Today was the day to see the Madoff fraud victims and losers when Madoff was sent to jail.

Apparently not all Madoff investors were losers and some made profits.

The many Bernard Madoff investors who withdrew money from their accounts over the years are now wrestling with an ethical and legal quandary.  What they thought were profits was likely money stolen from other clients in what prosecutors are calling the largest Ponzi scheme in history.

Hundreds and maybe thousands of investors in Madoff’s funds have been withdrawing money from their accounts for many years. In many cases, those investors have withdrawn far more than their principal investment.

Such winners were probably not present on this day for the victims and losers. One loser but not a victim was clearly Bernard Madoff himself, who was remanded to jail and faces up to 150 years in prison.

At the trial, fifty courtroom seats were reserved for some of the estimated 4,000 victims of Madoff’s Ponzi scheme. Some had placed all their savings in Madoff’s firm.  Madoff, 70, pleaded guilty to charges that he swindled investors through his firm, Bernard L. Madoff Investment Securities LLC. None of his clients’ funds were invested in securities for more than 13 years.

Another big loser was the SEC.  As Campbell Brown said, the SEC ignored the whistle-blower in the Madoff case

The Securities and Exchange Commission completely bungled the investigation and likely cost Madoff’s victims even more money.  Although new SEC Chairman Mary Schapiro told a congressional panel that rewards might be a good way to help bring in leads, that was quite unnecessary in this case.  The SEC wouldn’t have had to shell out a dime when Harry Markopolos tried to deliver the Madoff corruption probe on a silver platter starting four years ago.

Another surprising winner according to one of the victims may be the Internal Revenue Service (IRS).  It is alleged that Madoff investors paid hundreds of millions, if not billions, of dollars in income taxes on phantom income that never existed.  Perhaps the Internal Revenue Service should not be allowed to keep that money.

It is certainly a tragedy of mammoth proportions, particularly for many of the victims whose lives have been irreparably damaged.

Technorati Tags: fraud, Internal Revenue Service, losers, Madoff, Ponzi, victims