[Homestead] 50 Billion dollar ponzi scheme will affect everyone
Lynn Wigglesworth
lynnw1366 at hotmail.com
Fri Dec 12 14:41:41 EST 2008
Bob; It's like another world and another language to me. Completely alien.
I'm still wondering how all this will affect me.
Lynn Wigglesworth
----- Original Message -----
From: "bob ford" <bobford79 at yahoo.com>
To: <homestead at lists.ibiblio.org>
Sent: Friday, December 12, 2008 2:18 PM
Subject: [Homestead] 50 Billion dollar ponzi scheme will affect everyone
> This was only uncovered because of the failing economy. It has been all
> the talk since before daylight on busioness television and on trader's
> websites. When very wealthy, politically connected people (mostly in NY
> and Florida-retired) lose this much money , all at once, everything in the
> finacial world is affected. They could gamble with what they have left to
> try to make it back. The new fed funds could be distributed in such a way
> to make these people whole. The rich and powerful take care of themselves
> and their friends, first. These 'losers' (i mean that only in the sense
> that they have lost money, not a character designation) are the 'very'
> rich....
>
> ---------------------------------------------------------------------
>
> DECEMBER 12, 2008 Top Broker Accused of $50 Billion Fraud
>
> Sons Turned In Madoff After He Allegedly Told Them His Investment-Advisory
> Business for the Wealthy Was 'Giant Ponzi Scheme'Article
>
> Bernard L. Madoff, a former chairman of the Nasdaq Stock Market and a
> force in Wall Street trading for nearly 50 years, was arrested by federal
> agents Thursday, a day after his sons turned him in for running what they
> said their father called "a giant Ponzi scheme."
>
>
>
>
> The Securities and Exchange Commission, in a civil complaint, said it was
> an ongoing $50 billion swindle, and asked a judge to seize the firm and
> its assets. "Our complaint alleges a stunning fraud that appears to be of
> epic proportions," said Andrew M. Calamari, associate director of
> enforcement in the SEC's New York office.
>
> In a separate criminal complaint, Federal Bureau of Investigation agent
> Theodore Cacioppi said Mr. Madoff's investment advisory business had
> "deceived investors by operating a securities business in which he traded
> and lost investor money, and then paid certain investors purported returns
> on investment with the principal received from other, different investors,
> which resulted in losses of approximately billions of dollars."
>
> Dan Horwitz, a lawyer for Mr. Madoff, declined to elaborate on the
> allegations. "Bernard Madoff is a longstanding leader in the
> financial-services industry with an unblemished record," Mr. Horwitz said
> in an interview. "He is a person of integrity. He intends to fight to get
> through this unfortunate event."
>
> The 70-year-old Mr. Madoff is the founder and primary owner of Bernard L.
> Madoff Investment Securities LLC. The firm is primarily known for its
> business in market-making, or serving as the middleman between buyers and
> sellers of shares. But Mr. Madoff also oversaw an investment-advisory
> business that managed money for high-net-worth individuals, hedge funds
> and other institutions.
>
> According to the complaints, Mr. Madoff ran the investment advisory as a
> secretive business, independent from the firm's proprietary trading and
> market-making operations. The SEC complaint said that the alleged fraud
> was run through this arm of Mr. Madoff's company.
>
> The FBI complaint quotes two senior Madoff employees as saying Mr. Madoff
> ran the investment arm on a separate floor of the firm's offices. The two
> employees said Mr. Madoff kept the financial statements from the firm
> under lock and key and was "cryptic" about the firm's investment business.
>
> The complaint did not name the two senior employees. But according to
> people familiar with the matter, they are Mr. Madoff's sons, Andrew and
> Mark. Mark Madoff is the firm's senior managing director and chief
> compliance officer. Andrew Madoff is its director of trading.
>
> A call to the sons' attorney was not returned.
