Academic

The WSJ today reports on a firm, ASM Capital, that is making the Bernard Madoff investors an offer that may or may not refuse.  ASM is offering to pay Madoff investors 20% of the value of their claims in exchange for their claims against the Madoff bankruptcy estate.  As an alternative, investors could instead accept 16% of the value of their claims and retain a 33% interest in any future satisfaction of their claim.  ASM, a firm out of Woodbury, NY, specializes in buying claims of bankruptcy creditors at a discount.  This is their business.

I'm a bird in the hand kind of person, so I would be sorely tempted.  Irving Picard, the SIPC trustee and bankruptcy trustee, as estimated disbursement between 15 and 50%.  However, the liquidation is slow-going.  Gathering the funds has taken awhile (about $1.5 billion so far, another $2 billion on the way from estate of recruiter to feeder fund), and litigation may slow things down as well.  As noted here on the blog, the bankruptcy court ruled in March for Picard's calculation of net investment losses, but an appeal by the Madoff investors seems assured.  Ironically, if the Madoff investors win, and their allowed claims then reflect the "phantom" gains Madoff was reporting and not just their invested principal (minus withdrawals), then some investors' recoveries will be diminished on both a percentage and a net basis.

The reporter seemed to want to imply that ASM is scavanging in a way a little too unsavory -- taking advantage of a group of investors who have already been taken advantage of by Bernard Madoff.  However, I tend to see it differently; ASM is providing the investors with an additional choice that they are free to ignore.