The Unlucky Lucky Madoff Investors
So you were lucky enough to receive money back from Bernie Madoff before his pyramid scheme collapsed? Think again.
The usual process in pyramid scheme recoveries is for the court-appointed Receiver to obtain all the financial records of the scamster, including bank accounts. Then, disbursements are traced to each recipient, who receive a friendly letter telling that they must send all the money they received back to the Receiver, so that the Receiver can pool the moneys together for distribution to all victims. Oh, and by the way, if the moneys are not returned then the Receiver will either sue the victim or obtain an order to hold the victim in contempt of court.
Upon receiving such a letter, the scam victim yells "Bloody Murder!" and immediately complains that they put more money into the scheme than they ever got back, and are still in the hole.
The Receiver just doesn't care. The money is not that of the victim, the money is that of ALL victims. The Receiver's job is to husband all the remaining assets of the scheme into the pool, and the assets include those that were paid out of the "lucky" victims before the scheme collapsed.
But what if the victim who received money doesn't have any ready cash on hand? Tough. The receiver can bring a lawsuit against the victim, obtain a judgment, and then liquidate the victim's other assets, such as houses, IRAs, etc., until the Receiver gets back all the money received from Madoff.
Brutal? Yes, but necessary to protect all victims. It doesn't make any sense than an investor who received money from Madoff a month ago should be in a better position than one who didn't. The strong powers of the Receiver to claw money out of "lucky" investors is also why there is actually the possibility of some recovery by all victims. In the Reed Slatkin scam, for instance, victims received upwards of 40% of their original investments back. In the Cash-For-Titles scam of the late 1990s, victims received over 70% of their money back.