For the victims of Bernard Madoff's immense Ponzi scheme, it's finally starting to look like payback time.
On Friday, the biggest beneficiary of the scheme agreed to turn over "every penny" of ill-gotten gains from nearly 35 years of investing with Mr. Madoff - a sum of $7.2-billion (U.S.).
The total is a "truly staggering sum that was always other people's money," said Preet Bharara, the top federal prosecutor in Manhattan. It is the largest forfeiture in U.S. history, he said.
The funds come from the estate of a wealthy Florida philanthropist, Jeffry Picower, who was one of Mr. Madoff's earliest investors. In October of 2009, he suffered a heart attack and drowned in his swimming pool at the age of 67.
On Friday, a civil settlement was announced between Mr. Picower's estate, federal prosecutors, and a trustee, Irving Picard, charged with recovering money for Mr. Madoff's victims.
"The Madoff Ponzi scheme was deplorable and I am deeply saddened by the tragic impact it continues to have," said Mr. Picower's widow, Barbara, in a statement. "It is my hope that this settlement will ease that suffering."
Friday's deal transforms the road ahead for those swindled by Mr. Madoff. Their cash losses are now believed to amount to $20-billion, according to Mr. Picard. The money from Mr. Picower's estate will bring the total amount recovered to roughly $10-billion, meaning half of those losses could be repaid.
Estimating the size of Mr. Madoff's epic fraud has always proved difficult since the account statements he provided to investors were fictitious. On paper, it appeared they had more than $60- billion invested in stocks and other instruments.
But the investments were "one big lie," in Mr. Madoff's words. When the fraud came to light two years ago, it wiped out years of savings by individuals, businesses and charities. Some investors, however, withdrew more from their Madoff accounts than they put in and aren't eligible for compensation.
People who saw their savings destroyed in the fraud greeted the news of Friday's settlement with caution. Nancy Robinson runs a non-profit group called Citizens for Safety in Boston and believes her losses in the Madoff fraud were about $1-million. So far, none of it has been returned. Other members of her family, including her father and brother, were also victims.
"I will be thrilled if I recoup my losses, but I'm trying to manage my expectations," she said. Despite the struggles of the past two years, she considers herself one of the lucky ones, still young enough to work and rebuild.
Her non-profit, which aims to keep guns out of the hands of inner-city youth, is another source of perspective. "I've worked with mothers who have had to bury their children," she said. "In light of that, my hardships don't seem all that horrendous."
A long-time friend of Mr. Madoff, Mr. Picower made large investments in health and technology businesses and lived in Palm Beach, Fla. The $7.2-billion to be returned by his estate represents the difference between what he put into his Madoff accounts and what he withdrew.
Mr. Picower appears to have been a savvy investor in his own right. According to The New York Times, he made more than $2-billion in a trading account at Goldman Sachs over several decades.
Recent weeks have seen a steady drumbeat of lawsuits from Mr. Picard, the trustee, who had a deadline of Dec. 11, two years after Mr. Madoff's arrest, to file claims seeking money for victims.
He sued a prominent Austrian banker, Sonja Kohn, who channelled money from European investors into the scheme, for $19.6-billion, accusing her of being Mr. Madoff's "criminal soulmate." Mr. Picard is also seeking $6.4-billion from JPMorgan Chase & Co., Mr. Madoff's main bank, saying it turned a blind eye to his suspicious activity, something the bank vehemently denies. It's unclear how much could potentially be recovered by the lawsuits.
Another potential source of funds: members of Mr. Madoff's family, who were also named in several recent suits by Mr. Picard. On Dec. 11, Mr. Madoff's eldest son Mark committed suicide in his apartment in New York while his two-year-old child slept nearby. Unable to work on Wall Street after his father's crimes, he had been writing a daily newsletter on the real-estate industry - one where his name didn't appear.
Mark Madoff and his brother Andrew both worked on the trading side of their father's business and denied any knowledge of the fraud. Bernard Madoff is serving a 150-year sentence in a North Carolina prison.