Wall Street trader Bernard Madoff busted for multibillion-dollar fraud.
“On Thursday morning, this consummate trader, Bernard L. Madoff, was arrested at his Manhattan home by federal agents who accused him of running a multibillion-dollar fraud scheme — perhaps the largest in Wall Street’s history.”
Berard Madoff apparently lives in Manhattan but Greenwich tax records show a number of Madoffs living in town, including an Andrew and a Mark. The Times reports that Bernard has two sons with those names who ran the company with him. Same family? I don’t know but if it is, I’m sure we’ll hear about it soon.
Update:Sure enough, there are fraudsters afoot and Greenwich’s got them. Our real estate market may have lost some of its lustre recently but we continue to lead in scandals. Leona and her tax problems, Frankle Frankel and his sorry Russian whores, Andrew Kisslsel’ Kissel’s spectacular murdersuicide, Dickie Fuld’s machinations at Lehman and now this. All due respect to Mr. Fuld, but what a piker – the Madoffs made away with or lost $50 billion – Fuld just didn’t know how to go big. But all in all, it’s enough to restore some hometown pride in this Greenwich native.
Another thought:
From the NYT :
Competing hedge fund managers have wondered privately for years how Mr. Madoff generated such high returns, in bull markets and bear, given the generally low-yielding investment strategies he described to his clients.
“The numbers were too good to be true, for too long,” said Girish Reddy, a managing director at Prisma Partners, an investment firm that invests in hedge funds. “And the supporting infrastructure was weak.” Mr. Reddy said his firm had looked at the Madoff funds but decided against investing in them because their performance was too consistently positive, even in times when the market was incredibly volatile.
So how come no one blew the whistle on these guys? How come the regulators didn’t catch them?
For What It's Worth 
Andrew and Mark are the next generation sons of the firm’s founders. Both of them have senior positions in Madoff Securities. I thought one or both of them were sons of Bernie’s brother Peter, who ran the day to day business of the trading firm (Madoff Securities) , I could be wrong.
I never dealt with Bernie, but Peter Madoff is very smart; both on an intellectual basis and as a street savvy trader. It is hard to believe he didn’t know what his brother was doing on another floor of the same building, if he is still involved with the firm. These people and this firm have a very good reputation. This is a truly shocking revelation.
I was among many who never understood how they generated the consistency of these returns and where the transactions were representing the trading. I speculated that the hedge fund was the source of funding for the market making operations and there was internal dealings with the trading arm, which was where the transactions were buried. Cost of capital would be somewhat high, but offset with management fees and the internal dealings that can make your prop book very (legally) profitable, maybe it worked.
None of us who could not figure out the business model ever considered that this was a ponzi scheme, given the players involved (Andrew Kissel these people are not). Good grief!
My father worked with Bernie (maybe I should say, “had to” rather than “chose to”) on a major securities market project in the early 1980s. He said at the time (and repeated now), that Madoff was a thorn in his side and was an unpleasant and slippery personality. He wasn’t surprised this happened, but was surprised at the magnitude of it.
When there is so much money to be made LEGALLY, why do it dishonestly? Apparently, Bernie’s own trading schemes were awful and he lost a lot of money, but couldn’t admit it so falsified his returns.
When the markets go down, you see who’s been cheating. First Marc Dreier, now this. It disgusts me.
It was Frankel, not Frankle, and Kissel, not Kissles.
Chris,
According the Wall Street Journal, the sons turned their father in to the authorities. This does not make them “fraudsters”. Some would consider them heroes.
One’s dead, one’s in prison. Depending on your views on the existence of an afterlife, one or both of them have bigger things to worry about than how his name’s spelled on the fly. But I don’t want you to worry, Hiram, so I’ve noted your correction.
This is from the Wall Street Journal. He WAS suspected, and people DID tip off the Feds. But you have to remember – the SEC has a bunch of low-paid guys who stay there maybe a couple of years and move on. Stack them up against a lawyered-up hedge fund that denies everything and “cooks the books”, and they’re overmatched.
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Widespread Skepticism
Mr. Madoff’s Fairfield Sentry Ltd., a hedge fund run by Madoff Investment Services to invest in shares in the S&P 100, claimed to be up 5.6% through the end of November, a period when the Standard & Poor’s 500-stock index was down 37.65%. In October, Fairfield Sentry was said to be down 0.06%, a month when the S&P 500 lost 16.8%. Since its inception in December 1990, the fund averaged a 10.5% annual return, according to fund documents.
Such returns sparked widespread skepticism for years on Wall Street. News stories raised questions about his approach. A number of traders suggested his firm could be buying shares for its own account just before it filled orders for customers, an illegal act called front-running.
In 2001, Mr. Madoff told Barron’s that charges of front-running were “ridiculous.”
An executive in the securities industry, Harry Markopolos, contacted the SEC’s Boston office in May 1999, urging regulators to investigate Mr. Madoff. Mr. Markopolos continued to pursue his accusations over the past nine years, he said in an interview on Thursday, and according to documents he sent to the SEC that were reviewed by The Wall Street Journal.
“Bernie Madoff’s returns aren’t real and if they are real, then they would almost certainly have been generated by front-running customer order flow from the broker-dealer arm of Madoff Investment Securities LLC,” Mr. Markopolos wrote to the SEC in November 2005.
The SEC declined to comment on the matter.
Mr. Madoff’s investors described their shock and panic on Thursday. Susan Leavitt of Tampa Bay, Fla., said she had several million dollars of inherited money invested in the firm and added $500,000 earlier this year. A stay-at-home mother with two children, the 46-year-old Ms. Leavitt says she is considering going back to work. “That was my nest egg for the children, and my future. I’ll never see much back, I’m sure,” she said.
Ms. Leavitt said she recently discussed her investment with a friend who told her he was suspicious about the firm’s ability to generate such profits amid the economic crisis. “I thought, ‘He’s probably just jealous,’ ” said Ms. Leavitt. “We’ve been with [Mr. Madoff] for 15 years, and it’s grown every year at 10%.”
U.S. District Judge Louis Stanton, who is overseeing the SEC’s case against Mr. Madoff and his firm, on Thursday appointed Lee Richards, a Manhattan lawyer, as the firm’s receiver in order to preserve its assets and accounts outside the U.S. The judge also ordered Mr. Madoff and his firm not to move assets. At a hearing set for Friday, the judge will consider the SEC’s request to grant powers to the receiver over the entire firm, and a complete asset freeze.
So what is this going to do to hedge fund business other than cause increased withdrawals (who can you trust theory).
Read that Morgan Stanley is estimating that hedge funds will shrink by 50% to $900 billion by year end 2009.
Can’t be good for elevated compensation.
Anonymous, I just saw the WSJ article and posted a correction. I don’t suppose it’s impossible to believe the kids didn’t know what was going on but it’s getting a bit disheartening to hear all these highly-paid Wall Street executives express shock and surprise when they discover gambling going on at Rick’s Place. What were they paid to do, if not oversee operations?
Please. His own son was “head of compliance”. Nick Leeson was “head of compliance” for Barings – and they only lost $1 billion.