HE ADMITTED HE CREATED THE PHONY INVESTMENT SCHEME THAT’S NOW LOST BILLIONS FOR INVESTORS!
A Wall Street powerbroker for nearly 50 years who built an influential firm has confessed to a massive fraud scam that will cost investors at least $50 billion, federal authorities say.
Bernard L. Madoff, 70, facing a single count of securities fraud, declined to speak with reporters after a federal magistrate judge in U.S. District Court in Manhattan ordered him released Thursday night on $10 million bail.
Andrew M. Calamari, associate director of enforcement in the Securities and Exchange Commission’s New York office, said the SEC had filed a civil securities fraud charge as well and was alleging “a stunning fraud that appears to be of epic proportions.”
The SEC said it was seeking emergency relief for investors, including an asset freeze and the appointment of a receiver for the firm. A hearing was scheduled for Friday.
If the allegations contained in a criminal complaint are true, it may be the largest fraud ever blamed on a single individual. Nearly all of the allegations stem from an FBI agent’s recounting of what Madoff told two FBI agents and three senior employees of his firm, Bernard L. Madoff Investment Securities LLC.
It would be a steep fall for Madoff, a former Nasdaq stock market chairman who founded his business in 1960 with $5,000 he earned in part working as a lifeguard on Long Island beaches.
His firm was a market maker, handling trades in some of the largest securities on various stock exchanges, matching buyers and sellers. Investigators say Madoff’s crime originated in a separate and secretive investment-advising business that served between 11 and 25 clients and had a total of about $17.1 billion in assets under management.
Stephen A. Weiss, a lawyer for several dozen investors, said there are many more investors. He said he “personally spoke with over 30 investors” who are believed to have invested more than $1 billion with Madoff.
The criminal complaint signed by FBI Agent Theodore Cacioppi said Madoff told at least three senior employees at his Manhattan apartment Wednesday that the investment adviser business was a fraud and had been insolvent for years, losing at least $50 billion.
Madoff told the employees he was “finished,” that he had “absolutely nothing,” that “it’s all just one big lie” and it was “basically, a giant (pyramid) scheme,” according to the complaint filed in court.
The employees understood Madoff’s admission to mean that “he had for years been paying returns to certain investors out of the principal received from other, different, investors,” said the complaint, which did not identify the investors impacted by the scam.
Cacioppi said one of the employees told him that Madoff was “cryptic” about the firm’s investment advisory business and kept its financial statements locked up. The FBI agent said another employee told him that Madoff last week said clients had asked for about $7 billion in redemptions and he was struggling to meet those obligations but thought he could do so.
Cacioppi said two senior Madoff employees told him that Madoff said during the Wednesday meeting that he planned to surrender to authorities in a week but first wanted to distribute $200 million to $300 million he had left to certain selected employees, family and friends.
Cacioppi said he and another FBI agent arrived Thursday at Madoff’s apartment, where Madoff invited them in and acknowledged knowing why they were there.