Challenge: Madoff loss formula

[campbell]

Today's challenge - come up with a better formula/definition for losses in the Madoff fraud:
http://www.nytimes.com/2010/03/02/bu...l?ref=business

In a decision filed on Monday, Federal Bankruptcy Judge Burton R. Lifland ruled that losses should be defined as the difference between the cash paid into a Madoff account and the amount withdrawn before the fraud collapsed in mid-December 2008.

Judge Lifland rejected emotional arguments by hundreds of defrauded investors seeking to have their claims based on the balances shown on their final account statements, sent out just weeks before Mr. Madoff was arrested. He pleaded guilty last March and is serving a 150-year prison term.
....
If losses were based on the final account statements, Mrs. Fox and almost every Madoff investor would be eligible for up to $500,000 from SIPC — not as insurance, Judge Lifland noted, but as a cash advance against their fair share of any recovered assets.

The total of those account balances — the wealth investors believed they had saved — was nearly $65 billion, by far the largest financial fraud loss in history.

But those statements “were bogus and reflected Madoff’s fantasy world of trading activity,” Judge Lifland wrote in his opinion.

As such, they cannot reflect legitimate “securities positions” on which claims can be based, he said.

Instead, Judge Lifland endorsed the approach of the Madoff trustee, Irving H. Picard. The differences between how much investors put into their accounts and the amount they took out are “the only verifiable amounts” reflected in the Madoff firm’s records, Judge Lifland said of that method.

It seems reasonable to me.

Anybody got a better formula?

[vtek]

it's both reasonable and fair. zero would also be reasonable, though

[SirVLCIV]

1) I don't think the government should be reimbursing anyone for fictional losses.
2) I do think Madoff should be liable for the opportunity cost of the money. I don't know how to define that, however.

[campbell]

So, how much assets - real assets - did Madoff have at the time of conviction?

Seems to me the best one can get is percentage amount claims of Madoff's assets. I've seen a few articles where some Madoff investors who cashed out early are paying off those who got burned, but I'm not sure how kosher that is.