$50 billion fraud

[Troubled]

Now if you are going to do it do it big.
Bernard Madoff arrested over alleged $50 billion fraud



NEW YORK (Reuters) – Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a $50 billion "Ponzi scheme" in what may rank among the biggest fraud cases ever.
The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses.
Madoff told senior employees of his firm on Wednesday that "it's all just one big lie" and that it was "basically, a giant Ponzi scheme," with estimated investor losses of about $50 billion, according to the U.S. Attorney's criminal complaint against him.
A Ponzi scheme is a swindle offering unusually high returns, with early investors paid off with money from later investors.
On Thursday, two agents for the U.S. Federal Bureau of Investigation entered Madoff's New York apartment.
"There is no innocent explanation," Madoff said, according to the criminal complaint. He told the agents that it was all his fault, and that he "paid investors with money that wasn't there," according to the complaint.
The $50 billion allegedly lost would make the hedge fund one of the biggest frauds in history. When former energy trading giant Enron filed for bankruptcy in 2001, one of the largest at the time, it had $63.4 billion in assets.
U.S. prosecutors charged Madoff, 70, with a single count of securities fraud. They said he faces up to 20 years in prison and a fine of up to $5 million.
The Securities and Exchange Commission filed separate civil charges against Madoff.
"Our complaint alleges a stunning fraud -- both in terms of scope and duration," said Scott Friestad, the SEC's deputy enforcer. "We are moving quickly and decisively to stop the scheme and protect the remaining assets for investors."
Dan Horwitz, Madoff's lawyer, told reporters outside a downtown Manhattan courtroom where he was charged, "Bernard Madoff is a longstanding leader in the financial services industry. We will fight to get through this unfortunate set of events."
A shaken Madoff stared at the ground as reporters peppered him with questions. He was released after posting a $10 million bond secured by his Manhattan apartment.
Authorities, citing a document filed by Madoff with the U.S. Securities and Exchange Commission on January 7, 2008, said Madoff's investment advisory business served between 11 and 25 clients and had a total of about $17.1 billion in assets under management. Those clients may have included other funds that in turn had many investors.
The SEC said it appeared that virtually all of the assets of his hedge fund business were missing.
CONSISTENT RETURNS
An investor in the hedge fund said it generated consistent returns, which was part of the attraction. Since 2004, annual returns averaged around 8 percent and ranged from 7.3 percent to 9 percent, but last decade returns were typically in the low-double digits, the investor said.
The fund told investors it followed a "split strike conversion" strategy, which entailed owning stock and buying and selling options to limit downside risk, said the investor, who requested anonymity.
Jon Najarian, an acquaintance of Madoff who has traded options for decades, said "Many of us questioned how that strategy could generate those kinds of returns so consistently."
Najarian, co-founder of optionMONSTER: Real-time News, Webcasts, Education for Options Traders, once tried to buy what was then the Cincinnati Stock Exchange when Madoff was a major seatholder on the exchange. Najarian met with Madoff, who rejected his bid.
"He always seemed to be a straight shooter. I was shocked by this news," Najarian said.
'LOCK AND KEY'
Madoff had long kept the financial statements for his hedge fund business under "lock and key," according to prosecutors, and was "cryptic" about the firm. The hedge fund business was located on a separate floor from the market-making business.
Madoff has been conducting a Ponzi scheme since at least 2005, the U.S. said. Around the first week of December, Madoff told a senior employee that hedge fund clients had requested about $7 billion of their money back, and that he was struggling to pay them.
Investors have been pulling money out of hedge funds, even those performing well, in an effort to reduce risk in their portfolios as the global economy weakens.
The fraud alleged here could further encourage investors to pull money from hedge funds.
"This is a major blow to confidence that is already shattered -- anyone on the fence will probably try to take their money out," said Doug Kass, president of hedge fund Seabreeze Partners Management. Kass noted that investors that put in requests to withdraw their money can subsequently decide to leave it in the fund if they wish.
Bernard L. Madoff Investment Securities has more than $700 million in capital, according to its website.
Madoff remains a member of Nasdaq OMX Group Inc's nominating committee, and his firm is a market maker for about 350 Nasdaq stocks, including Apple, EBay and Dell, according to the website.
The website also states that Madoff himself has "a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark."
The company's website may be found here: Bernard L. Madoff Investment Securities LLC
(Additional reporting by Christian Plumb, Phil Wahba, Michelle Nichols and Jennifer Ablan in New York and Rachelle Younglai in Washington; Editing by Andre Grenon, Bernard Orr and Alex Richardson)

[ItsRobsLife]

I wonder how much time he will do for the worlds biggest fraud?

[blackgang]

Why should he do any time?
Damn if people were not greedy then he would have had no one investing in his Ponzi Scheme, some more of "Investor Beware".

[Deck Ape]

Not the kind of returns that would characterize it as a pyramid scheme, though. 8%?
Low single digits? Dunno, but that's a SHITLOAD of money.

