Madoff victims win $7.2bn from fraud insider

The estate of Madoff insider Jeffry Picower settled civil claims of $7.2bn (£4.6bn) yesterday, significantly boosting the amount available to repay investors swindled in the epic fraud.

Mr Picower, a long-time friend of Bernard Madoff, died of a heart attack in Florida in October 2009 – five months after the court-appointed trustee, Irving Picard, claimed Mr Picower's rates of returns from investments were implausibly high.

Documents filed in the US District Court in New York said Mr Picower's wife, Barbara, agreed to forfeit $7.2bn of net withdrawals, considered proceeds of the Madoff fraud. The settlement is the largest yet for the trustee searching for proceeds of the fraud.

Mrs Picower said: "We will be returning every penny received from almost 35 years of investing with Bernard Madoff. I believe the Madoff Ponzi scheme was deplorable and I am deeply saddened by the tragic impact it continues to have on the lives of its victims."

The family of the accountant and lawyer turned billionaire philanthropist said that Mr Picower had been working toward reaching a settlement at the time of his death. Mrs Picower spoke of her hope that the multi-billion dollar pay-out might "ease the suffering of the fraud victims".

Following Friday's settlement, the trustee overseeing the bankrupt investment company, traders and investors say they are already starting to see potential claims on the money they lost when the scheme collapsed in 2008.

The FBI and US prosecutors had investigated whether Mr Picower knew he was profiting from Madoff's scheme, considered the biggest financial fraud in history. The Picower estate's lawyers claimed he knew nothing of the fraud but victims' lawyers argued that he must have recognised the fact that investment returns were "implausibly high". Madoff admitted last year to defrauding thousands of investors through a Ponzi scheme, which paid out returns using money from new investors rather than interest made from profits.

The scheme, which had gone unnoticed since the early 1990s, unravelled during the economic downturn last year when Madoff's investors attempted to withdraw funds amounting to $7 billion which he could not produce.

Madoff, 72, is currently serving a 150-year jail sentence after pleading guilty in March 2009 to orchestrating the fraud. Prosecutors estimated that the scam took in about $65bn.

The Madoff trustee has estimated the amount investors lost at around $20bn. On the second anniversary of Madoff's arrest earlier this month, Mr Picard had managed to secure around $2.6bn in settlements and asset sales.

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