>
> Both complaints say Mr. Madoff told his sons he believed losses from his
> fraud exceeded $50 billion. That figure couldn't be confirmed. But such a
> loss is plausible, had money been flowing in and out for years: At the
> beginning of 2008, according to the SEC filing, his operation had more
> than $17 billion under management.
>
> Such a scheme would dwarf past Ponzi schemes. It would also be nearly five
> times larger than the accounting fraud that drove telecom company WorldCom
> into bankruptcy proceedings in 2002.
>
> The criminal complaint said that when Mr. Cacioppi and another agent went
> to Mr. Madoff's apartment Thursday, Mr. Madoff told them: "There is no
> innocent explanation." Mr. Madoff told the agents that "he paid investors
> with money that wasn't there," adding that he was "broke" and had decided
> "it could not go on." He said he expected to go to jail.
>
> View Full Image
>
> Associated Press
> Investors inquiring about their money, and others, gather Friday in the
> lobby of where Bernard L. Madoff Investment Securities has its offices.
> After his arrest, federal prosecutors in Manhattan charged Mr. Madoff with
> criminal securities fraud.
>
> Mr. Madoff didn't enter a plea during a court hearing Thursday evening. He
> was released after agreeing to post a $10 million bond secured by his
> Manhattan apartment. A preliminary hearing was scheduled for Jan. 12. He
> declined to comment after the hearing.
>
> Under 'Great Stress'
> Earlier this month, the criminal complaint says, Mr. Madoff told one of
> his sons that "clients had requested approximately $7 billion in
> redemptions, that he was struggling to obtain the liquidity necessary to
> meet those obligations." On Tuesday, the complaint alleges, Mr. Madoff
> added that he wanted to pay bonuses to employees this month, which was
> earlier than usual.
>
> The next day, the sons met with Mr. Madoff at his office to ask about the
> bonus situation because he had appeared to be under "great stress" in
> prior weeks, they told the FBI. Mr. Madoff refused to answer their
> questions and arranged to meet them at his Manhattan apartment, the
> complaint says.
>
> Mr. Madoff "wasn't sure he would be able to hold it together" if they
> continued to discuss the issue at the office, the complaint quotes one of
> the sons as saying. At the apartment, Mr. Madoff confessed that his
> business was a fraud and that he was "finished." He said he had
> "absolutely nothing," that "it's all just one big lie," and that it was
> "basically, a giant Ponzi scheme." He told them the firm was insolvent,
> according to the complaint.
>
> Mr. Madoff told them he planned to surrender to authorities, but first, he
> wanted to pay certain employees portions of the $200 million to $300
> million dollars that was left.
>
> According to a person familiar with the firm, the sons brought the matter
> to the attention of their attorney, who notified federal officials
> Wednesday night.
>
> Since its inception almost a half-century ago, the Madoff firm has been a
> family affair. Mr. Madoff started his company with $5,000 he saved from a
> lifeguarding at Rockaway Beach in Queens and a job installing underground
> sprinkler systems, according to a 2000 report in a trade magazine, "Wall
> Street + Technology."
>
> Mr. Madoff's brother, Peter Madoff, joined the firm around 1970 and is the
> senior managing director. Peter Madoff did not return calls for comment.
>
> The two sons, Andrew and Mark, have worked for the securities firm since
> graduating from college 20 or so years ago. Neither is involved in the
> asset-management business that their father runs, according to a person
> familiar with the situation.
>
> "All of his family members grew up with this being our lives. When it is a
> family operated business you don't go home at night and shut everything
> off. So you take things home with you, which is how all of us grew up,"
> Mark Madoff told "Wall Street + Technology."
>
> According to a 1986 report in a monthly financial magazine, Financial
> World, titled "The Highest Paid People on Wall Street," Mr. Madoff owned
> three homes and kept a yacht moored in the Bahamas. The report said he
> earned $6 million in 1985. Property records show at one point he owned a
> home in Montauk, N.Y., and paid more than a $1 million in annual taxes. He
> has made major donations to Democratic candidates and organizations.
