The amount of claims resulting from the Madoff Ponzi scheme scam and sub-prime crisis could be on the rise considerably as investors try and claw their money back, if recent trends are anything to go by — according to a legal expert.

Eric Scheiner, partner at Sedgwick Chicago, told delegates at the company's seventh annual 'Hot Topics Seminar for the Bermuda Insurance Market', held at the Bermuda Underwater Exploration Institute yesterday, that 108 of the 169 securities-related lawsuits filed in the first quarter of 2009 were against financial firms and driven mainly by the Madoff/Ponzi scheme fallout.

But he added that there had been a fall in the number of new securities lawsuits during the second quarter, while he said observers believe errors and omissions (E&O) insurers will see increased claims for sub-prime-related cases that deal with professional judgment and fiduciary duties in the future.

Meanwhile, Mr. Scheiner reckons that, despite the economy making a slow recovery, bankruptcy filings could continue at a high pace, with Advisen reporting that, since 1995, approximately 35 percent of large public companies that filed for bankruptcy also had securities class actions filed against them, with that number rising to 77 percent over 2007 and 2008.

"Press reports Madoff losses from $30 billion to $65 billion, but if a person invested $10 million 15 years ago in a Ponzi scheme, and thought they made $100 million, the question is whether they lost $10 million, $100 million or something in between?" he said.

"If that money were put into the US stock market in an index fund, would it be worth less than their original investment? Liquidator estimates that the 'true' losses (excluding fictional returns) are likely in the range of $18 billion.

"But it should also be noted that some investors profited from these schemes (federal prosecutors have stated that approximately half of Madoff's customers withdrew more than they invested), so much still has to be investigated." Mr. Scheiner kicked off proceedings by setting the context for the Madoff fraud and explaining the impact it had on investors, before turning to the new Ponzi schemes which have been uncovered since, including the case of more than 400 investors claiming Cuesta Title and its Houston-based parent company helped San Luis Obispo County lender Hurst Financial keep its Ponzi scheme alive (with an alleged $60 million in losses).

Also the promoter of a Chicago sports talk website was charged with running an $11 million Ponzi scheme, and a $100 million Canadian-based Ponzi scheme, which lured investors to hand over money to a company that allegedly had new technology that could extract gold and other minerals for disused mines, being exposed as recently as last month.

He revealed that the number of filings in Q2 (35) were well below the first quarter of 2009 (59), and even lower then Q2 of 2008 (56), according to Directors and Officers Diary statistics, while the filings still largely focused on the financial sector, and even with reduced filings, annualised filings were still expected to be in line with historical averages.

Mr. Scheiner said the number of bankruptcies was also on the rise, with 1.3 million business and non-business filings made the year ended June 30, 2009, up from 750,000 in 2007, while the figure for business filings alone over the same period stood at 55,000 for the end of June this year versus 25,000 for the corresponding time two years earlier.

He also showed that, as of September 4, 2009, 89 banks had failed in the US since January 1, 2009, with a total of 114 bank failures from the start of 2008 onwards.