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Trading legend Bernard Madoff charged with ‘massive’ securities fraud

By Carol Eisenberg

December 11, 2008 at 6:33pm

Bernard L. Madoff, the founder of Bernard L. Madoff Investment Securities and a former NASDAQ governor, was arrested Thursday morning and charged with multi-billion-dollar criminal securities fraud.

A complaint filed by the Securities and Exchange Commission alleges that Madoff told two senior employees Wednesday that his business was “a giant Ponzi scheme” that had lost $50 billion over a period of years, that he had “absolutely nothing” and “it’s all just one big lie.”

The disclosure came after the 70-year-old founder had tried to hand out early bonuses to employees. When questioned by the senior employees, he reportedly said he had a couple of hundred million dollars left and wanted to distribute it before turning himself in to authorities.

The senior employees understood him to be saying that he had been paying returns to certain investors out of the principal received from other, different investors, according to the SEC complaint filed in federal court in Manhattan.

“We are alleging a massive fraud — both in terms of scope and duration,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors, and we are working closely with the criminal authorities to hold Mr. Madoff accountable.”

The SEC is seeking emergency relief for investors, including an asset freeze and the appointment of a receiver for the firm.

Regulatory filings show the Madoff firm had more than $17 billion in assets under management as of the beginning of 2008. It appears that virtually all assets of the advisory business are missing, the SEC complaint said.

Madoff Investment Securities is one of the largest independent trading firms in the securities industry. The company web site says that its clients include “scores of leading securities firms, banks and financial institutions from across the United States and around the world.”

Madoff appeared this afternoon before U.S. Magistrate Judge Douglas Eaton and was charged with a single count of securities fraud. He was released on a $10-million bond guaranteed by his wife and two others, according to Bloomberg News.

“Bernard Madoff is a longstanding leader in the financial services industry,” said defense attorney Dan Horwitz. “We will fight to get through this unfortunate set of events. He’s a person of integrity.”

Madoff started his firm in 1960 with $5,000 of savings and took advantage of securities-law changes in the 1970s designed to spur competition in U.S. stock markets, according to a profile posted on the web site Finance Tech.

He was chief of the Securities Industry Association’s trading committee in the 1990s and early this decade, where he represented brokerage firms in discussions with regulators about new stock-market rules as electronic-trading systems and networks gained prominence.

He was also a member of NASDAQ Stock Market’s board of governors and its executive committee and served as chairman of its trading committee.

The firm’s web site boasts of the firm’s “high ethical standards.”

“Clients know that Bernard Madoff 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.”

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5 Comments

  • #1.   P Roberts 12.11.2008

    amazing; the tragic thing to think about is the loss in total human life that it will take to make up for this guy’s Madoff’s thievery

  • #2.   Stu 12.12.2008

    I keep wondering where all the money went? If it was a ponzi scheme then I guess the early investors made out and the later folks will be getting screwed. $50b is a lot of bananas!

  • #3.   Mike 12.13.2008

    How can this man be allowed to make bail at 10 million dollars (by his wife!!???) … Isn’t that money the investors - who he stole? I

  • #4.   SELWYN 12.16.2008

    IF YOU THINK FOR A MINUTE THAT BERNARD HIMSELF WAS THAT ONLY ONE BEHIND THIS PONZI THEN YOU TOO MUST HAVE INVESTED IN THIS SCAM, LOOK AT WHO TOOK ALL THERE MONEY OUT IN JANUARY AND MARCH.

  • #5.   daniel jarrold 12.23.2008

    i say open season on all ! they took my blood money. let them spend the rest of there life in a wheelchair eating thur a feeding tube give some justice daniel mark jarrold is my name 607 821 9958 is my #

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