Legal Research

Madoff Fraud Put At $65 Billion, Plea Expected

By David Badertscher, PLL

Source: Crime and Justice News, March 11, 2009.

"Bernard Madoff's fraud was as simple as it gets -- he apparently made up the numbers, the Wall Street Journal reports. Madoff, 70, is expected to plead guilty tomorrow and spend the rest of his life in prison. Investigators have said they determined that Madoff made no trades for at least 13 years. Instead, he allegedly took in money from a network of feeder funds and investors and used it to meet any withdrawals his investors requested. If proved, it was a classic Ponzi scheme that stands out mainly for its longevity. Because returns were so steady, investors had little need to redeem their money, and many of them were clients for decades."

"As the numbers grew, Madoff apparently counted on feeder funds that vacuumed up cash around the world. Some funds claimed to be managing the money but simply passed it off to Madoff. His ability to produce modest but steady returns, typically 10% to 15% annually, was a big attraction for investors at a time when interest rates were low. In the end, the firm sent account statements indicating investors had $64.8 billion invested with Madoff, including gains made from decades of what appeared to be bogus returns. The mechanics of the alleged fraud relied on a finely balanced mix of loyal employees and family, falsified client statements and financial documents, and investors who felt privileged to be clients, so didn't ask too many questions. It took place in the firm's investment advisory business, which was believed to be separate from its original stock-trading operation. "

Wall Street Journal

Full post as published by New York Supreme Court Criminal Term Library on March 11, 2009 (boomark / email).