$50 billion Wall St swindle by broker Bernard Madoff

From The Times
December 13, 2008
$50 billion at stake after Wall St broker Bernard Madoff is arrested over ‘world’s biggest swindle’

Tim Reid in Washington

Some of America’s wealthiest socialites were facing ruin last night after the arrest of a Wall Street big hitter accused of the largest investor swindle perpetrated by one man.

Shock and panic spread through the country clubs of Palm Beach and Long Island after Bernard Madoff, a trading powerbroker for more than four decades, allegedly confessed to a fraud that will cost his wealthy investors at least $50 billion – perhaps the largest swindle in Wall Street history.

Mr Madoff, 70, a former Nasdaq stock chairman, was apparently turned in by his two sons and arrested on Thursday morning at his Manhattan apartment by the FBI. Andrew Calamari, a senior enforcement official at the US Securities and Exchange Commission, described the scheme as “a stunning fraud that appears to be of epic proportions”.

The FBI’s criminal complaint states that when two federal agents arrived at Mr Madoff’s apartment, he told them: “There is no innocent explanation.” The agents say that he told them “he paid investors with money that wasn’t there”, that he was “broke” and that he expected to go to jail.

Many of his investors came from the enormously wealthy enclaves of Palm Beach, Florida and Long Island, New York, where people had invested billions in Mr Madoff’s firm for decades. He was a fixture on the Palm Beach social scene, and was a member of some of its most exclusive clubs, including the Palm Beach Country Club and Boca Rio Golf Club, where he drummed up much of his business.

The FBI claims that three senior employees of Mr Madoff’s investment firm turned up at his apartment on Wednesday to ask questions about the company’s solvency. Two of them are believed to be his sons, Andrew and Mark, who have worked for their father for two decades.

Mr Madoff told them that he was “finished”, that he had “absolutely nothing”, and that “it’s all just one big lie”. He said the investment arm of his firm was “basically a giant Ponzi scheme”, and that it had been insolvent for years.

A Ponzi scheme, named after the swindler Charles Ponzi, is a fraudulent investment operation that pays abnormally high returns to investors out of money put into the scheme by subsequent investors, rather than from real profits generated by share trading.

The FBI complaint states that Mr Madoff told his sons that he believed the losses from his scheme could exceed $50 billion. If that is the case, his fraud would be far greater than past Ponzi schemes and easily the greatest swindle blamed on a single individual.

There has been scepticism for years on Wall Street over how Mr Madoff managed to pay such consistently high returns. Ponzi schemes inevitably collapse, and Mr Madoff found himself to be no exception. This month, clients asked for $7 billion to be returned, the FBI says.

Mr Madoff ran the scheme separately from his main business and his sons had no involvement in it.

Mr Madoff has been charged with a single count of securities fraud. He declined to enter a plea in Manhattan’s US District Court and was released on $10 million bail. He faces up to 20 years in jail and a $5 million fine if convicted. His lawyer, Dan Horwitz, said that his client was “a person of integrity. He intends to fight to get through this unfortunate event.”

One investor told The Wall Street Journal: “This is going to kill so many people. It’s absolutely awful.” Ira Roth, from New Jersey, said that his family had $1 million invested, and that he was in a state of panic.

Madoff fraud scandal chills Florida wealthy
Fri Dec 12, 2008 1:57pm EST

By Michael Connor

MIAMI, Dec 12 (Reuters) - Hedge fund managers and other Wall Street professionals are scrambling to tabulate losses from Bernard Madoff's alleged $50 billion fraud, but the financial pain for individual investors is already clear.

"I expect to get back zero," Susan Leavitt, an investor in Tampa Bay, Florida, said on Friday. "When he tells the Feds, he has $200 million to $300 million left out of billions, what can you expect."

Madoff was arrested in New York on Thursday and charged with orchestrating a large finance fraud through an investment-advisory arm of market-making firm Bernard L. Madoff Investment Securities LLC.

Madoff's advisory business had $17.1 billion of assets under management but many investors may have had indirect exposure by investing through the hedge funds and other of the firm's clients. Madoff, 70, has said losses were about $50 billion, according to government complaints.

Two hedge funds that invested with Madoff were the $7.3 billion Fairfield Sentry Ltd and the $2.8 billion Kingate Global Fund Ltd. Both reported positive returns during 2008.

Many clients of Madoff, a former chairman of the Nasdaq Stock Market, were recruited at New York and Florida country clubs, such as the Palm Beach Country Club, where Madoff has been a longtime member, according to news reports.

Leavitt, 46, said in an interview that she had recently added $500,000 to a Madoff fund in which she invested substantial amounts since the early 1990s.

A friend introduced Leavitt to the Madoff fund, which had been shut to new investors for many years and produced strong, reliable returns, she said.

