What a sad and tragic mess. It is always amazing how people can be scammed and hoodwinked despite all we know about the dangers of investing. I am reminded of President Reagan’s admonition: “Trust yet verify.”
About the only thing that investors can do is take a few steps to partially recover some of the losses. First of all, consideration should be given to taking a loss deduction for the investment as a theft loss. The IRS could challenge that on various grounds but I doubt politically that the government which failed to monitor Madoff will want to issue assessments against the thousands of cases this could involve. Of course, the deduction only helps if you have income to write it off against. Secondly, investors can file SIPC claims with the trustee in New York. Again, there are grounds upon which the government can deny these claims but nothing ventured nothing gained. Finally, investors who paid advisors to handle their investments should ask for a refund of any and all fees which those advisors earned in placing their money in Madoff investments.
All of this won’t recoup these losses but it is something to try.