Former Nasdaq chairman busted for running a $50 billion fraud -- largest Ponzi scheme ever

A former Nasdaq chairman has been arrested for stealing over $50 billion through an elaborate Ponzi scheme run through his private investment fund -- he allegedly ripped off some clients to pay other clients, then recruited (and robbed) new clients to pay off the last round of losers. The Wall Street Journal says he was turned in by his sons.
In a separate criminal complaint, Federal Bureau of Investigation agent Theodore Cacioppi said Mr. Madoff's investment advisory business had "deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in losses of approximately billions of dollars..."

The 70-year-old Mr. Madoff is the founder and primary owner of Bernard L. Madoff Investment Securities LLC. The firm is primarily known for its business in market-making, or serving as the middleman between buyers and sellers of shares. But Mr. Madoff also oversaw an investment-advisory business that managed money for high-net-worth individuals, hedge funds and other institutions...

Both complaints say Mr. Madoff told his sons he believed losses from his fraud exceeded $50 billion. That figure couldn't be confirmed. But such a loss is plausible, had money been flowing in and out for years: At the beginning of 2008, according to the SEC filing, his operation had more than $17 billion under management.

Such a scheme would dwarf past Ponzi schemes. It would also be nearly five times larger than the accounting fraud that drove telecom company WorldCom into bankruptcy proceedings in 2002.

Top Broker Accused of $50 Billion Fraud (via Taplin)

(Image: Madoff.com)

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  1. Sounds a lot like he was doing a Bush-style bailout, only he was robbing from the rich to pay the rich. He’d still be in business if he’d stuck to robbing the poor.

  2. What if modern capitalism is the largest Ponzi scheme ever? Every dollar is debt that is owed by someone to someone. Also, capitalism doesn’t seem to work unless it keeps on growing. One huge metaponzi to rule all ponzis.

  3. The investors should have read the prospectus:

    Attn: President/CEO,

    First, I must solicit your confidant in this transaction, this is by virtue of its nature as utterly CONFIDENTIAL and TOP SECRET. Though I know that the transaction of this magnitude will make any one apprehensive and worried, but I am assuring you that all will be well at the end of the day. We have decided to contact you due to the urgency of this transaction, as we have been reliably informed of your discreteness and ability in transaction of this nature.

    Let me start by first introducing myself properly to you, I am Bernard L. Madoff founder and primary owner of Bernard L. Madoff Investment Securities LLC…

  4. When are people going to realize that our entire monetary system is nothing more than a huge pyramid scheme, run by those who specialize in such schemes?? It’s just a lot more complicated than the average.

    Bruno

  5. I wonder if his employees will be prosecuted, too. He wasn’t the only one who knew how this thing operated. Anyone who knew is an accomplice. The game was almost over, so I bet his sons turned him in for some kind of immunity deal.

    How fucking much money do you need anyway?

  6. How fucking much money do you need anyway?

    $700 billion. “It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”

  7. Death is too good for these jaggoffs! That said, I’d like to fill large rocket with these a-holes and blast it off for the sun. While Rome has been burning for the past 8 or so years, these specimens of walking fecal matter have been participating in the bankrupting fire sale of of the century, taking anything and everything not nailed down. A special GitMo style max security prison in Antarctica would maybe fit the bill.

  8. For those who have forgotten, the largest Ponzi scheme is the one being carried out by that bald headed f— Hank Paulson and his friends. The victims in this scheme are all of the tax paying Americans.

  9. For those who have forgotten, the largest Ponzi scheme is the one being carried out by that bald headed f— Hank Paulson and his friends. The victims in this scheme are all of the tax paying Americans.

    Pirates and Emperors

    “Whether they do it big, or they do it small, but only one goes down when they break the law. While the big one claims, ‘This really don’t apply to me.’ “

  10. @ Takuan

    “Legal experts are already talking about how this clearly marks the trend towards the Court being less strictly Constitutional and more strictly Awesome.”

  11. @5

    Sorry Cupcake Faerie, I couldn’t hear you… some old guy next to me was playing his fiddle too loud. Come again?

  12. There’s a similar thing happening with a prominent Twin Cities businessman right now- Tom Petters. Known for a really odd set of electonics stores, which is how he was laundering all his transactions. Also owns Sun Country airlines (local decent airline that’s in hard times now) and depressingly, Polaroid. So if Polaroid wasn’t dead before, it’s pretty much history now.

    But It sounds like Petters was funding his pyramid with investments from non-profits, and giving them a ridiculous 30% roi or something.

  13. The Ponzi scheme always reminds me of attempts at perpetual motion machines. Although to their “credit”, those in search of perpetual motion at least truly believe what they are doing is real– I doubt anyone running a Ponzi/pyramid scheme believes for a second that they can keep their dance going forever.

  14. Add that to the CDS Ponzi scheme that gave tremendous results while the economy was booming and brought tremendous failure when things went slightly askew.

    It’s cool seeing large corporations tie themselves together with one tremendously long length of prima-cord. Just a touch off of the Lehman/Bear Sterns blasting cap and we have seen some of them financially cut in half while others are still lingering in ICU and burn wards across the nation.

