NEW YORK (Reuters) - Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a $50 billion "Ponzi scheme" in what may rank among the biggest fraud cases ever. 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 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," with estimated investor losses of about $50 billion, 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 U.S. 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 $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 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.
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."
(Additional reporting by Christian Plumb, Phil Wahba, Michelle Nichols and Jennifer Ablan in New York and Rachelle Younglai in Washington; Editing by Andre Grenon, Bernard Orr and Alex Richardson)
SONN & EREZ PLC TO REPRESENT MADOFF INVESTORS
Fort Lauderdale - Sonn & Erez PLC will be representing victims of the Madoff Ponzi Scheme, said Jeff Sonn, Esq.. "We were contacted today by several investors who have lost millions in the Madoff Ponzi Scheme. Even though all the money is allegedly gone, we believe there are several legal remedies that may be used to recover investors/' monies." Sonn & Erez PLC is a law firm well known for representing victims of investment fraud nationwide, including victims of Ponzi Schemes. A Ponzi Scheme is an investment with the promises of high returns, characterized by the use of later investor money used to pay off the returns to earlier investors. "What is interesting, is Madoff's comments that he was going to pay off friends and family to the tune of $200-300 million right before he was arrested." said Sonn. "The clearing firm who did business with Madoff must have seen that Madoff was experiencing losses in the millions or billions, while Madoff advertised 9-10% returns, yet did nothing," said Sonn. Sonn charged that those who aided or abetted Madoff in his scheme are subject to liability for the losses, as well as those employees, officers, family and friends who directly benefitted from the fraud. "There is a presumption that there were fraudulent conveyances because it is a Ponzi Scheme," said Sonn, adding that those fraudulent conveyances of monies will have to be unwound because there are groups of winning investors, who made money, and groups of investors who lost money, over the years.
Jeff Sonn, Esq. can be contacted at 954-763-4700 for a free consultation.
