Some Madoff investors took out more money from the fund than they initially put in, should they complain in an effort to get any of their principal returned? How will money received be treated – may an investor keep it, use it to offset its losses, or simply owe it all back?
Madoff WINNERS Wonder Whether To Complain Or Shut Up 
Bernie Madoff didn’t just wipe people out. He also made people millions. And many of the people whom Madoff made millions didn’t just let them sit there and accrue in Madoff’s accounts–they took them out. And now they’ve learned that those millions were just stolen money. So should they give them back?
Many of these Madoff winners ALSO left huge piles of money accruing with Madoff. They took out more than they put in, so they’re better than whole, but they also left millions for Madoff to make them more on. Now they’ve learned that those piles were just black marks on a page.
So should these file a claim on that fake money with Madoff’s actual victims? Or should they just thank their lucky stars that they got out whole and leave the real victims to collect pennies on the dollar?
These are tough decisions! Because if these Madoff winners file claims to recoup the fake money they’ve lost, they might alert the Madoff trustee to the fact that they took real (stolen) money out. And if they do that, the trustee might want that money back, in which case they might end up worse off. But they’d at least feel good about having given the stolen money back, right? But what if they’ve already spent it?
AP chronicles the trials and tribulations of a new class of Madoff victim, the Madoff WINNER:
[T]his week… about 8,000 former Madoff clients began to receive letters inviting them to apply for up to $500,000 in aid from the Securities Investor Protection Corp.
Lawyers for investors have been warning clients to do some tough math before they apply for any funds set aside for the victims, and figure out whether they were a winner or loser in the scheme.
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 In many cases, those investors have withdrawn far more than their principal investment.
"I had a call yesterday from a guy who said, ‘I’ve taken out more money then I originally put in, but I still had $1 million left with Madoff. Should I file a $1 million claim?’" said Steven Caruso, a New York attorney specializing in securities and investment fraud.
"I’m hard-pressed to give advice in that situation," Caruso said.
Among the options: Get in line with other victims looking for restitution. Keep quiet and hope nobody notices. Return the money. Or hire a lawyer and fight to keep profits that were probably fraudulent.
No one knows yet how many people will emerge as net winners in the scandal, but the numbers appear to be substantial. Many of Madoff’s long-term investors have, over time, cashed out millions of dollars of their supposed profits, which routinely amounted to 11 percent to 15 percent per year.
Jonathan Levitt, a New Jersey attorney who represents several former Madoff clients, said more than half of the victims who called his office looking for help have turned out to be people whose long-term profits exceeded their principal investment.
"There are a lot of net winners," he said.
Asked for an example, Levitt said one caller, whom he declined to name, invested $1.8 million with Madoff more than a decade ago, then cashed out nearly $3 million worth of "profits" as the years went by.
On paper, he still had $4 million invested with Madoff when the scheme collapsed, but it now looks as if that figure was almost entirely comprised of fictitious profits on investments that were never actually made, leaving his claim to be owed anything unclear.
Other attorneys report getting similar calls…
Applying for the aid could give the trustee evidence he needs to initiate a clawback claim. On the other hand, investors who ignore the letter would most likely forfeit any chance of recovering lost funds.
The SIPC and the Madoff trustee, meanwhile, don’t have a clue what do to about this:
Stephen Harbeck, chief executive of the Securities Investor Protection Corp., told The Associated Press neither he nor the trustee handling Madoff’s business, Irving Picard, have decided what to do about Madoff investors who made money. He predicted the process would be "a legal and accounting nightmare."
"Between money in and money out, versus statements received, it is a real difficult pile of issues," Harbeck said. "There are some customers who would want us to use clawback procedures against other customers, and there are other customers who would resist that."
Asked if SIPC would rule out paying claims to investors who appear to have net profits, Harbeck said it was "too early" to say. He encouraged people to file claims, even if they think it might ultimately be denied, but said investors had no legal duty to do so.
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