[blackgang]

Not very good returns is it for a pyramid.

[jim1176]

Yep, another greedy New York Jewish lad raking it in, screwing the public. A long standing cultural tradition in the financial community

[Redneck]

There are some major funds of funds (incl Asian ones) who are going to be hit hard by this.

This sounds like a faraway story, but its not. It will have a lot of impact.

A source described it to me today as "This will do away with more Jews than Hitler did"

[barbaro]

Hey, he was just tryin' to make a buck.

[Rural Surin]

I wonder how much time he will do for the worlds biggest fraud?

Guest of posh country-club prison....6 months tops. Parole for the remainder of his sentence {free to do more harm}. This is a common American way. These types don't go to jail. Even though their criminal acts have far more serious reaching elements and devastation on the public at large. They refer to it as justice in the States. You and I? We go to a hardened federal penitentiary for smoking a doobie......

[Deck Ape]

I'm kind of getting tired with every god damn thing being in the billions. 50 billion here, 700 billion bailout, "losses could be in the billions". Is it just me, or does no one really give a fuck anymore? I think the news media is trying to desensitize us. They should say it like the Thais. fifty thousand million dollars.

[larvidchr]

This is one man stealing more money than the 3 big auto makers is asking for!!!, amazing long live ingenuity, and free enterprise the American way with next to no oversight and blind trust in high morals and ethics amongst the the most scruple less cynical finance people in the world, no matter how many Enron's, sub primes or individual thieves in the super billion class that kick them right in the balls the bells don't ring, I guess their nuts is suspended in American peanut butter and their heads is buried so deep in the assholes of the financeworlds campain contributors that they are completely isolated from the events in their country, and what the hell in the end it's the taxpayers who will foot the bill and the workers in the auto industri that will end up with no jobs, so who gives a fuck.

[Texpat]

Wake up Larv, it happens everywhere.

[larvidchr]

Wake up Larv, it happens everywhere.

I know Tex you are right, but the US is the cradle of free enterprise and capitalism, (and sub primes) and the biggest market and US aggressively export their model, many Country's and financial institutions often look to US.
US must now wake up and go first with responsible drastic measures to curb these people.
And it is just as wrong anywhere else.

[keda]

Why should he do any time?
Damn if people were not greedy then he would have had no one investing in his Ponzi Scheme, some more of "Investor Beware".

Can't see 7-9% or even low double digits being classed as greedy...his punters could have done just as well for themselves and without much savvy just by plonking it on a decent divi yield.

[keda]

Not very good returns is it for a pyramid.

Probably the key to its success.

[watterinja]

An interesting number $50 billion:

$50 billion = $50,000 million = THB 1,750,000 million => 350,000 x THB 5 million houses !!!

That is an extraordinary amount of loss... hard to comprehend, really. Somebody please check my numbers. In Laos, it would be equivalent to filling the Savannakhet province with top luxury houses...

[barbaro]

There are some major funds of funds (incl Asian ones) who are going to be hit hard by this.

This sounds like a faraway story, but its not. It will have a lot of impact.

Yeah, $50 Billion, is going to affect some places, somewhere.

This is just another one of many more recent scandals, that seem to have increased since the collapse of Enron 8 years ago.

[bkkandrew]

I posted a post here:

https://teakdoor.com/us-domestic-issu...tml#post876708

Which links to an excellent WSJ article on this. A couple of choice quotes:

Jeff Fischer, a top divorce attorney in Palm Beach, says many of his clients were also Mr. Madoff's clients. "Every big divorce that came through my office had portfolio positions with Madoff," he says.

Two of his investors said that among his clients, Mr. Madoff was considered a money-management legend; they would joke that if Mr. Madoff was a fraud, he'd take down half the world with him.

Richard Spring, a Boca Raton resident and former securities analyst, says he had about $11 million -- or 95% of his net worth -- invested with Mr. Madoff. "That's how much I believed in him," Mr. Spring said.

[daveboy]

There's an old saying if it sounds to good to be true it probably is, no sympathy from me.

[Butterfly]

stupid suckers,

statistically he was accomplishing the impossible,

for once, some billionaires got shafted, serve them right !!! The extremely rich can be as dumb and naive as the uneducated poor,

[Norton]

In Laos, it would be equivalent to filling the Savannakhet province with top luxury houses...

Or, four times:

Lao GDP: $13.63 billion (2006 est.) (purchasing power parity)

[Norton]

The extremely rich can be as dumb and naive as the uneducated poor,

Truer words have never been spoken. You have seen the light Brother BF! Would green ya but out of ammo.

[watterinja]

^^ An amazing number... An absolutely huge loss in real terms...

[Butterfly]

so where is the money ? was it at least invested in the market ?

he has only 25 clients, not much for a pyramid scam, usually you need to con 1000 to make it last that long,

my bet is that he did a few bad investment, manipulated the losses, and started to pay investors dividends with the actual capital !!!

[watterinja]

^ The 25 clients seemed to have included a number of feeder funds...