[Cid_Yama]

Suicide hotlines in Greenwich, Conn., could be lit up today as investors in the posh suburb begin to realize how much they've lost in the rip-off scheme perpetrated by Wall Street legend Bernard Madoff.

While the extent of Madoff's madness will take a while to suss out, it is known that Madoff managed money for a wide range of investors, including prominent New Yorkers, university endowments and charities.

But Madoff's scam - which Madoff himself estimates is as large as $50 billion - could extend beyond those directly affected, as the ripples of his ruse spread.

"There are a number of ramifications," said Doug Kass, founder of hedge fund Seabreeze Partners. "For one, it will serve to cripple an already-skeptical community of individual and institutional investors that have held our money managers in high regard only to be disappointed time and again."

Added a Wall Street trader, "It's yet another big straw on the camel's back at a time when everyone's screaming for liquidity." He predicted redemptions, or requests to pull out money from hedge funds, could surge as a result of Madoff's misdeeds.

Given that Madoff's investment-advisory arm, which is at the center of the alleged Ponzi scheme, managed just $17 billion in assets, observers suspect the only way his scam could have reached $50 billion was through massive borrowing.

A number of respectable institutions, from banks to firms that manage funds of hedge funds, will likely be damaged by yesterday's stunning revelations.

Groups known to have worked with Madoff in the past include alternative-asset manager Fairfield Greenwich Group, the Nomura Bank of Japan, and Swiss asset-management firm NPB New Private Bank.

Sources tell The Post that Madoff managed money for Fairfield Greenwich through a $7 billion hedge fund called Fairfield Sentry, which Nomura and NPB offered to clients.
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[efarmer]

In articles on the subject it states that a 5 million dollar fine could be levied for this 50 billion dollar swindle. Seems to me like a toothless tiger gums a banksters fanny if and when they do get caught.

[drgoodword]

Added a Wall Street trader, "It's yet another big straw on the camel's back at a time when everyone's screaming for liquidity." He predicted redemptions, or requests to pull out money from hedge funds, could surge as a result of Madoff's misdeeds.

For me, this is the biggest potential effect of the Madoff scandal. If the hedge fund industry--or some large part of it--collapses, no one knows how quickly and catastrophically it could worsen the current economic crisis.

[Cid_Yama]

It is fairly clear that most suspensions of redemptions by hedge funds was because they could not meet the redemptions without collapsing.

This just kept the managers in business until the end of 1st quarter, while extending the losses for those unable to withdraw their funds.

Since hedge funds generally follow a herd mentality and do what the other funds do, chances are many if not most are as much an empty shell as Modoff's.

How many hedge fund investors are broke but just don't know it yet? I'll bet many that had their redemption requests denied or postponed suspect now.

Start watching for these hedge fund managers being caught trying to sneak their assets out of the country, in anticipation of fleeing prosecution.

<i>A prominent attorney who fancied himself as a jet-setter was jailed without bail Thursday after a federal prosecutor - branding him a "Houdini" who might escape the country -- said losses from his purported hedge fund fraud have surpassed $380 million.

U.S. Magistrate Judge Douglas Eaton said Marc Dreier posed an "extraordinary risk of flight" in a case that "seems to have some extraordinary behavior."

The judge sided with prosecutor Jonathan Streeter, who said Mr. Dreier was "in a desperate situation and the only way out of the desperate situation is to flee."

"His life has completely unraveled," the prosecutor said, adding that the possibility of life in prison had to be crushing for "an extremely rich man who flew private jets and met rich and famous people."

The firm has represented celebrities including retired football star Michael Strahan and former News Corp. publishing executive Judith Regan.</i>
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[Cid_Yama]

Madoff's wealthy investors believed in him, typically entrusting money to him for decades, and were often intimates of the financier, Stephen Weiss of the law firm Seeger Weiss LLP told reporters at the Federal Court in lower Manhattan.

"Their children grew up together. They had the utmost faith in his abilities and propriety," said Weiss, who together with lawyer Brad Friedman of law firm Milberg LLP, represents dozens of people who invested over $700 million with Madoff.

"Many of these people are going to go from being very wealthy to virtually destitute," Friedman said.

"At one point, he was the favoured broker of Palm Beach," a club member told the Palm Beach Post newspaper. "Every big guy was his client.
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[Sixstrings]

Aren't all hedge funds sort of a ponzi scheme? Isn't our entire economy a ponzi scheme?

