Kevin Bacon And Kyra Sedgwick Thought They Had $30–$40 Million. Unfortunately, Their Fortune Was Managed By… Bernie Madoff

Everybody loves Kevin Bacon and Kyra Sedgwick. What's not to like? They've both had long, diverse, and consistently interesting careers. They've been married for nearly 40 years. And now we get to see the whole Bacon family in the appropriately titled "Family Movie," a cheeky, low-budget horror-comedy that features not just Kevin and Kyra, but also their children, Sosie and Travis Bacon. Directed by Kevin and produced by the entire family, the film is a rare full-family collaboration, blending their real-life dynamic into a fictional story about a dysfunctional filmmaking clan trying to shoot one last movie together when things go wildly off the rails.

Whenever Kevin and Kyra are in the headlines, we here at CelebrityNetWorth see a surge in questions about a less fun chapter in their lives: their experience as victims of Bernie Madoff's massive Ponzi scheme.

In case you were not aware, Kevin Bacon and Kyra Sedgwick were among the most high-profile victims of Bernie Madoff's fraud, which collapsed in December 2008 and remains the largest Ponzi scheme in history.

At the time of the collapse, Bacon and Sedgwick were successful, working actors who had spent decades building wealth. Like thousands of other clients, they believed they had entrusted their savings to a conservative, steady investment manager. Instead, they discovered that much of what they thought they had simply did not exist.

So how much did Kevin and Kyra actually lose? And how much did they roughly recover over time, thanks to the surprisingly successful Madoff Victims Fund?

Kevin Bacon & Kyra Sedgwick in 1988 (photo: Frank Micelotta/ImageDirect)

Kevin Bacon and Kyra Sedgwick's Madoff's Losses

When the dust settled on Bernie Madoff's fraud, Kevin and Kyra stood out as perhaps the most famous victims. But, they were not the only celebrity Madoff victims. Larry King reportedly lost around $700,000. John Malkovich reportedly lost around $2 milion. Zsa Zsa Gabor reportedly lost around $7 million.

Whenever Kevin and Kyra's Madoff losses are brought up, you will often hear that they lost $30 to $40 million. Even if this range is true, it's a bit more complicated.

Kyra and Kevin were among the roughly 4,800 "direct" high-net-worth clients who had accounts with Bernard L. Madoff Investment Securities LLC (BLMIS). By contrast, they were not among the roughly 41,000 investors who had accounts indirectly through feeded funds and other sources.

Direct clients like Kevin and Kyra would have received monthly statements showing that their money was growing at a slow and steady, conservative, consistent rate.

That last point was actually one of the aspects that allowed Madoff's fraud to stay under the radar for so long. Unlike many Ponzi schemes that promise extraordinary, get-rich-quick, 30% or 100% returns, Bernie's fake returns were relatively modest. Rain or shine, bull market or recession, Madoff's fake statements reliably showed his clients making around 10% to 12% every single year.

That kind of stability created enormous trust. It also created a very convincing illusion of wealth.

$10 Million Invested

Here's what I think is the most likely real scenario experienced by Kevin and Kyra:

Kevin and Kyra married in 1988. By the mid-1990s, they were both successful actors, though, obviously, Kevin as an A-list film star was the primary one to bring home… the bacon. Kevin had been famous since the early 1980s. Had starred in dozens of films by the mid-1990s. Let's conservatively estimate that by 1995, the couple had $10 million in liquid investable wealth that they handed over to Bernie Madoff.

Using Bernie's phony 10-12% annual rate of returns, just before his fund collapsed, their account statements would have shown that their $10 million had ballooned to around $35 million.

That number would have felt completely real. They would have paid taxes on any sales based on those gains. They would have made financial decisions assuming that money was sitting safely in the markets.

Then it vanished overnight.

On December 10, 2008, at his luxury Manhattan apartment, Bernie Madoff confessed his sins to his two sons, Mark and Andrew, that the firm was "one big lie… basically, a giant Ponzi scheme." At the time, clients had submitted roughly $7 billion in withdrawal requests, and Madoff's firm had only about $200 million left. His sons left the apartment, called a lawyer, and the very next day, Madoff was arrested at that very same apartment.

As his arrest became global news and the fraud began to fully unravel, Kevin and Kyra would have quickly gone from believing they had around $35 million in the account… to realizing they had essentially nothing.

But there was some slight good news on the (distant) horizon…

The Recovery

Unlike most Ponzi schemes, where victims recover little or nothing, the Madoff case resulted in one of the most successful financial recovery efforts in history.

Through a combination of asset seizures, lawsuits, and massive settlements with banks and financial institutions, investigators were able to claw back billions of dollars. This money was paid out through the Madoff Victims Fund.

By the time the final distributions were completed, victims had recovered approximately 93.71% of their recognized out-of-pocket losses.

That phrase, "out-of-pocket losses," is critical.

It does not refer to the $35 million Kevin and Kyra believed they had. It refers only to the actual cash they deposited. In this scenario, their legal claim would have been based on the original $10 million investment.

So a roughly 94% recovery would mean they ultimately received back around $9.3 million.

But there's an important catch.

They did not receive $9.3 million right away or even all at once. They did not receive a penny for the first roughly six years, from 2008 to 2014. Their recovery was paid out in installments over the next nine years, between 2014 and 2023.

Step back for a moment. Imagine in December 2008, you believed your net worth was $35 million. In reality, your net worth was ZERO. That's roughly what Kevin and Kyra experienced.

Bringing Home the Bacon

The one major benefit Kevin and Kyra had over most of Madoff's victims was the fact that they remained very in-demand actors. Over time, they rebuilt their finances the old-fashioned way: by continuing to earn. They brought home more bacon… if you will.

At the time the fraud was exposed, Kyra was in the middle of what became a seven-season run on "The Closer." In the last three seasons of the series, Kyra's $350,000 per episode salary (roughly $7 million per season) made her one of the highest-paid actors on television. She has continued to work steadily, appearing in several series or films per year every year since. The same is true for Kevin, whose career never stopped sizzling. Has never been crisper.

Today, we estimate that Kevin and Kyra's combined net worth is $30 million. Obviously, that's an impressive amount. However. Let's run one more hypothetical to see what could have been if, in 1995, they had invested $10 million somewhere else. And a quick warning if Kevin and Kyra are reading this, these results are going to be painful to see…

The simple move would have been to put the money into the S&P 500. With dividends reinvested, $10 million invested in the S&P in 1995 would be worth $210 million today. That is not a typo. I didn't believe it at first, but I double checked the math, and it's accurate.

It's not likely that Kevin and Kyra would have put all $10 million into a single stock in 1995, but, just for fun, let's say they did. Here's what their $10 million would have become in a few example stocks: