Madoff Math

See, it wasn't just us. The question we tackled on that podcast back in March, of how to add up the size of Bernie Madoff's Ponzi scheme, has surfaced in federal court.

Attorney Barry Lax is arguing the victims are owed the amount shown on the last financial statement Madoff sent them. From the New York Times:

"We are talking about some of the saddest cases imaginable," he said. "These are people in their 70s and 80s who cannot work and have no possible source of income to replace the money" lost in the fraud.

Irving Picard, the trustee charged with making these awkward calculations about who should get paid what, argues that the numbers on the financial statements were fictions. And Madoff gave his friends higher (fictitious) returns.

In a recent interview, Mr. Picard argued that recognizing these fraudulent transactions as the basis for actual cash losses would be to "allow the thief to pick the winners and losers."

It's a tough issue. People planned their lives around Madoff's lies, so the numbers on those financial statements had consequences. But those numbers were lies.

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