Here is the question to ask yourself: Even with the Ponzi scheme, would you have been better off investing with Madoff than with Smith Barney? Or for that matter, any of the other brokerage houses that were more concerned with bonuses and making money through mortgage syndication than taking care of their small-fish clients.

Was Bernie Madoff really Ponzi Claus?

Life is full of irony and the Madoff Ponzi scheme may prove to be the biggest irony yet. Irving Picard is the trustee suing to reclaim the money Madoff clients’ lost. The recent promise of payment of $7.2 Billion from the Picower Estate brings the total recovery up to just over half of what the investors gave to Madoff to invest. What most people don’t appreciate is the amount being sought does not include investment appreciation. As a victim you get only the principal that you invested with Big Bernie. Meaning, if you invested $100,000 and thought after Madoff invested it, that you now have $120,000 only to find out it was a sham, you don’t get the $20,000; only the $100,000 minus anything you took out before the collapse. Now that you have this piece of news, compare the Madoff “victims” to non-Madoff vicitms.

If many investors in the downturn lost half of what their accounts were worth that means if the Madoff ‘victims’ get more than half back they are better off than the ‘non-Ponzi-victims’. Which begs the next question: In the end what Bernie Madoff did may turn out better for this clients than clients of say Smith Barney. Did Big Bernie put his ‘victims’, his Ponzi clients, in a better position than those with no one to sue?

Now wouldn’t that be ironic?

For an explanation of the principal-only recovery method read David Lat’s post A $7.2 Billion Settlement Generates Money for Madoff Victims, December 19, 2010.

And don’t forget the ‘victims’ also recouped a sort of tax-windfall for their losses. See Op-Ed Contributor, The Ponzi Scheme That Changed My Life, Michael Kubin, December 11, 2010.