Special Master Richard C. Breeden


from the Special Master

Moving into a New Phase

MVF has been extremely busy since our update in December of 2015. At that time, MVF had reviewed 51,071 claims covering $45.1 billion in losses, and there were 13,052 claims yet to review. We reported that MVF planned to recommend 20,241 claims for approval by DOJ, and there were 24,174 incomplete claims.

As of May 16, 2016, MVF has now completed a detailed review of 63,580 claims with aggregate claimed losses of $67.8 billion(1). Except for approximately 1,000 claims involving special situations(2), the initial claim review process is now substantially complete. With completion of the "claim review" phase, MVF has shifted our main effort to finalizing the "incomplete" claims, and then working with DOJ on actual claim decisions. Broadly speaking, we are moving from the "claim review" phase to the "decision/appeal" phase of the process.

Outcome of Claim Review Process

Based on the initial claim reviews, MVF is currently prepared to recommend 19,101 claims for approval by DOJ. In addition, there are 6,179 claims involving investments through a "mixed asset investment vehicle" ("MAIV") that will also be recommended for approval once we complete additional work to refine the Madoff allocation percentage and fraud loss calculation for those funds(3). Thus, in the aggregate we have 25,280 claims involving nearly $4 billion in fraud losses that we expect to recommend for approval in our first Report to DOJ(4).

Claims Review Status as of May 16, 2016

As of this time, MVF believes that 7,540 claims covering approximately $25.7 billion in claimed losses do not satisfy the requirements of the Plan. The Report will recommend that those claims be denied.

There are approximately 30,750 "incomplete" or "deficient" claims covering approximately $27 billion in claimed losses. We don't yet know how many of these claims will be finalized successfully, and how many will eventually be denied due to incomplete documentation. However, we do know that the time frame for finally resolving the deficiencies is very short, and how these claims are resolved will have an enormous impact on the size of our eventual distribution. It is worth noting, however, that the number of claims that are ready to be recommended is already approximately 10X the number of total claims that were allowed in the bankruptcy proceedings, and that number will go much higher in coming months.

Claims Base Progression as of May 16, 2016

Claim Deficiency Notices ("CDNs")

As Special Master, I would love to see every eligible Madoff victim receive a cash recovery. However, we can't complete the process and actually pay claims until we resolve the incomplete claims one way or the other. To do this, we have now mailed CDNs to virtually all incomplete claims. The CDNs are a formal notice of what is needed to complete an incomplete claim, and they carry a 45 day deadline for responding(5). By early July the deadline for a response will expire for virtually all incomplete claims, so CDN recipients must act fairly quickly to prevent loss of your claim. This process will force resolution of the nearly 31,000 incomplete claims.

CDNs are only being sent to those with an incomplete claim, so do not be alarmed if you do not receive a CDN. If you do receive a CDN, it has a table showing your specific cash-in or cash-out transactions and what documentation is missing. Please review the coded descriptions of what is required and respond as soon as possible.

MVF has already received almost 1,000 responses to CDNs, and we are encouraged by the initial quality of the responses. However, this is only a small sample of the incomplete claims. Please remember that MVF will not be able to help if you do not respond to a CDN. If you receive a CDN but do not understand what is required, or you have a special issue, please contact MVF right away. At a minimum, send us the material you think is required with a note explaining what you don't have. Emailing us at info@madoffvictimfund.com is the easiest channel of communications, but if you need to speak with customer service please be patient as our current call volume is very high.

Updating Collateral Recovery Information

Throughout this summer, MVF will be seeking updated collateral recovery information from all potentially eligible claimants. Collateral recoveries are payments received from sources other than MVF with respect to your Madoff losses. MVF collected collateral recovery information on the initial claim forms, but we need to update our information because large distributions have occurred since then from various sources. Collateral recoveries include bankruptcy distributions, recoveries from class action litigation or insurance policies, payments from your bank or investment manager, or any other types of compensation payments to you with respect to your Madoff losses(6). If you have doubt about whether cash you received qualifies as a collateral recovery, please advise us of the source and the amount so that we can make that determination.

Report to DOJ

MVF expects that at least 10,000 claimants (and hopefully more) will submit supplemental information to cure deficiencies prior to expiration of the CDN deadlines. These claim files will then be updated with the new information and any additional analysis that might be required(7). As this process is moving forward, I will be preparing a formal Report to DOJ which I anticipate submitting by the end of August. Undoubtedly some claims will not be resolved by then, but the Report will cover the claims that are ready(8).

As we have previously explained, under U.S. laws governing the disposition of forfeited assets, the Attorney General of the United States is responsible for determining whether or not to accept petitions for compensation from victims. The Attorney General (or her designee, who is called the "Ruling Official") has very wide discretion over final decisions. The Report is my formal recommendation to DOJ on the disposition of specific claims. After reviewing the Report, the Ruling Official will make the final decision on disposition of each claim. I am absolutely confident that DOJ will make its decisions as quickly as possible consistent with their legal responsibilities.

Determination Notices

After DOJ makes its decisions, MVF will send you a formal "determination notice" ("Determination Notice") advising you of the outcome of your claim. The Determination Notices will include details of the process for filing a request for reconsideration ("RFR") of DOJ's decision if you believe it is inappropriate for any reason. While MVF strives to evaluate every claim correctly the first time, the RFR is an important avenue for reviewing final decisions. Once you receive your Determination Notice, you will only have a very short time to decide whether or not to file a RFR.

When the period for filing a RFR expires, DOJ must review the appeals and decide whether to modify or affirm their claim decisions. Only after the claim decisions and RFRs are finalized will MVF be able to compute a final claims denominator, which is the key to beginning payouts on approved claims. As you can tell, the decision phase of the process is a balancing between finalizing claims quickly and being sure that every victim has a reasonable opportunity to resolve deficiencies and seek reconsideration.

Payment Phase

As described in the Plan, MVF has always planned on making multiple payouts. Claims that are not included in the first payout will still be potentially eligible to participate in subsequent distributions. However, you will be far better off if you can resolve any issues through responding to a CDN rather than waiting to appeal at the end of the process.

There are still many variables that will affect the timing and the percentage rate of cash distributions. Nonetheless, completing the initial review of claims is a major milestone in the case, and it brings us a big step closer to the cash distributions we all want to see. Expiration of the CDN deadlines will be our next major milestone, and I plan to update you again once my Report is filed with DOJ this summer.


Richard C. Breeden
Special Master

1. MVF has completed the review of roughly 30,000 claims since May of 2015.
2. These include claims involving swaps or derivatives totaling more than $10 billion, so we do not mean to suggest that these claims with special eligibility issues are inconsequential.
3. This effort is designed to insure that we remove fictitious Madoff profits from the percentage allocations that MAIVs may have given their customers.
4. This is an increase of over 5,000 recommended claims since December.
5. As claims were being reviewed, MVF distributed roughly 28,000 "informal deficiency notices" ("IDNs") advising claimants of items their claims were missing. Nearly 12,000 claimants provided supplemental information in response to IDNs, which allowed us to finalize many claims.
6. If you invested through a MAIV, proceeds from the disposition of non-Madoff investments do not constitute collateral recoveries.
7. These types of updates require far less time than the initial detailed review of the claim.
8. Claims that are not resolved in time for the Report will be covered in a subsequent report.

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