The bankruptcy of Bernard L. Madoff Investment Securities (BLMIS) revealed the largest Ponzi scheme in United States history. As of December 11, 2008, BLMIS recorded (on paper) nearly $65 billion in investment value, approximately $17 billion of which was customer principal investments.
Kroll was hired by the trustee to the BLMIS estate and his law firm, Baker Hostetler, on behalf of its client, the Securities Investor Protection Corporation (SIPC). The role of the trustee was to understand the magnitude of the situation and, through the courts, recover funds back into the trust to pay creditors and victims.
Given that the fraud of BLMIS went on for over 40 years, the number of victims and the volume of data, documents and information was enormous. Further, nearly 1,000 lawsuits were filed by the trustee across domestic and foreign jurisdictions. The claims covered an extensive range of analytical issues, from fraud to damages to valuation and computer malfeasance. The firm needed help analyzing the mountains of information, so they partnered with Kroll to ultimately repay the victims of this decades-long fraud.
Kroll’s Expert Services team led the engagement and provided the analytical and testifying know-how. Kroll’s Valuation Advisory Services (VAS) supported the data analysis and valuation work streams, and the Data Analytics teams managed and analyzed the massive amount of data generated. Finally, Kroll’s Digital Forensics team played a crucial role in examining and interpreting the extensive code across systems used to spread the fraud at BLMIS.
Over 12 years, Kroll has provided a suite of one-stop solutions for their client, working with nearly 75 employees across five U.S. offices to review 40 million documents, terabytes of data, computer code, pleadings and extensive deposition and trial testimonies.
Kroll's engagement with the client (which began in 2011) and the other parties involved with the Madoff case resulted in the trustee being able to recover approximately $14 billion to date, which will be distributed to the victims.
Kroll's work in these civil matters was also instrumental in being engaged by the U.S. Attorney General's office for the Southern District of New York's criminal case against five former BLMIS employees. All five defendants were found guilty.
With its wide range of services and expertise, Kroll was uniquely positioned to provide the client with necessary and multi-faceted analyses and solutions. Kroll not only had the required financial and forensic analytical capabilities but could also interpret and simplify the data for testimony in a court setting.
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