Fake Madoff profits, it turns out, are not covered by AIG insurance policies. AIG does not need to compensate two former Bernard Madoff clients who say they lost millions to the convict's Ponzi scheme, a U.S. district judge ruled. The money allegedly lost, the judge said, never existed in the first place. The lawsuit, filed more than a year ago, alleged that AIG had to pay Robert and Harlene Horowitz up to $30,000 under their AIG insurance policy, to compensate for $8.5 million they claimed they lost.