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The Madoff Exiles


"I am completely jaded," says Cyndee. "These congressmen, they speak in these sound bites about helping the victims. You know they don't mean it."
Richard and Cyndee Friedman Lost: $3 million  

On December 16, then–SEC chairman Christopher Cox issued a statement acknowledging “credible and specific allegations regarding Mr. Madoff’s financial wrongdoing, going back to at least 1999,” and “apparent multiple failures over at least a decade to thoroughly investigate these allegations.” As Elisofon saw it, Cox was not just talking about incompetence but negligence. “He didn’t just say that ‘we sucked at our jobs,’ ” Elisofon says of Cox. “He said they had repeated warnings, multiple failures, breakdowns in his system. It’s at that point that I became convinced.” Cox’s admissions were reinforced, Elisofon says, by a bombshell inspector general’s report filed in August chronicling seventeen years of SEC oversight failures in the Madoff matter. Now after exhausting an administrative claim against the SEC, Phyllis Molchatsky is poised to become the plaintiff in a lawsuit seeking $1.7 million from the federal government. “It will be a long fight,” Elisofon says. “But if a case like this is dismissed, my view is we might as well repeal the Federal Tort Claims Act and go back to sovereign immunity. If this is not a classic case of negligence, then none exists.”

“The lawsuit is an uphill battle,” Molchatsky says, “but it’s something that in my heart I actually believe. You know, they really wronged a lot of people.” Then again, she admits, “It’s probably one of the only ways I could go.”

In the weeks after Madoff’s fraud was revealed, a community of victim-activists began to mobilize online. First came a member’s-only Google group called Madoff Survivors, created to help victims find and support one another emotionally. Since then, that group and a spin-off, a private site called, also have become information clearinghouses and conduits for lobbying. Says one member of both sites, “It’s everything from ‘Let’s write a cookbook together’ to ‘Did you see the updates on Picard’s site?’ to ‘I sent an e-mail to this congressman, and I got a response on this.’ ”

Ron Stein is a financial planner and investment adviser from Long Island. His father-in-law sold a family business in 1995 and transferred the proceeds to Madoff accounts that he distributed to his kids, including Stein’s wife, Barbara. This year, Stein set up his own website,, putting his professional expertise to use by offering advice on filing for relief and hosting seminars on legal strategies. “I realized there needed to be somebody who could put this information in some kind of a tangible form so people could begin to get their hands around some of the complex issues and get some advice on how to move forward.” He also hoped that by bringing people together, “pressure could be placed on the powers-that-be to bring about restitution.” Members of all three sites are now working to get the IRS to extend the carry-back window and Congress to address the net-equity question.

Instead of identifying as victims, the more politically active Madoff investors are now recasting themselves as agents of change. “The 9/11 widows—and no way do we ever really want to compare ourselves to them—they were able to effect change for the greater good,” says Ilene Kent, a member of Madoff Survivors. “We’re not asking to be made whole. It’s about the government living up to its promise to protect and defend. We want to get across to Middle America that this is us today, you tomorrow.” Ronnie Sue Ambrosino, who helps run, has started calling her group the Madoff Coalition for Investor Protection for this very reason. “First we wanted to take the word victims out of our name, because victims are people who just sit on their butt. And then we added the words investor protection because—and this was a tough realization for me—nobody really cares about Madoff victims. We realized we are not the only victims here. Every American investor is not protected. Everybody lost money in the market. We just lost it all at once.”

The different victims’ websites share many members, but as the lobbying effort steps up, tensions have begun to simmer. The site Ambrosino helps to run, says one victim, “has to do more with Ronnie Sue’s need to be perceived as a leader of a group than with anything else.” Ambrosino is unapologetic about her zeal. “It wasn’t my intent to become a recognized name in all this,” she says. “But it had to be done, and I did it. I think I can get our point across well, so I guess I’ll keep doing it.”

The Madoff victims are cycling through some of the same emotions any trauma victim would—denial, anger, depression. Audrey Freshman, a social worker who is conducting a study of Madoff survivors, says her preliminary findings indicate that Madoff victims are up to ten times more likely than the general population to suffer from anxiety and depression.

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