Authorities have announced arrest of a legendary Wall St broker on charges that he swindled $50bn in an alleged pyrimad scheme.
Bernard Madoff, 70, faces a maximum 20 years prison and a fine of up to $5bn if convicted on the securities fraud charge.
Mr Madoff told his employees at Bernard L Madoff Investment Securities LLC, a securities broker, that an investor advisory business he had been running in parallel was fraudulent.
Mr Madoff filed with the Securities and Exchange Commission on 7 January that his investor advisory business served 11 to 25 clients with about $17bn in assets under management.
However, Mr Madoff allegedly told his employees that he was ‘finished’, that he had ‘absolutely nothing’ after losing approximately $50bn.
According to the prosecutor's statement, he said he had run ‘a giant Ponzi scheme’, essentially a pyramid scam.
He told the employees he would surrender himself to the authorities after using his remaining $200-300m to pay selected employees and family and friends.
No ordinary broker
As in the downfall of Lehman Brothers, AIG and other seemingly invulnerable institutions, Mr Madoff's troubles are seen as symptomatic of staggering mismanagement, over-leveraging and greed at the heart of Wall Street.
With 50 years in the business, Mr Madoff was more than just an investor. He was an integral player.
A self-made success, he rose to become chairman of the Nasdaq stock market and founder of his own company, Bernard L. Madoff Investment Securities LLC.
This year he reported to the Securities and Exchange Commission that his private investor advisory business - the focus of the alleged pyramid scheme - was managing more than $17bn in assets.
The implosion of that scheme was likely triggered when nervous clients asked to withdraw funds, as they have been demanding from hedge funds around the world.
Except there was no money to withdraw.
In a further twist, The Wall Street Journal reported that Bernard Madoff was turned in by his sons.
