Friday, December 12, 2008

Huge Alleged Ponzi Scheme Nabs Madoff

Got to invest in the hottest hedge fund , right? Wrong. I have always spoken about the need for investors to require transparency in their investments, and there is no better case for the need for transparency than today's shocking news. Former Nasdaq chief, Bernard Madoff, was busted by the feds, for allegedly committing securities fraud. I think the word 'fraud' is an understatement. You see we are talking about $50 billion! Holy cow.

In a report on Marketwatch: "Madoff counted several large hedge fund investment firms as clients, along with some European banks, so if his firm has lost more than $50 billion, the impact could be widespread.
On Wednesday, Madoff told two senior employees that he was "finished," that he had "absolutely nothing," that "it's all just one big lie," and that it was "basically, a giant Ponzi scheme," federal prosecutors said in their statement.
According to a criminal complaint filed on Thursday and cited by the Journal, Madoff "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."
Madoff also said his business was insolvent, and that it had been for years, estimating losses to be at least $50 billion, prosecutors alleged, again citing the two unidentified employees.
According to the complaint, Madoff told one of his senior employees that clients were seeking about $7 billion in redemptions and that "he was struggling to obtain the liquidity necessary to meet those obligations." The employees believed the firm had about $17 billion under management."

Investors should stick to stocks, bonds, mutual funds and work with their financial advisers, check your statement and pay attention to what you own.

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