>
> Mr. Madoff's asset-management business appealed to investors for its
> remarkably steady returns for investing in the stock market. His investors
> consistently enjoyed small monthly gains, usually between zero and 2%. Mr.
> Madoff told investors his strategy was to trade in and out of large-cap
> stocks and buy options on those shares to help smooth the ups and downs.
> When he failed to see opportunities in the market, he would shift to U.S.
> Treasurys, according to fund marketing documents and people familiar with
> his strategy.
>
> Inside Wall Street's Madoff Scandal
> 3:55
> Another large-scale scandal rocks Wall Street as Bernard Madoff, a Wall
> Street titan and investment advisor was arrested for an alleged $50
> billion dollar fraud against investors, WSJ's Kelsey Hubbard and Amir
> Efrati discuss.
> Widespread Skepticism
> Mr. Madoff's Fairfield Sentry Ltd., a hedge fund run by Madoff Investment
> Services to invest in shares in the S&P 100, claimed to be up 5.6% through
> the end of November, a period when the Standard & Poor's 500-stock index
> was down 37.65%. In October, Fairfield Sentry was said to be down 0.06%, a
> month when the S&P 500 lost 16.8%. Since its inception in December 1990,
> the fund averaged a 10.5% annual return, according to fund documents.
>
> Such returns sparked widespread skepticism for years on Wall Street. News
> stories raised questions about his approach. A number of traders suggested
> his firm could be buying shares for its own account just before it filled
> orders for customers, an illegal act called front-running.
>
> In 2001, Mr. Madoff told Barron's that charges of front-running were
> "ridiculous."
>
> An executive in the securities industry, Harry Markopolos, contacted the
> SEC's Boston office in May 1999, urging regulators to investigate Mr.
> Madoff. Mr. Markopolos continued to pursue his accusations over the past
> nine years, he said in an interview on Thursday, and according to
> documents he sent to the SEC that were reviewed by The Wall Street
> Journal.
>
> "Bernie Madoff's returns aren't real and if they are real, then they would
> almost certainly have been generated by front-running customer order flow
> from the broker-dealer arm of Madoff Investment Securities LLC," Mr.
> Markopolos wrote to the SEC in November 2005.
>
> The SEC declined to comment on the matter.
>
> Mr. Madoff's investors described their shock and panic on Thursday. Susan
> Leavitt of Tampa Bay, Fla., said she had several million dollars of
> inherited money invested in the firm and added $500,000 earlier this year.
> A stay-at-home mother with two children, the 46-year-old Ms. Leavitt says
> she is considering going back to work. "That was my nest egg for the
> children, and my future. I'll never see much back, I'm sure," she said.
>
> Ms. Leavitt said she recently discussed her investment with a friend who
> told her he was suspicious about the firm's ability to generate such
> profits amid the economic crisis. "I thought, 'He's probably just
> jealous,' " said Ms. Leavitt. "We've been with [Mr. Madoff] for 15 years,
> and it's grown every year at 10%."
>
> U.S. District Judge Louis Stanton, who is overseeing the SEC's case
> against Mr. Madoff and his firm, on Thursday appointed Lee Richards, a
> Manhattan lawyer, as the firm's receiver in order to preserve its assets
> and accounts outside the U.S. The judge also ordered Mr. Madoff and his
> firm not to move assets. At a hearing set for Friday, the judge will
> consider the SEC's request to grant powers to the receiver over the entire
> firm, and a complete asset freeze.
>
>
>
>
> _______________________________________________
> Homestead list and subscription:
> http://lists.ibiblio.org/mailman/listinfo/homestead
> Change your homestead list member options:
> http://lists.ibiblio.org/mailman/options/homestead/lynnw1366%40hotmail.com
> View the archives at:
> http://lists.ibiblio.org/pipermail/homestead
>
>
>
More information about the Homestead
mailing list