Bernard L. Madoff, the founder of Bernard L. Madoff Investment Securities LLC, a registered investment adviser, and former Chairman of the Nasdaq Stock Market, was arrested today and charged with one count of securities fraud, Acting U.S. Attorney for the Southern District of New York Lev L. Dassin and Assistant Director-in-Charge of the FBI's New York Office Mark J. Mershon announced.
According to the complaint filed in Manhattan federal court, Bernard L. Madoff is the founder of Bernard L. Madoff Investment Securities LLC (the Firm), a securities broker dealer with its principal office in New York City. According to the Firm's website, the Firm: (a) "is a leading international market maker. The firm has been providing quality executions for broker-dealers, banks and financial institutions since its inception in 1960"; (b) "[w]ith more than $700 million in firm capital, Madoff currently ranks among the top 1% of U.S. Securities firms; and (c) "Clients know that Bernard Madoff has a personal interest in maintaining an unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark."
According to two senior employees of the Firm (the Senior Employees), Madoff conducts certain investment advisory business for clients that is separate from the firm's proprietary trading and market making activities. According to the Senior Employees, Madoff ran his investment adviser business from a separate floor in the New York City offices of Bernard L. Madoff Investment Securities LLC. According to a Senior Employee, Madoff kept the financial statements for the firm under lock and key, and Madoff was "cryptic" about the firm's investment advisory business.
According to a document filed by Madoff with the U.S. Securities and Exchange Commission (SEC) on Jan.7, 2008, Madoff's investment advisory business served between 11 and 25 clients and had a total of approximately
$17.1 billion in assets under management.
On Dec. 10, 2008, Madoff informed the Senior Employees, in substance, that his investment advisory business was a fraud. Madoff stated 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. Madoff stated that the business was insolvent, and that it had been for years. Madoff also stated that he estimated the losses from this fraud to be at least approximately $50 billion. Madoff further informed the Senior Employees that, in approximately one week, he planned to surrender to authorities, but before he did that, he had approximately $200-300 million left, and he planned to use that money to make payments to certain selected employees, family and friends. Madoff, 70, currently resides in New York City.
The securities fraud charge in the complaint carries a maximum penalty of 20 years in prison and a maximum fine of $5,000,000. Madoff is expected to be presented before U.S. Magistrate Judge Douglas F. Eaton today.
Mr. Dassin praised the investigative work of the FBI and thanked the SEC for its assistance. Assistant U.S. Attorney Marc Litt is in charge of the prosecution. The charges and allegations contained in the complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.