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Author Topic: Madoff's Ponzi Scheme Cost Investors 50 Billion Dollars  (Read 1786 times)
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« on: December 15, 2008, 12:45:56 AM »

Madoff ‘Tragedy’ Said to Have Escaped Scrutiny by SEC

By David Scheer and Jesse Westbrook
Dec. 15 (Bloomberg) -- U.S. regulators never inspected Bernard Madoff’s investment advisory business, alleged to be a Ponzi scheme that cost investors $50 billion, after he subjected it to oversight two years ago, people familiar with the case said.

  " Everyone is entitled to his own opinion, but not his own facts."  - Daniel Moynihan
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« Reply #1 on: December 15, 2008, 10:59:29 PM »

US pyramid fraud scam hits Europe's biggest banks
Mon Dec 15, 6:10 pm ET

LONDON (AFP) – Europe's biggest bank, HSBC, joined a list of top names in world finance admitting huge potential losses on Monday in a suspected pyramid fraud scam run by ex-Wall Street heavyweight Bernard Madoff.

Shares in Santander, the biggest bank in Spain and the second-largest in Europe after HSBC , plunged after the lender said it had an exposure of more than three billion dollars to Madoff Investment Securities in New York.

And Fortis Bank Netherlands said it stood to lose up to a billion euros in the suspected scam, even though it had no direct exposure to Bernard Madoff Investment Securities LLC.

"Parts of the group do have a risk exposure to certain funds it provides collateralised lending to," the bank said in a statement.

"If, as a result of the alleged fraud, the value of the assets of these funds is nil and the respective clients cannot meet their obligations, Fortis Bank Nederland (Holding) N.V.'s loss could amount to around 850 million euros to one billion euros" (1.2 to 1.36 billion dollars), it added.

British, French, Japanese and Spanish banks and funds said investments totalling billions of dollars could be wiped off their balance sheets in a scandal set to affect some of the world's richest people.

"On the basis of information presently available, HSBC is of the view that the potential exposure under these financing transactions is in the region of one billion US dollars (740 million euros)," the London-based HSBC said.

Royal Bank of Scotland said it could lose about 400 million pounds (598 million dollars, 444 million euros).

France's Natixis investment bank, already brought low by subprime losses, put its maximum exposure at 450 million euros (606 million dollars). Retail banking giant BNP Paribas revealed potential losses of 350 million euros.

Japanese financial giant Nomura said it could lose up to 303 million dollars and officials in South Korea said financial institutions there had a total exposure of some 95 million dollars.

Madoff, a 70-year-old Wall Street veteran, was arrested on Thursday, and is alleged to have confessed to defrauding investors of 50 billion dollars in a scam that collapsed after clients asked for their money back due to the global financial crisis.

International Monetary Fund chief Dominique Strauss-Khan said he was shocked US regulators had failed to identify and prevent the fraud.

"The surprise is not that there are some thieves in the system, the question is where were the police? It's very surprising to find you're living in a system where a failure of the regulatory system was so big," he told a news conference in Madrid.

Banks have rushed to disclose potential losses in an apparent bid to avert any deepening of the suspicion which has frozen credit markets.

US authorities allege that Madoff delivered consistently strong returns to clients by secretly using the principal investment from new investors to pay out to other investors in what is known as a "pyramid fraud".

US Vice President Dick Cheney said in a radio interview that the alleged scam by the former chairman of the Nasdaq was "very disturbing" but blamed a few "bad apples."

"Unfortunately, we've always had some bad apples ... at the scene who just involve themselves in out-and-out theft, which I think is probably what happened here," Cheney said.

The scheme apparently worked as long Madoff he could attract new investors but seems to have unravelled when some of his clients asked to withdraw their investment -- only to discover that his seemingly brimming coffers were empty.

British investment fund Bramdean Alternatives Limited, which revealed it had put about 31.2 million dollars in Madoff's company, said the scandal raised "fundamental questions" about the American financial regulatory system.

"It is astonishing that this apparent fraud seems to have been continuing for so long, possibly for decades, while investors have continued to invest more money into the Madoff funds in good faith," the firm said in a statement.

Spain's El Pais newspaper reported the country's second-biggest bank, BBVA, could lose around 500 million euros in the scam .

Italy's biggest bank, UniCredit, said its exposure was around 75 million euros and one of its investment units may also have been indirectly affected.

In Switzerland, Geneva private banks could lose up to five billion dollars (3.7 billion euros), Swiss newspaper Le Temps reported.

  " Everyone is entitled to his own opinion, but not his own facts."  - Daniel Moynihan
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« Reply #2 on: December 16, 2008, 08:56:55 AM »

Terrible anology!!!!   

A few bad apple spoil the barrel......

These financial schemes are a blight which has spread from one orchard to another wiping out the economy of industries.  The does not just affect a couple of apple pies.

Governments solution will be to fine the culprit(s), but there will be no restitution.

It is what happens when you close out regulation.

"May you have the hindsight to know where you've been,
 the foresight to know where you're going and
 the insight to know when you've gone too far."
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« Reply #3 on: December 27, 2008, 09:19:00 PM »

Madoff's Victims to Review His Wallet
By Erik Larson
Bloomberg News
Sunday, December 28, 2008; Page F02
Investors looking to recoup some of the $50 billion they lost in Bernard Madoff's alleged Ponzi scheme may get a better idea what the New York financial adviser has left when he is forced to reveal his assets to regulators this week.

Madoff, 70, must provide a detailed list of all investments, loans, lines of credit, business interests, brokerage accounts and other holdings to the Securities and Exchange Commission by New Year's Eve, a federal judge ruled earlier this month. Madoff's foreign business units were given until Jan. 26 to provide a similar accounting.

The list is to include all assets held for his "direct or indirect benefit," U.S. District Judge Louis Stanton in Manhattan wrote in his order in the SEC lawsuit. It must describe "the source, amount, disposition and current location of each of the items listed."

A catalog of Madoff's assets may reveal targets for angry investors, including hedge funds and charities seeking the return of their funds. New York-based Bernard L. Madoff Investment Securities began liquidating after his Dec. 11 arrest for securities fraud. Madoff, under house arrest in his Manhattan apartment, faces as much as 10 years in prison and a $5 million fine if convicted.

Several investors have filed suits against Madoff and his firm following FBI allegations that he admitted the business was "one big lie." Investment firms that did business with Madoff also have been sued.

Federal prosecutors allege Madoff engaged in a classic Ponzi scheme in which he would pay off old investors with the money of new investors. His lawyer, Ira Sorkin, didn't return a call Friday seeking comment, although he said previously that his client is cooperating with the government.

Madoff, who hasn't formally responded to the securities fraud charge, is due in court Jan. 12, unless he is indicted before then. Prosecutors and defense lawyers also may agree to postpone the court date.

  " Everyone is entitled to his own opinion, but not his own facts."  - Daniel Moynihan
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