has distributed about $4.9 billion to victims, with billions more held in reserve until various legal issues are resolved.

“In the very early days of this effort, getting back a few pennies on the dollar was a goal,” Picard said last month, around the 5-year anniversary of Madoff’s arrest on Dec. 11, 2008. Since then, Picard said, his team “has recovered far more than pocket change.”

Madoff, 75, pleaded guilty to fraud in 2009 and is serving a 150-year sentence at a federal prison in North Carolina. At least seven others pleaded guilty, including his brother Peter Madoff, who is serving a 10-year term.

Five members of Madoff’s inner circle, who worked for him for decades, are on trial in Manhattan federal court on charges of helping to perpetuate the fraud to get rich. The five have pleaded not guilty.

Picard’s accord, which resolves his claims against JPMorgan in bankruptcy court and a related class-action lawsuit, must be approved by a bankruptcy judge. A hearing on the matter is Feb. 4 in Manhattan.

The JPMorgan settlement money will become available to victims once the deal is approved by a judge and can’t be appealed, Picard said in the statement.

JPMorgan approached Picard about a settlement several months ago, according to the statement. The deal avoids the risk and costs associated with continuing the dispute in court, the trustee said.

“This compromise with JPMorgan allows us to sidestep those pitfalls while recovering additional, significant monies,” David Sheehan, Picard’s lead lawyer in the case, said in the statement.

Before Tuesday’s accord, Picard’s team had recovered $9.5 billion through lawsuits and out-of-court settlements, including $5 billion from the estate of billionaire Jeffry Picower, who began investing with Madoff in the 1970s. Picower, whom Picard called the biggest beneficiary of Madoff’s Ponzi scheme, had a heart attack and drowned in a pool in Florida in October 2009.

Federal investigators had recovered about $2.3 billion for Madoff investors before Tuesday, including $2.2 billion from Picower’s estate and $100 million from Madoff’s Midtown Manhattan penthouse apartment and other belongings.

The JPMorgan deal brings the government’s total recoveries to $4 billion — a sum it will distribute through a separate process from the one used by Picard.

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