Word: feeder
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...know what to do with that $173 million in uncashed checks investigators found in Bernie Madoff's desk drawer last week: send them to his feeder-fund customers. These people also could use the bling Bernie's been secretly sending to friends...
...While the Securities Investor Protection Corp. (SIPC) is helping Bernie's closest friends and investors with recovery of up to $500,000, the unregistered feeder-fund victims are likely to get little. Here's why: As it stands, the SIPC's charter helps investors recover monies only from registered brokers and firms engaged in fraud. This is all good for the 8,000 who had registered or direct accounts with Bernard Madoff Investment Securities, a broker/dealer. In fact, right now, most are busy filling out their just arrived SIPC claim-recovery forms in hopes of getting back half...
...billion global Ponzi - people like me, who collectively may have contributed 30% to 50% of Madoff's billions under management and never heard of Madoff until a month ago - are wondering what to do and whom to sue. Currently there are 17 legal cases filed against Madoff or his feeder-fund managers, according to the D&O Diary, a legal blog following the case. Some of these suits are akin to grasping at straws. For example, my feeder-fund manager, Stanley Chais, has already said he's broke because of losses suffered with Madoff...
...Bernie Madoff come to have two classes of investors - the first-class crowd enjoying SIPC support, and the rest of us in coach? The Securities and Exchange Commission (SEC) encouraged the growth of unlicensed, unregistered feeder funds when it liberalized investing rules in the 1996 National Securities Markets Improvement Act, now part of the Investment Company Act of 1940. As a result, anyone managing pooled investments held by fewer than 100 people, or managing monies for an unlimited number of "qualified purchasers" (investors with more than $5 million or institutions with more than $25 million), need not worry about...
...Robert Chew is a former investor with Madoff via a feeder fund. He lives in Colorado...