Time reports that according to the U.S. Attorney's office in the southern district of New York, Madoff admitted to defrauding clients for up to $50 billion in a massive Ponzi scheme that was committed over a number of years. (See the top 10 scandals of 2008.)
Forbes reports that Madoff, known to his mates as Bernie, informed “senior employees,” possibly his sons, that his investment advisory business was a fraud. (See "Mad Madoff.")
Madoff reportedly said he was “finished,” that he had “absolutely nothing,” that “it's all just one big lie.” He allegedly stated that the business was insolvent, and that it had been for years.
His estimated losses from the fraud clocked in at $50.0 billion. The U.S. Securities and Exchange Commission said regulatory files showed that the firm had more than $17.0 billion in assets under management at the start of the year and that virtually all of that is missing.
The 70-year-old Madoff is being charged with one count of securities fraud, which carries a maximum penalty of 20 years in prison and a maximum fine of $5.0 million. Madoff was released on his own recognizance after posting a $10.0 million bond secured by his Manhattan apartment.
The Securities and Exchange Commission asked the federal court in New York to freeze Madoff’s assets. The commission also appointed a receiver who will try to gather all the assets and will try to determine whether anyone else was complicit in the fraud. “The process takes years,” said Powers. “Although these frauds may appear simple, forensic accountants must go through the various transactions that occurred to understand the full extent.”
Powers said Ponzi-like schemes typical start when the scamster made a bad investment decision or dipped into clients' funds, and instead of admitting to the mistake or paying back the losses, uses new money from investors to meet redemptions.
Some are considering Madoff’s scheme the biggest fraud case in Wall Street’s history. Madoff’s clients, which reportedly include Lombardier, the Loeb Family, Banco Santander, and a slew of charities, will likely seek civil lawsuits or other legal action to try to recover the money they’ve invested.