*scratches head*

[Cid_Yama]

Wealthy men like J. Ezra Merkin, the chairman of GMAC; Fred Wilpon, the principal owner of the New York Mets; and Norman Braman, who owned the Philadelphia Eagles, simply appreciated the steady returns he produced, regardless of market conditions.

But these clients of Bernard L. Madoff had this in common: They chose him to oversee much of their personal wealth.

And now, they fear, they have lost it.

While Mr. Madoff is facing federal criminal charges, accused by federal prosecutors of operating a vast $50 billion Ponzi scheme, many of his clients are facing an abrupt reversal of fortune that is the stuff of nightmares.

“There are people who were very, very well off a few days ago who are now virtually destitute,” said Brad Friedman, a lawyer with the Milberg firm in Manhattan. “They have nothing left but their apartments or homes — which they are going to have to sell to get money to live on.”

From New York to Palm Beach, business associates of Mr. Madoff spent Friday assessing the damage, the extent of which will not be known for some time. Many invested with Mr. Madoff through other funds and may not know that their money is at risk.

Emergency meetings were being held at country clubs, schools and charities to assess the potential losses on their investments and to look for options.

For Stephen J. Helfman, a lawyer in Miami whose father had opened an account with Mr. Madoff more than 30 years ago, the news on Thursday came as a hammer blow.

“The name ‘Madoff’ has overnight gone from being revered to reviled in the Helfman family,” Mr. Helfman said on Friday. His grandmother, at 98, relied on her Madoff money to pay for round-the-clock care, he said, and his two children’s college funds were wiped out.

“Thirty-six years of loyalty, through two generations, and this is what we get,” he said.

Sam Englebardt, a media investor in Los Angeles, said several relatives had entrusted virtually all of their assets to Mr. Madoff — and he understood why.

“It seems like a huge over-allocation, I know,” Mr. Englebardt said. “But remember, they had started out small and invested over 5 years, 15 years, 30 years — and every year they got a great return, and they could always take money out without ever having a problem.”

As that track record lengthened, his relatives gradually entrusted more of their savings to Mr. Madoff, he said. “I suspect that is what has happened across the board,” he added. “People came to trust him so much that, eventually, they trusted him with everything.”

Such stories were repeated in e-mail messages and telephone calls throughout the day on Friday. A woman in Brooklyn whose father died just weeks ago found that his entire estate and a substantial portion of her stepmother’s money was invested with Mr. Madoff. A law school official in Massachusetts fears he has lost millions in the collapse of the Madoff operation.
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[nobodypanic]

this thread gives me the warm fuzzies.

[Sixstrings]

So, is this going to set off a wave of hedge fund writhdrawls?

[nobodypanic]

i believe madoff deserves a medal. man, the thought of all those rich wankers suddenly finding themselves no better off than j6p really cheers my heart. job well done bernie

[AlexdeLarge]

Aren't all hedge funds sort of a ponzi scheme? Isn't our entire economy a ponzi scheme?

*scratches head*

A fiat based currency system, built on debt, is a giant Ponzi scheme, and the chickens have come home to roost................

[Sixstrings]

Before we feel too sorry for these folks, I assume most could liquidate their yachts, mansions, jewelry, ski lodges and what not.. and still have more coin than most of us will ever see in a lifetime.

Then again, everything is relative. It would truly be devastating for someone worth half a billion to suddenly be worth a few million.

[AlexdeLarge]

i believe madoff deserves a medal. man, the thought of all those rich wankers suddenly finding themselves no better off than j6p really cheers my heart. job well done bernie

Spreading the Wealth and he didn't need Obama to do it !

[Cid_Yama]

There was one largely Jewish charity event last evening.

"It was like the Titanic," one attendee said. "The ship was sinking, and people were crying, 'I lost this and that.' And everybody was drunk. The Titanic was going down, and we might as well carry on."

College funds! Pensions! Everything! Up and down the east coast!

<i>One thing is certain this coming week. These people will be needing cash and wanting out of any remaining investments "to save what's left".</i>
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[Eli]

The SEC knew this was a scam all the way back in 1999.

SEC knew it was a scam.

Really though, if they prosecuted all the Ponzi schemes being run on Wall St. what would be left?

[Sixstrings]

Oh, this is rich.. from his website:

In an era of faceless organizations owned by other equally faceless organizations, Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner's name is on the door. Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark.

..deeply involved in leading the dramatic transformation that has been underway in US securities trading.

AND

One of the critical ingredients in creating the added value which Madoff Securities offers its clients is the firm's intricate interweaving of advanced technology and experienced traders.

http://www.madoff.com/dis/display.asp?i ... me=1#owner

[Cid_Yama]

The WSJ fills in more details regarding the Madoff case, and it's actually more gobsmackingly unbelievable than it was last night.

