E. SIPC says there were "90,000 disbursements totaling $18.5 billion made to Madoff investors in excess of their investments." (P. 5.) Whether this means during the entire course of the scam, or only during the six year period prior to December 11, 2008 -- the maximum possible period for avoidance actions -- is not said. If the latter, this would mean that on average there were 15,000 such disbursements per year, or an average of 1,250 per month. If the former, it would mean there were on average about 5,300 per year, averaging about 450 per month. I find it hard to say which is more likely, and, if SIPC is referring only to the last six years before December 2008, there also would obviously be many disbursements above investment before the last six years.
Thus, regardless of which SIPC means, there are likely to be many current or prior Madoff investors who, by December 11, 2002 (six years before the fraud was disclosed) had taken out more than they put in. Yet, because of statutes of limitations this "excess" is beyond the reach of avoidance suits unless the investors were negligent or complicit -- and it is probable that only wealthy investors and/or institutions were negligent because they had sufficient money to do due diligence that would have uncovered the fraud, and therefore can be sued for "excess" monies they took out before December 11, 2002.
It is quite important to try to find out just how much in "excess withdrawals" were made before December 11, 2002 and are not subject to avoidance suits. For SIPC and the Trustee claim that "fairness" -- at least their crabbed, narrow-minded concept of it, under which fairness requires that advances and customer property be denied to people now living in poverty so that more from customer property can be given to the rich -- requires the use of CICO, which, as just indicated, denies advances and customer property to the small person so that more customer property will be available to wealthy persons and rich institutions. SIPC and the Trustee are thereby placing a major financial burden of the fraud on small innocent investors who withdrew more than they put in, while leaving untouched investors who did the same and got out of Madoff more than six years before December 11, 2008. In other words, their concept of "fairness" is that if you got out in time you're safe, and if you didn't get out in time you're screwed -- and this in addition to their anti Robin Hood conduct of taking from the poor to give to the rich.
In combating this distortion of values arising from the use of CICO, it would be useful to learn how many investors took out all their money before December 11, 2002 and by how much did their withdrawals exceed the amounts they put in. If necessary -- if the Second Circuit rules for SIPA and Picard on net equity and Congress does not enact a statute mandating that net equity be determined by the FSM, the information should be sought in discovery.
F. There are a number of points in SIPC'S answers that relate to the adequacy of its planning. To wit: SIPC says that since April 1, 2009 it has been assessing members one-quarter of one percent per year to build the SIPC fund. (This after a decade of assessing them only $150 per year -- even if they were Goldman Sachs or Merrill Lynch.) Its "target" is to build the fund to $2.5 billion dollars, and "assessments based upon a percentage of net operating revenue will remain in place until" then. (P. 2.) When the fund is built to $2.5 billion, SIPC will have access to $5 billion by combining the $2.5 billion fund with another $2.5 billion line of credit available from the Government. Before March 1, 2009, SIPC had two revolving commercial lines of credit of $500 million dollars each (or a total of $1 billion) available from a consortium of banks, but the banks, says SIPC, were "unwilling to renew the credit lines, due to the developing financial crisis." (P. 2.) And SIPC says that "SIPC, under current law, has demonstrated that it has sufficient resources for its statutory mission." (P. 3.)
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