Bernard L. Madoff, a legend among Wall Street traders, was arrested on Thursday morning by federal agents and charged with criminal securities fraud stemming from his company’s money management business.
The arrest and criminal complaint were confirmed just before 6 p.m. Thursday by Lev L. Dassin, the acting U.S. attorney in Manhattan, and Mark Mershon, the assistant director of the Federal Bureau of Investigation.
According to the complaint, Mr. Madoff advised colleagues at the firm on Wednesday that his investment advisory business was “all just one big lie” that was “basically, a giant Ponzi scheme” that, by his estimate, had lost $50 billion over many years.
The fallout form this is going to be huge. Imagine waking up and finding out that returns on 200 million dollars of your money over the last 10 years has been a fraud and it is all gone. Think about all the taxes that have been paid on mythical gains. All the loans that have been taken with the belief that these assets are real. All the businesses, i.e. hedge funds and other investment firms who had placed money with this guy in good faith, that are going to collapse. All the employees who have been showing up for years believing they were doing an honest investment job. Very Sad.
Some will rob you with a gun, others with a fountain pen. We are far too lax on white collar crime. This sot of thing ruins economies and many lives. It is far worse than many violent crimes.
Surely this raises the question of what the regulatory authorities were doing all these years? The article makes it clear that the high returns on investments were widely regarded as improbable in the financial services industry. And the SEC never woke up? Hello? It seems that in the US, as here in the UK, it’s usually slumberland in the watchdogs. And here (bilious moment coming) whenever an institutional watchdog fails the cry always goes up that they want more money and more staff to do the job properly that they were never able to do in the first place.