Bernard L. Madoff, a former chairman of the Nasdaq Stock Market and a force in Wall Street trading for nearly 50 years, was arrested by federal agents Thursday, a day after his sons turned him in for running what they said their father called "a giant Ponzi scheme."
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%. Since its inception in December 1990, the fund averaged a 10.5% annual return, according to fund documents.
Such returns sparked widespread skepticism for years on Wall Street. News stories raised questions about his approach. A number of traders suggested his firm could be buying shares for its own account just before it filled orders for customers, an illegal act called front-running.
In 2001, Mr. Madoff told Barron's that charges of front-running were "ridiculous."
U.S. District Judge Louis Stanton, who is overseeing the SEC's case against Mr. Madoff and his firm, on Thursday appointed Lee Richards, a Manhattan lawyer, as the firm's receiver in order to preserve its assets and accounts outside the U.S. The judge also ordered Mr. Madoff and his firm not to move assets. At a hearing set for Friday, the judge will consider the SEC's request to grant powers to the receiver over the entire firm, and a complete asset freeze.
2 comments:
During this time of crisis, I feel it is important to charge corrupt investors such as Madoff to the full extent. During a time where everyone is taking a hit, it is easy for investors to turn to other means to secure their investments. It must be made clear that for this country to financially recover, these types of people should not be tolorated.
I think this is a matter of incentive. Since the benefit he gets is bigger than responsibility he faces in case of failure, Moral Hazard occurs.
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