First, we read that savvy investors were paying 20 cents on the dollar to Madoff victims for their claims. Quickly, inexorably, not surprisingly—investor bids ticked up to 25 and 30 cents.
Then, we read that Jeffry Picower's widow settled with the Madoff trustee for $7.2 billion dollars. Some victims will net north of 50 cents on the dollar from this deal. It is the largest settlement ever for a Ponzi scheme.
It is also a big win for "buyers" of Madoff lawsuits according to The New York Times:
Now, it seems increasingly likely that claims bought for that amount will wind up being worth considerably more, perhaps as much as 50 cents on the dollar — a nice profit for the speculators who took the risk of buying them.
Oh, puhlease. The bid creep smells, especially in light of that $7.2 billion agreement. I have no direct exposure to the settlement process or how information is disseminated. But the pricing behavior—lawsuits trading up 50 percent from 20 to 30 cents—reminds me of those surges in call option prices just before public companies announce bonanza earnings.
Acrimoney ran a post last October about reloading—that's hitting the same Ponzi victim twice. Now with some Madoff victims losing 30 cents on the dollar—the spread between the 20 they receive and the 50 in potential recoveries—I wonder if we're seeing more of the same.
Are these investor windfalls the result of savvy investing or insider trading? Is there a functional equivalent of expert networks in the Ponzi world? What do you think?
The New York Times describes my novels as “money porn,” “a red-hot franchise,” and “glittery thrillers about fiscal malfeasance.” Through fiction I explore the dark side of money and the motivations of those who have it, want more, and will steamroll anybody who gets in their way.