Financial Advisor's $50 Billion Ponzi Scheme

Well, if anything is going to top a prominent lawyer's alleged fraud of $100 million, we guess it would be have to be a prominent trader's alleged fraud of $50 billion. According to authorities, Bernard Madoff (former Nasdaq chairman) told his firm's employees "that his entire business was...'one big lie.'" What's more, the Wall Street Journal reports his two sons were the ones who turned him in to the feds after Madoff admitted he was running a "giant Ponzi scheme."

The Securities and Exchange Commission's associate director of enforcement Andrew Calamari (Calamari!) said, "Our complaint alleges a stunning fraud that appears to be of epic proportions." The criminal complaint suggests that Madoff "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." Yup, that sounds like a Ponzi scheme! The complaint also says, per employees, Madoff ran the "investment business" on a separate floor and was "cryptic" about it. The NY Times says this might be the largest fraud in Wall Street history.

Madoff had many prominent clients, who found his firm's high returns and low fees appealing. The Daily News reports that Mets owner Fred Wilpon's company had invested with Madoff and may have lost up to $300 million. And some are patting themselves on the back: A hedge fund consulting firm says it told its clients not to invest with Madoff "after learning of 'red flags' at his company, including that its books were audited by a three-person accounting firm...operating out of a 13-by-18 foot location in an office park in New York City’s northern suburbs."

And those friends and neighbors who invested with him—they're totally going to sue.

Contact the author of this article or email tips@gothamist.com with further questions, comments or tips.

By Jen Chung in News on December 12, 2008 4:04 PM

Comments [rss]

dopplerd

Regulation is costly. Deregulation is catastrophic. The Republican's experiment with deregulation has proven to be a GREAT success.

gilbertleighprestigemonkey

Hey Jen Chung, i think you mean that he was planning to surrender AFTER passing out some holiday goodies to friends and family, and the sons turned him in BEFORE that could happen.

Well I can say this, he sure raised some decent kids!

nik13

He was Charlie Rangel's big & steady donor. Hillary got some cash too, while DNC made it like bandits off Madoff's munificence.

HughGass

That nigga owes me five dollars!

ANGRYGOD11

We all know ONE BILLION DOLLARS went for Doctor Evil's frickin laser.

FelixtheCat & Christine Quinn'

They had a fake auditor

http://buzz.yahoo.com/article/1:clusterstockc697:b1e839765d73e65af20339a171edd7df

the money is in Israel,no doubt

longacre

It's not quite clear where all the money went, but it's pretty certain he didn't KEEP $50 billion. It seems he lost much of it in legitimate (bad) trades.

The Man Bat

I would've stopped at $100 Mill....but that's just me.

Gregoire

Yeah, I would totally have been fine at, say, $200 million.

The Man Bat

ONE BILLION DOLLARS....how can that possibly not be enough!?!?

Steven

When it comes to money there is always never enough to be made or be happy with.

JacqueMehoff

is he going to flee the country like that other hedge fund manager, living it up as a ski bum.

moocowtoo

I have a sudden urge to go out for Italian food tonight.

moocowtoo

Ponzi scheme FAIL!

fishfryin

chain this guy to one of those vehicle barriers downtown and let passersby have their way with him.

Jen Chung

I think Andrew Calamari's best friend could be Charlie Ravioli.

What I love is that Madoff wanted to surrender to the feds BEFORE he distributed hundreds of millions to certain employees and friends, but his sons turned him in before he could do that.

r1b2

We've been talking about this story all day. I especially liked that the SEC investigator's name is Calamari. It's liek the old Dom Irrera bit. "My name's Calamari. This is my colleague, Joey Bagadonuts, and our partner, Mussels Marinara."

The Man Bat

$50 BILLION!?!?!? How much is enough??....wouldn't it have been better to stop after, oh I dunno, say maybe the FIRST billion and then jet off to some 3rd world country and live like a frickin King for the rest of your days?