For one thing, Madoff didn't invest simply on behalf of a couple of dozen multibillionaires; he had many common-or-garden millionaire clients, many of whom were introduced to him -- I'm not making this up -- through the Boca Rio Golf Club in Boca Raton and the Palm Beach Country Club in Palm Beach. Apparently the ability to invest with Madoff was sold as a side benefit of joining the clubs -- as ever, if you make something seem exclusive, people will clamor to get it.

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%.

Now those kind of returns are very attractive to country-club millionaires: you can see where that part of the fraud came from. But it turns out that Madoff's largest investors were fund-of-funds managers, including huge names like Tremont Capital Management.

Such managers do one thing, first and foremost: they exist as an extra pair of eyes to oversee the actual fund managers; they're a risk control, and they're sophisticated enough to smell impossible returns like Madoff's. I simply can't believe that they funneled billions of dollars of client money to Madoff without ever talking to his chief risk officer (there wasn't one).

<i>Did they know, were they colluding?</i>

There's also the question of the $50 billion number, given that Madoff "only" had $17 billion in assets under management, according to his SEC filings.

The amount of funds that Madoff reported to the SEC was a fraction of the amount of funds that Madoff reported to his investors. (and apparently it could be far greater than $50 billion)
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<i>I don't think this stops will Madoff. I think the only explanation for all the discrepancies and failures in checks and balances, was that there was widespread collusion. Where there is massive unregulated funds flowing, there is also massive greed and enough to spread around to keep the game going. Madoff just became the nexus. In other words, Madoff was just the head of a beast that was feeding on the wealthiest of the wealthy.</i>

[ReverseEngineer]

Before we feel too sorry for these folks, I assume most could liquidate their yachts, mansions, jewelry, ski lodges and what not.. and still have more coin than most of us will ever see in a lifetime.

Then again, everything is relative. It would truly be devastating for someone worth half a billion to suddenly be worth a few million.

Assuming meg rich folks can liquidate their Yachts and Mansions presupposes first that there are other mega rich folks who will buy them, and second that somebody would issue them credit to buy one unless they are paying cash.

All your mega rich folks have their money tied up in Hedge Funds they can't liquidate. If they were smart rich folks, they might have $1M in cash and Kruggerands in the basement safe, but most of them are just used to flashing the Daimond Studded Visa Card at Lutece and being escorted to their regular table.

A $10M Mansion in the Hamptons paid off free and clear would be a nice asset to sell off, maybe you can find someone with $100,000 cash to buy it tomorrow?

Most of these folks don't WORK for a living, they live off their investments. They have NO source of income once the money disappears. They are just as poor as the GM worker who just got laid off, and they have fewer skills.

It won't be long now before Wall Street is Raining Stockbrokers, and both Old Money and New Money goes SPLAT on the pavement below. The Jig is UP. The money isn't stolen and you can't find it hidden in a suitcase in somebody's apartment. The money is GONE, because it never really existed in the first place, and the mega rich are now wearing no clothes. Literally.

This is JUSTICE.

Reverse Engineer

[Cid_Yama]

He fostered a veneer of exclusivity and created an Alist of investors that became his most powerful marketing tool. From New York and Florida to Minnesota and Texas, Madoff became an insider’s choice among well-heeled investors seeking steady returns. By tapping into elite country clubs and creating “invitation only” policies for investors, he recruited a steady stream of new clients.

One of the largest clusters of Madoff investors was in Florida, where he relied on a network of friends, family and business colleagues to attract investors. “If you were eating lunch at the club or golfing, everyone was always talking about how Madoff was making them all this money,” one investor said. “Everyone wanted to sign up.” Another said Madoff’s clients would joke that if he was a fraud he would take down half the world with him.

Legal experts doubted that Madoff could have done so much damage on his own. John Coffee, a professor at Columbia Law School, said: “It is very rare that a fraud of this proportion could be handled by just one man. There are trades and redemptions to be done that a 70-year-old man would have to work 20 hours a day to do.”
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[seldom_seen]

Pyramid schemes within pyramid schemes. The Madoff story is a microcosm of the global economy.

You can trust us, give us your money and hard work and we'll create a global economy with peace and prosperity for all. You'll retire early with a huge house and lots of money. Just give us your taxes, your SS payments and set up a pension fund, a 401k and an IRA. Don't worry we're looking out for you, keep those deposits coming!