The success of Madoff trustee Irving Picard in collecting on claims filed against "friends, families and feeders" of Bernie Madoff has driven up prices of Madoff claims in the secondary market - with hedge funds and banks doing the buying.  

e.g., the price of holdings in Madoff "feeder" funds, such as Fairfield Sentry and Kingate, have risen to 7 or 8 cents on the dollar, up from 1 or 2 cents six months ago.  Buying a bankruptcy claim from a direct investor with Madoff would cost in the range of 30 - 40 cents.  Tullett Prebon makes a market in these stakes.

The secondary market in hedge fund stakes has been growing in recent years as investors look for ways to cash out of funds that have locked up clients, while specialist buyers prepared to wait for their gains hunt for a bargain.  The market, in recent months, has soared with the large number of lawsuits filed by trustee Picard.

Mr. Picard has already recovered about $10 billion, including $7.2 billion from the estate of long-time Madoff friend and investor Jeffry Picower.  Several large lawsuits are still open, including the following:  $19.6bn claim against Austrian banker Sonja Kohn and others;  $9bn claim against HSBC Holdings and a network of feeder funds;  $6.4bn against JPMorgan Chase.  Many funds of funds are doing the selling, as they try to get Madoff holdings off their books to limit reputational damage, rather than hang on for extra gains.

And while direct stakes are more valuable, so too are funds where few investors withdrew money, because Picard has sued investors who withdrew more than they put in, viewing their profits as merely ill-gotten gains from subsequent investors in the Ponzi scheme.   [Reuters, London, 2/11]