After Bernie Madoff’s elaborate and gigantic Ponzi scheme evaporated during the financial crisis of 2008, $20 billion in investors’ money disappeared along with it.
Now, more than seven years later, the trustees have managed to recover more than $9 billion of the lost money, enough to pay victims back about 57 cents for each dollar they’d put in to the phony funds. That at least goes the majority of the way to making them whole—which is a lot better than the nickel on the dollar investors originally thought they’d get.
But victims were only able to recoup as much as they did because of a potentially nefarious mystery that has yet to be fully solved: investors never filed claims for $2.5 billion of the $20 billion lost.
The trustees distributing Madoff’s remaining funds to victims, a group of lawyers at New York firm BakerHostetler led by Irving Picard, confirmed to Fortune that they’d only received claims for $17.5 billion, a figure Bloomberg reported earlier on Friday. And it’s too late to speak up now: The deadline to file claims passed in July 2009, so no one will ever be able to get the $2.5 billion back, the trustees’ spokesperson said.
In fact, no one even really knows where the money is: The trustees only looked to recover funds for which people filed claims, and won’t go searching for the rest, so it’s essentially lost to history. “We’ll never know,” says the spokesperson. Madoff continues to inspire intrigue: The Ponzi mastermind is the subject of a recent TV series and a forthcoming movie starring Robert De Niro.
Picard’s team doesn’t know why the other victims never came forward. But Bloomberg speculates that nearly half of the unclaimed pot belonged to “feeder funds,” hedge funds that invested with Madoff. Two offshore funds never filed claims, but had withdrawn significant amounts of their money from Madoff’s firm before the Ponzi scheme architect was arrested—moves that apparently looked suspicious to the trustees. Picard sued the firms in an attempt to collect the money they withdrew to payback other victims, claiming the hedge funds probably knew Madoff was a fraud, according to Bloomberg.
But because the withdrawn money was more than the funds were likely to receive by filing a claim, they decided to cut their losses and just keep what they already had. One of those funds, Harley International, later collapsed, and the CEO of the firm handling its liquidation doesn’t think its failure to file a claim is much of a mystery at all: “It shouldn’t be too difficult to figure out why Harley didn’t file a claim in the Madoff liquidation,” he told Bloomberg.