Wall Street adviser Bernard Madoff charged with $50 billion fraud

December 12, 2008

(ChattahBox) — This country (USA) is getting torn apart by greed, from the collapse of our financial institutions to alleged Senate seats for sale. Here we have another another alleged example of outright greed and it sickens me to report it.

Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a “Ponzi scheme.” In what may rank among the biggest fraud cases ever, Madoff 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,” 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 FBI 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. 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 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 $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 the former chairman of the Nasdaq Stock Market 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 (which is pretty laughable considering how much money is missing). Madoff has been conducting a Ponzi scheme since at least 2005. 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.”

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.


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