Wall St Ponzi Scheme: $50 Billion In Losses

For those critics of Wall St and the preferred bailouts they get for behavior and financial trickery that appears to be on par with a low brow pyramid scheme, I give you this: Bernard L. Madoff Investment Securities LLC.

Bernard L. Madoff, was arrested at his Manhattan home by federal agents who accused him of running a multibillion-dollar fraud scheme — perhaps the largest in Wall Street’s history.

Just days earlier, Mr. Madoff had told another senior executive he was struggling to raise cash to cover about $7 billion in requested withdrawals from his clients, and he had appeared “to have been under great stress in the prior weeks,” according to the S.E.C. complaint.

So on Wednesday, the senior executive visited Mr. Madoff’s office, maintained on a separate floor with records kept under lock and key, and asked for an explanation.

Instead, Mr. Madoff invited the two executives to his Manhattan apartment that evening. When they joined him there, he told them that his money-management business was “all just one big lie” and “basically, a giant Ponzi scheme.”

And what is the scope of this fraud? How does this reflect on Wall St? Madoff's firm, which at one point was the largest market maker on the electronic Nasdaq market, estimated the losses at $50 billion and would dwarf past Ponzi schemes. It would be nearly five times larger than the accounting fraud that drove telecom company WorldCom into bankruptcy proceedings in 2002.

Source: NYT