Bernard Madoff's investors vividly recall the shock — 10 years ago Tuesday — when they learned they were victims of the biggest con man of all time. "It was disbelief. It was distrust. I mean this man was highly recommended," said Ilene Kent of Columbus, Georgia, who said her elderly parents lost three-quarters of their net worth in the $65 billion fraud. "I trusted him because he'd been managing my daughters' college funds since the 1970s," said Joyce Greenberg, a stockbroker who is now retired and living in Houston. By 2008, her Madoff account balance had grown into millions of dollars. "I absolutely thought it was gone with the wind," Greenberg said. For customers like Greenberg and the Kents, the shock of Madoff's arrest on Dec. 11, 2008, quickly turned into action as they moved to sort out what had happened and what, if anything, they could recover. But that is where their stories diverge. The outcomes for Madoff's victims — as many as 37,000 people in 136 countries — vary widely. They are the result of a deeply controversial process for unwinding the fraud that is still playing out to this day, having set precedents — and cautionary tales — for scandals to come. As a group, Madoff's customers have fared remarkably well for a fraud of this magnitude — or any size for that matter. According to Irving H. Picard, the trustee appointed by a federal bankruptcy court to liquidate the Madoff firm and return assets to investors, more than $13.3 billion has now been recovered. That amounts to 76 percent of the $17.5 billion in principal lost in the scam. And on Tuesday's anniversary, Picard's office announced it was seeking court approval to distribute another $419 million of that money to customers, bringing the total amount returned to more than $12 billion. "At the start of this recovery initiative nearly ten years ago, conventional wisdom said we would only be able to recover pennies on the dollar, given the challenges of reconstructing the fraud, identifying the stolen funds, and recovering those funds," Picard said in a statement. In addition, a second fund, established by the Department of Justice and comprising forfeitures from the various Madoff criminal cases, has paid out nearly $2 billion, primarily to customers who invested with Madoff indirectly through feeder funds. The fund has another $2 billion to pay out as it continues processing claims.

Tale of two victims

But behind those seemingly encouraging numbers lies a much more complicated story. For Greenberg, it is a story that seems to be headed toward a happy ending. She said she has received payments totaling about 60 percent of her Madoff investment, with more to come. She has nothing but praise for Picard. "He was doing a very good job as a liquidating trustee," she said. The Kents, on the other hand, were lucky to be able to keep what little money they had left, after Picard sought to "claw back" funds they had withdrawn from their Madoff account over the years. "My parents don't think for a minute they should be made whole, but they really thought that they were protected," said Ilene Kent who for a time became a full-time advocate for the thousands of Madoff investors in similar positions.

For more on Madoff: 10 Years Later, subscribe to American Greed on Apple Podcasts or wherever you listen. The discrepancy is the result of the formula adopted by Picard — and upheld repeatedly in court — for distributing recoveries to victims. Customers like Greenberg, who kept their funds invested in their Madoff accounts only to have them consumed by the bankruptcy, would be considered "net losers," first in line for recoveries. But people like the Kents, who withdrew more than they invested, were subject to clawbacks. That was because the returns they had tapped into — based on their fraudulent Madoff brokerage statements — were fictitious. The money was not theirs to take. Under Picard's formula, customers like the Kents were considered "net winners," a term Ilene Kent scoffs at. "How can you be a winner when everything you worked so hard for has been taken away from you and you have to depend on the kindness of others?" she asked.

Protection in question

The net winners argued they should have been covered by the Securities Investor Protection Corp., the industry-funded nonprofit organization — of which Madoff's firm was a member — established in the 1970s to protect clients of failed brokerage firms. SIPC guarantees customers' securities up to $500,000, and cash up to $250,000. But SIPC — and Picard, who is paid by SIPC — argued that the guarantee does not cover a fraud like Madoff's in which no securities were actually purchased. The courts agreed, completing what Kent called a "triple tsunami." "At first you find out you lose all your money, and then the next day you think, 'Oh, that's OK, I have insurance.' And then the third day you find, 'Oh no, not only do you not have insurance, you are now being forced to pay back any money you took out,'" she said. The Kents, like many investors, managed to avoid a clawback by proving to the court that they did not have the money to return — a process Ilene Kent called "humiliating." She said her parents, now in their 90s, are in assisted living and still trying to come to terms with what happened. More importantly, she said the court decisions set a bad precedent for future frauds.

Ilene Kent (L) co-founder of Madoff Survivors Group, Richard Friedman (C) and a woman who did not want to be identified clap after lawyer Howard Elisofon (not pictured) spoke on behalf of victims of Bernard Madoff June 24, 2009 at the law offices of Herrick, Feinstein in New York. Stan Honda | AFP | Getty Images

"It says the system is in trouble," she said. "It says that any investor that has an investment (with a SIPC firm), their statement means nothing." But SIPC considers the Madoff liquidation a success story, still featured prominently on the organization's website. "Any customer that gave Madoff Investment Securities up to $1,385,000 has now been made whole," the site says. Greenberg said she sympathizes with the net winners — which include her daughters. But she believes Picard's formula was the only fair way to handle the situation. "I think it's fair that the people who invested with Madoff, if they were taking out Ponzi money, which was disclosed that they were not entitled to it, and if they had the funds available, being clawed back made a lot of sense," she said. Greenberg — who said she never expected to get any money back — is now donating her recoveries to fund the Joyce Z and Jacob Greenberg Center for Jewish Studies at the University of Chicago, her alma mater. She calls the donations "ironic," since the Madoff fraud targeted the Jewish communities in New York and Palm Beach, Florida.

Cautionary tale

While Greenberg's and Kent's experiences are different, both agree the Madoff fraud offers some important lessons. "Keep good records, is the moral of the story," said Greenberg, who was able to document decades of Madoff investments to the penny. "I was able to provide the forensic accountants with the historic record and they verified it." Kent advises investors to diversify — but not only in the traditional sense. "Diversify among different brokers," she said. "Everybody who had invested with Madoff, … we all thought we were diversified because there were tech stocks. There were commodities stocks." Greenberg agreed that people should spread their investments among more than one advisor.