Abstract
In December of 2008, former NASDAQ Chairman Bernard L. Madoff’s multibillion-dollar Ponzi scheme collapsed under the weight of client redemptions spurred by the financial crisis of 2007–2009. The story of Madoff’s devastating fiction seized international attention until his sentencing to 150 years. However, the Madoff Trustee’s clawback suits, which make claims on how fictitious profits should be treated—continues to be overlooked by the public and scholars. This paper argues for their significance to the very ideological bulwarking of finance capital in the twentyfirst century by providing a Marxist reading of these suits and their outcomes. The author applies insights from Capital Volumes II and III, while situating the suits and the debates surrounding their use within the cultural logic of capitalism in the twenty-first century. This logic, as shown through clawback suits, is more and more willing to consciously and brazenly embrace the obliteration of lines between Marx’s concept of fictitious capital and real capital.
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Notes
- 1.
JP Morgan would pay 1.7 billion to settle claims of complicity. See Helen Chatiman’s (2016), JP Madoff: The Unholy Alliance Between America’s Biggest Bank and America’s Biggest Crook for a thorough accounting of the relationship between Madoff and the bank.
- 2.
“Except in limited circumstances, SIPC only protects the direct customer of a brokerage firm,” the agency states.
- 3.
The term “clawback” has different meanings and application. Cherry and Wong’s [3] definition is “a right to, or action for, the restitution of unfair enrichment that is otherwise justified or permitted under prevailing applicable law.”
- 4.
She presents commentators’ predictions that clawbacks use will only increase in the future due to a populism allegedly pushing the American economy to the brink (see p. 6).
- 5.
See Harvey, pp. 242–243 and also Meacci, “fictitious capital arises at any time that money capital is not employed either in production or circulation as two distinct phases of the reproduction of wealth” p. 6.
- 6.
Interestingly, to my knowledge, no investors who lost money on investment vehicles like derivatives contracts referenced to Madoff securities have argued against their exclusion. But question must have arisen, as Breeden on the Madoff Victim Fund website cautions that such investors are ineligible for recoveries.
- 7.
And, as Marx describes, there is belief in the “mystery” of compound interest through myriad forms of fictitious capital. Marx notes in Volume 3, “the identity of surplus value and surplus labor sets a qualitative limit to the accumulation of capital,” but compound interest ignores this limit (see p. 523).
- 8.
See Kitty Calavita et al.’s Big Money Crime: Fraud and Politics in the Savings and Loan Scandal (Berkeley: University of California Press, 1999) for an extended treatment of the way in which the insider fraud, collusion, deregulation, and the casino economy factored into the S&L debacle.
- 9.
Lazarini writes “There is no cognizable loss based on the amount of Plaintiff’s actual investment with Madoff, some $6 million. Had $6 million been withdrawn from Madoff and invested elsewhere…there is no plausible scenario under which Plaintiff would have enjoyed returns in excess of the $33 million in ‘profits’ Plaintiff pocketed.”
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Eren, C.P. (2020). The Final Fiction: Madoff Clawback Suits and Their Implications for Capitalism in the Twenty-First Century. In: Silver, M. (eds) Confronting Capitalism in the 21st Century. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-13639-0_12
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