  15. it’s one thing to steal from little people. I imagine some of his victims hold Views about their money. And have Means. At his age, well, let’s hope they don’t visit the sins of the fathers in lieu of enough to take away.

  16. I like the part about his sons turning him in. Children of the future: turn in your parents who parasitize your planet!

    Bruno’s right: laissez-faire capitalism IS a Ponzi scheme.

    The worst buy the most Congress Creatures who then give the worst the most tax breaks, who then fund the Creatures’ campaigns. Then the Creatures bail out the worst with tax money. Etc.

    An alternative: http://Vote.org

  17. From the bloomberg.com article on this:

    “…according to the Web site [http://www.madoff.com/ – now bearing a DOJ notice]. “Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fairdealing, and high ethical standards that has always been the firm’s
    hallmark.””

    It’s all lies. They’re all liars. One can only hope that these guys, as with the marketing division of the Sirius Cybernetics Corporation, will be the first against the wall when the revolution comes.

    I have finally, really, completely come to the conclusion that, for pretty much all of the people running this planet, there’s nothing but utter and complete incompetence and a profound inability to detect bullshit. They’ll believe anything that they’re told, as long as that person is wearing an expensive business suit…

  18. What if modern capitalism is the largest Ponzi scheme ever? Every dollar is debt that is owed by someone to someone. Also, capitalism doesn’t seem to work unless it keeps on growing. One huge metaponzi to rule all ponzis.

    Oh, it’s much worse than that. Have you ever wondered why the number of Homo Sapiens on this planet always keeps growing? now that’s a Ponzi scheme gambling with the ecosystem we depend on for the air we breathe, the food we eat and the water we drink.

  19. To all the bozos deriding capitalism: what is your better alternative?

    Chinese tried something else. As did Vietnamese, East Europeans, and now even Cubans who are questioning if maybe capitalism is not better.

    Get over it: this is the only system we have, we will always have predatory people that will feast on the gullible, uninformed or weak, that is the price to pay for a better general standard of living, what is undeniably necessary is an improvement of democracy in which the people in power are *legally* accountable if these shenaningans happen under their care (why is Donald Rumsfeld not in a jail cell for example?)

    As long as people keep voting for the parties that offer no solutions because they are pretty much part of the establishment (both Democrats and Republicans in the US, Tories and Labour in the UK and so on) then the oversight will be minimal and mostly flawed.

  20. (a) Some images from the original site are still in the page source, but commented out…

    http://madoff.com//images/textcycle.gif
    http://madoff.com//images/squaredrop.gif

    (b) Capitalism sucks, it breaks periodically resulting in lot of human suffering and misery, it’s fundamentally based on exploition and greed, (even when properply regulated, and the deliberate dismantling of “big government bureaucracy and red tape” over the last 25 years in the name of the new right has been a huge factor in the scale and seriousness of the current bust) but it’s the best of a bad bunch.

    (c) Item (b) does not mean that humans /aren’t/ massively overloading the planet’s ability to support us. We’re going to have a major drop in population and living standards this century. Reality does not owe us a living.

  21. Is Wall St. Just One Big Ponzi Scheme ?

    With a $50 Billion Fraud,
    it could be one of the largest fraud schemes in Wall Street history.

    So Where is the Money?

    Madoff told his employees. “It’s all just one big lie”

    But didn’t anyone, including the SEC,
    wonder why this fund wasn’t audited by a known firm?

    That’s why I recommend to verify the people before doing any business.
    You can use any free services to prevent scams
    just looking in his public records.

    You can prevent some frauds just using:

    ArchiveNational.Com
    to make some background check to anybody before any serious deal.
    Get free information and don’t lose your money without research first.

    Hope that this helps someone!

    ArchiveNational.Com

  22. “Oh, it’s much worse than that. Have you ever wondered why the number of Homo Sapiens on this planet always keeps growing? now that’s a Ponzi scheme gambling with the ecosystem we depend on for the air we breathe, the food we eat and the water we drink.”

    That’s because we came from bacteria, and bacteria do the exact same thing. They reproduce constantly, eating up their environment/resources until they die.

  23. How solid is the stuff that makes up the difference between the real value of a house and its market value?

    Nobody really understands money. When some people who don’t understand it convince other people that they do, we wind up with what we’ve got.

    Which helps me to understand why people who’ve already got 100 million need 500 more. Because they’re in the best position to realize that it’s all made of imagination.

  24. @jphilby

    Just like most of the people who were looking at their 401k, real estate value and stock and bond value didn’t realize that paper value is an imaginary number floating out there until you cash everything in and convert it into a real-world item.

    If you have a retirement fund, it is only a potential income until it starts making you monthly payments. At that point what remains in the account is still only a potential income.

  25. @36 Gollux

    That money is not worth having if you can’t spend it. That certain people have a lot of money that they badly want to spend. And that if we can give them a way to spend it, through the Crypt, that these people will be very happy, and conversely that if we screw up they will be very sad, and that whether they are happy or sad they will be eager to share these emotions with us, the shareholders and management team of Epiphyte Corp.

    — Neal Stephenson, Cryptonomicon, Chapter 59 ‘Hoard’

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