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 Bernard L. Madoff, a former Nasdaq Stock Market chairman and founder of
Bernard L. Madoff Investment Securities LLC, may join the ranks of
financial fraudsters Ivan Boesky, Michael Milken and Dennis Kozlowski
if the charges of securities fraud in what federal prosecutors called a
$50 billion Ponzi scheme are true.
The disclosure came after Madoff had tried to hand out early bonuses to
employees on Wednesday. When questioned by the senior employees, he
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 from Madoff's admission 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.
But on Thursday, when two agents for the U.S. Federal Bureau of Investigation entered Madoff's New York apartment, he reportedly said, "There is no innocent explanation," 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." Madoff was charged with one count of securities fraud, according to a statement from the acting U.S. attorney for the Southern District of New York and the Federal Bureau of Investigation. The Securities and Exchange Commission filed a complaint in federal court in Manhattan seeking an asset freeze and the appointment of a receiver for the firm run by Madoff. "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." Madoff was arrested and arraigned late Thursday and released on his own recognizance after posting a $10.0 million bond secured by his Manhattan apartment. In 2000, Madoff's market-making business BMIS partnered with Goldman Sachs & Co. and Merrill Lynch & Co. to form the Primex Trading platform, one of the early rival electronic exchanges to the stock exchanges, which eventually fell by the wayside following a partnership with Nasdaq. Madoff began BMIS with just $5,000 of savings from jobs lifeguarding at Rockaway Beach in New York and installing sprinkler systems. The firm grew to become a leading market maker, with brother Peter, nephew Charles, niece Shana, and sons Mark and Andrew all involved in the business at some stage in recent years. His firm's Web site claims that BMIS ranks among the top 1% of U.S. securities firms, and states that "clients know Bernard Madoff has a personal interest in maintaining ... high ethical standards."
According to Bloomberg News,
the biggest losers in the Madoff affair may be a pair of hedge funds.
Fairfield Greenwich Group, whose $7.3 billion Fairfield Sentry Ltd., and
Kingate Management Ltd., whose $2.8 billion Kingate Global Fund Ltd., invested with Madoff, Bloomberg said, citing three people
familiar with the matter. - Donna Block Categories Deal Video
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