Bernard Madoff arrested over alleged $50 billion fraud

Videos
Photos

(Agencies)
Updated: 2008-12-14 11:32

NEW YORK– Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a US$50 billion "Ponzi scheme" in what may rank among the biggest fraud cases ever.

Bernard L. Madoff, chairman of Madoff Investment Securities is seen on his Manhattan trading floor in this photo taken Dec. 30, 1999 in New York. [Agencies]

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 US prosecutors said racked up US$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 US$50 billion, according to the US 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 US 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 US$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 US$63.4 billion in assets.

US 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 US$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 US$10 million bond secured by his Manhattan apartment.

Authorities, citing a document filed by Madoff with the US 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 US$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.

Previous page 1 2 Next Page