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Madoff Fraud
By Martin English | December 15, 2008
The Wall St Journal has plenty of stories on what’s shaping up to be the largest fraud case of all time:
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.
This was a very simple fraud, as Madoff’s hedge fund was a straight-forward ponzi scheme: if you gave him a million dollars to invest he’d simply give the money away to existing clients telling them it was profit. As with all ponzi schemes the last people in are the losers. What kept this one going for so long was that most of Madoff’s investors recapitalised their profits and handed them back to him to invest (at 10% ROI why wouldn’t you?)
Two of his investors said that among his clients, Mr. Madoff was considered a money-management legend; they would joke that if Mr. Madoff was a fraud, he’d take down half the world with him.
A former securities analyst is quoted as having had about $11 million invested with Mr. Madoff. It’s one thing when high nett-worth individuals wake up to find they have lost everything: There’s the temptation to suggest they should have taken more car, or were greedy in th first place. However, whats really frightening about this fraud is that reputable hedge funds and banks also had large investments with Madoff. These organisations will have charged their customers large fees to carry out risk analysis and due diligence on their portfolios and then just handed all the cash to a con-man to invest on their behalf. Sounds like the making of a class-action suit…..
As Dim Post suggests, I’m starting to see why some people keep all their money in a mattress.
Topics: History, People, Security | 1 Comment »
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January 12th, 2009 at 5:46 am
Nice Info. thank you