Funds: Legendary trader arrested
Bernard L Madoff, founder of Bernard L Madoff Investment Securities, a trading "hedge fund" has been arrested amid accusations of a USD50 milliard fraud.
Madoff, now 70, started his business with money saved from his "day job" as a lifeguard on the beaches of Long Island, according to the New York Times. But the growth of his business to encompass almost 30 funds with more than USD17 milliard under management was conducted in an improper fashion, say the SEC.
Madoff will appear before a Court charged with defrauding investors over a period of several decades and of massive amounts of money.
The SEC is taking steps to prevent the dissipation of both assets and information and describes "a stunning fraud of epic proportions" in its documents.
The alleged fraud is similar to that committed by a significant number of so-called "hedge funds" - using money from new investors to pay off existing investors in a "Ponzi" scheme. Central to such frauds is, generally, the simple technique of issuing false statements providing fictitious details of holdings.
But there is a wrinkle: Madoff says that the fraud is not in the Bernard L Madoff Investment Securities business but in three separate "hedge funds" that he personally oversaw. Court papers say that Madoff called three senior colleagues into his room on Wednesday and told them that the three funds were a fraud, basically a Ponzi scheme and that he was broke. He intended, he is said to have told them, to pay off certain friends, clients and family with around USD250 million that remained and then to surrender himself to the authorities.
But the staff told the Feds and the Feds turned up on his doorstep. Reportedly, Madoff who is now released on USD10 million bail, told the officers that he knew why there had come, that he was ready to go with them and that he expects to go to jail.
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