"He had a closed fund, which is why people put more money into it, instead of diversifying," said Leavitt, a full-time mother and former newspaper writer. "You couldn't just come in off the street and plunk down a hundred thousand dollars."

In addition to personal investments, Leavitt said the Madoff fund also managed money for a family philanthropy she helped run.

"We had a foundation that we had a lot of money in, a charitable foundation," she said. "That is gone. We were very philanthropic, Those days are over."

Leavitt has never met Madoff, owner of a Palm Beach residence and a familiar figure on the Palm Beach society scene, but said, "He is a crook."

Norman Goldblum, a former town council member in Palm Beach, said he docks a boat near one owned by Madoff and knew him casually at the oceanside Palm Beach Country Club, located near the Kennedy family home.

"I used to say hello," Goldblum said on Friday. "But I never invested with him and I won't say who did. I don't like to spread rumors."

Other members of the Palm Beach club, founded in 1917, also declined on Friday to identify club members who had invested with Madoff.

Local business agencies and regulators had no records of complaints against Madoff.

"At one point, he was the favored broker of Palm Beach," a club member told the Palm Beach Post newspaper. "Every big guy was his client. I've received dozens of calls about this today. There are a lot of people who lost a whole of money with this guy. But no one will admit to it in public."

This scumbag deserves the most horendious sentence that they can come up with....

but then again, the US Govt Social Security fund is a Ponzi scheme! They pay today's retirees (who paid into the fund all their lives) with money from todays workers.... all the while, the money the retirees put in has been swindled by the congress for their own projects, and a usless IOU is left in the vault! If congress had left their dirty, thieving hands off the SS trust fund, there would have been more than enough money to take care of payments for everyone, past, present, and future!

That is why I have a bumper sticker on my car that says:
"Thou Shalt Not Steal"
From the Social Security Trust Fund!

You got that right


GOGETEM

GoGetEmTigers wrote:

Madoff fraud scandal chills Florida wealthy
Fri Dec 12, 2008 1:57pm EST

By Michael Connor

MIAMI, Dec 12 (Reuters) - Hedge fund managers and other Wall Street professionals are scrambling to tabulate losses from Bernard Madoff's alleged $50 billion fraud, but the financial pain for individual investors is already clear.

"I expect to get back zero," Susan Leavitt, an investor in Tampa Bay, Florida, said on Friday. "When he tells the Feds, he has $200 million to $300 million left out of billions, what can you expect."

Madoff was arrested in New York on Thursday and charged with orchestrating a large finance fraud through an investment-advisory arm of market-making firm Bernard L. Madoff Investment Securities LLC.

Madoff's advisory business had $17.1 billion of assets under management but many investors may have had indirect exposure by investing through the hedge funds and other of the firm's clients. Madoff, 70, has said losses were about $50 billion, according to government complaints.

Two hedge funds that invested with Madoff were the $7.3 billion Fairfield Sentry Ltd and the $2.8 billion Kingate Global Fund Ltd. Both reported positive returns during 2008.

Many clients of Madoff, a former chairman of the Nasdaq Stock Market, were recruited at New York and Florida country clubs, such as the Palm Beach Country Club, where Madoff has been a longtime member, according to news reports.

Leavitt, 46, said in an interview that she had recently added $500,000 to a Madoff fund in which she invested substantial amounts since the early 1990s.

A friend introduced Leavitt to the Madoff fund, which had been shut to new investors for many years and produced strong, reliable returns, she said.

"He had a closed fund, which is why people put more money into it, instead of diversifying," said Leavitt, a full-time mother and former newspaper writer. "You couldn't just come in off the street and plunk down a hundred thousand dollars."

In addition to personal investments, Leavitt said the Madoff fund also managed money for a family philanthropy she helped run.

"We had a foundation that we had a lot of money in, a charitable foundation," she said. "That is gone. We were very philanthropic, Those days are over."

Leavitt has never met Madoff, owner of a Palm Beach residence and a familiar figure on the Palm Beach society scene, but said, "He is a crook."

Norman Goldblum, a former town council member in Palm Beach, said he docks a boat near one owned by Madoff and knew him casually at the oceanside Palm Beach Country Club, located near the Kennedy family home.

"I used to say hello," Goldblum said on Friday. "But I never invested with him and I won't say who did. I don't like to spread rumors."

Other members of the Palm Beach club, founded in 1917, also declined on Friday to identify club members who had invested with Madoff.

Local business agencies and regulators had no records of complaints against Madoff.

"At one point, he was the favored broker of Palm Beach," a club member told the Palm Beach Post newspaper. "Every big guy was his client. I've received dozens of calls about this today. There are a lot of people who lost a whole of money with this guy. But no one will admit to it in public."

Good thing it didn't affect the Florida PAUPERS like me!!