Madoff victim fund swamped with claims

May 14, 2014, 1:24 PM UTC

FORTUNE — The government fund created to compensate victims of fraudster Bernard Madoff’s massive Ponzi scheme has been deluged with claims exceeding $40 billion.

Richard Breeden, the U.S. Department of Justice-appointed special master for the Madoff Victim Fund, announced Tuesday that more than 51,700 people submitted claims looking to recover investments they say were lost as a result of the fraud at Madoff’s firm. That number exceeds what the government had been expecting, with Breeden saying in a statement, “it appears that at least twice as many investors as previously thought lost money in the Madoff fraud, with losses running many billions larger than previously documented.”

As overseer of the victims fund, Breeden is now tasked with sorting through those claims in order to determine how to dole out the roughly $4.05 billion the government was able to recover through asset forfeitures by those involved in Madoff’s scheme. Breeden is expected to toss out a “substantial” amount of “ineligible, duplicate or overstated claims” before distributing the money.

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The claimants come from 119 different countries overall, with 58% residing in the U.S. After the U.S., the greatest number of claimants can be found in Germany, Italy, and France, respectively. According to administrators of the fund, nearly 78% of claimants reported losses of less than $500,000, and almost 13% say they lost more than $1 million each. In total, the investors submitted more than 3 million pages of documentation in support of their claims.

The MVF claims showed a strikingly larger group of victims — with much larger losses — than anyone previously knew to exist,” Breeden said, using the acronym for the victims fund. “Other than the Gobi desert and the polar icecaps, few places on earth seem to have escaped the scourge of this fraud. This fraud was of epic, and truly global, proportions.”

The timing of the victims fund distribution has yet to be determined and will occur after Breeden makes his recommendations to the Justice Department.

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Breeden says most of the people filing claims said they have yet to receive any money at all to recoup their losses. The victims fund is allowing investors in so-called feeder funds — hedge funds and other investment vehicles that entrusted Madoff with their investors’ money — to recover funds. That has not been the case with a separate compensation fund created through the liquidation of Bernard L. Madoff Investment Securities. That $9.8 billion fund is being overseen by a bankruptcy court-appointed trustee, Baker & Hostetler attorney Irving Picard, who has thus far distributed roughly $5.2 billion to Madoff’s victims, but only if they were direct investors.

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