On the front page of today’s Wall Street Journal is the story of Bernard L. Madoff, founder and principal owner of registered investment adviser Bernard L. Madoff Investment Securities LLC.  The U.S. Securities and Exchange Commission and federal prosecutors have accused him of running a $50 billion Ponzi scheme.

“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.  Out of more than $17 billion in assets under management by Mr. Madoff’s firm at the start of 2008, essentially all the assets appear to be missing, the SEC alleged.

According to the WSJ  Madoff admitted the fraud to senior employees, telling them that his business “was a fraud,” and that “it was all just one big lie.”  The firm employees say that they understood Madoff’s statements to mean that he has been paying investors with the principal paid in by later investors in classic Ponzi fashion.

Investor’s Watchblog has posted about the revelations of fraud that would emerge from the recent financial collapse.  Frightened investors have been demanding redemptions of investments in hedge funds and other unregistered securities.  The hedge fund managers who have, thus far, been able to keep up the illusion of legitimacy, are now finding it impossible to conceal their fraud.  Expect to see more stories like this in the weeks and months to come. 

Madoff is the former chairman of the Nasdaq Stock Market.   He has had a stellar reputation on Wall Street for 50 years.  All of you who are prone to believe that you would never fall for an investment scam, ask how it is that you would have seen what no one else saw. 

Madoff is in federal custody and the Court has appointed a Receiver to take control of the business and marshal assets.  It remains to be seen whether Madoff’s investors will receive anything.  Private investor protection is the only reliable way to protect yourself from the cold panic that is now gripping Madoff’s investors, many of whom have, no doubt, lost their entire life savings.   

This entry was posted on Friday, December 12th, 2008 at 6:27 am and is filed under Investor Protection, New York, Florida, Investors at Risk, SEC, Scams, Ponzi schemes, Securities Industry (general). You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.