NEW YORK — Investors who lost billions of dollars in Bernard Madoff’s massive multi-decade fraud are not entitled to recover fake profits that were described to them in phoney statements, a federal appeals court said Tuesday.
The 2nd U.S. Circuit Court of Appeals concluded that a trustee’s calculation of the investors’ losses was “legally sound” and that a bankruptcy court was correct when it rejected arguments from lawyers for investors who said their clients should receive more than what they initially gave to Madoff.
A three-judge panel of the Manhattan court said customer statements showing that initial investments of about $17.3 billion had ballooned to more than $65 billion “reflect impossible transactions and the trustee is not obligated to step into the shoes of the defrauder or treat the customer statements as reflections of reality.”
Helen Davis Chaitman, who argued the case for investors, said the 2nd Circuit ruling “will destroy investor confidence in the capital markets” because investors will no longer trust that they will recover their money if they are cheated.
“The message to every American who invests in the stock market is clear: invest at your own risk” because insurance cannot be relied upon, she said in a statement