Judge Orders Freeze Of Madoff’s Assets; Investigators Will Try To Determine If Funds Were Co-Mingled In Ponzi Scheme

Bernard Madoff

Bernard Madoff

UPDATE DEC. 14, 7:51 A.M. EST (U.S.A.): Forbes.com is quoting a lawyer from Akerman Senterfitt on the Bernard Madoff case. Akerman Senterfitt is representing Andy Bowdoin in the Ad Surf Daily Ponzi scheme case. The attorney quoted at Forbes.com is being quoted in a general sense as an expert in unraveling Ponzi schemes.

We reported yesterday that some of the world’s great publications and journalists are reporting on the Bernard Madoff case. We’ve included a few links at the bottom of this post. Though Madoff’s alleged fraud is much more involved than the allegations against AdSurfDaily, the issues in the cases are strikingly similar. If you’ve been following the ASD case, you’ll learn a lot by following the Madoff case.

Here, below, our earlier post . . .

It hasn’t taken long for the probe into Bernard Madoff’s failed securities business to kick into high gear. A receiver appointed by a federal judge already has seized Madoff’s website. Meanwhile, the judge already has issued an order that empowers the SEC to go over Madoff’s financial statements and bank accounts with a fine-tooth comb. Included in the order are business and personal accounts.

Elsewhere, clients and companies that have billions of dollars invested with Madoff already have started their own probes. One of them, Fairfield Greenwich Group, has acknowledged it had $7.5 billion — more than half of its $14.1 billion portfolio — “invested in vehicles connected to Bernard L. Madoff Investment Securities.”

“We are shocked and appalled by this news,” said Jeffrey Tucker, founding partner of
Fairfield Greenwich Group. “We have worked with Madoff for nearly 20 years, investing
alongside our clients. We had no indication that we and many other firms and private
investors were the victims of such a highly sophisticated, massive fraudulent scheme.”

Federal prosecutors said last week that Madoff had been running a giant Ponzi scheme that had gone undetected for years. Preliminary losses were pegged at $50 billion. The alleged scheme reportedly unraveled when customers sought $7 billion due them and Madoff had no more shells to move.

Madoff, the former chairman of Nasdaq and a Wall Street titan, is 70. If convicted, he faces up to 20 years in prison and a fine of up to $5 million.

One of the things investigators will try to determine is whether Madoff co-mingled funds from business accounts and personal accounts.

Co-mingling is an issue in the AdSurfDaily case. Authorities said ASD President Andy Bowdoin was running a $100 million Ponzi scheme tied to checking and bank-card accounts over which he had sole signatory authority. Investigators said the accounts were used to purchase $51,000 in jewelry on a single day, along with real estate in Florida and South Carolina.

Prosecutors said ASD was insolvent and that Bowdoin was paying older program members with money from new members, the classic Ponzi set-up. The U.S. Secret Service seized ASD’s assets.

Insolvency also is an issue in the Madoff case. Madoff acknowledged the firm was insolvent and had been running a giant Ponzi scheme for years, federal officials said. As was the case in the ASD probe, a judge froze Madoff’s assets in a bid to contain the damage — or, as the court documents say — to preserve the “status quo.”

Madoff Links:

1.) Forbes Quotes Michael Goldberg Of Akerman Senterfitt, The Firm Representing Andy Bowdoin

2.) Wall Street Journal Identifies Some Alleged Victims

3.) Forbes Says Some Victims Face Prospect Of Having To Return Illegal Profits

4.) New York Times Questions Whether NY Mets’ Operations May Suffer Because Of Alleged Madoff Scheme

5.) New York Times Calls It ‘The Stuff Of Nightmares’

6.) Reuters: Geneva Banks Lost $4 Billion In Madoff Ponzi

7.) Bloomberg: Madoff Used Three-Person Accounting Firm That Operated In 13-By-18-Foot Location

8.) Boston Globe: Carl Shapiro Charitable Foundation Lost $145 Million With Madoff

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4 Responses to “Judge Orders Freeze Of Madoff’s Assets; Investigators Will Try To Determine If Funds Were Co-Mingled In Ponzi Scheme”

  1. So, it looks like Akerman Senterfitt must specialize in older citizens involved in Ponzi schemes. Interesting choice of clientele.

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  2. Hi Don,

    The Forbes article doesn’t imply Akerman Senterfitt is representing Madoff. But one of its attorneys, Michael Goldberg, has considerable experience in unraveling Ponzi schemes and has acted as a receiver in such cases.

    Seems Forbes talked with him to get an idea of what investors could expect as the Madoff case proceeds.

    Here is Goldberg’s profile:

    http://www.akerman.com/public/attorneys/aBiography.asp?id=529

    The thing that has struck me about the Madoff case so far is the similarities to ASD — and not just the Ponzi elements.

    Some of Madoff’s investors clearly had blind faith, even though Madoff’s operation had raised eyebrows in the past.

    Another parallel is in the area of due diligence. Remember all the claims of due diligence having been performed in ASD promoters’ ads for ASD? Absent the publication of verifiable financial information, it’s basically impossible to perform due diligence.

    In the Madoff case, even large, well-known funds-to-funds players had billions tied up with him, apparently accepting the company line as gospel, even though Madoff was secretive about his accounting.

    Law firms are now lining up to sue both Madoff and funds-to-funds players who had weighty Madoff portfolios. Their exposure is huge.

    Meanwhile, the case so far suggests a considerable element of Affinity Fraud. ASD traded on Christianity. In the Madoff case, people of the Jewish faith invested heavily with Madoff.

    One Jewish charitable group reportedly is out millions and might have to suspend operations.

    Yet another parallel is the Florida tie. Florida’s wealthy were among Madoff’s star clients, perhaps particularly in the Palm Beach area.

    Poor Florida! It’s getting hammered by foreclosures and has become a haven for alleged Ponzi schemes. Parts of Florida have an extremely high concentration of senior citizens, which makes it a constant target of scammers.

    Some people who went to bed very rich last Wednesday night awoke to news Thursday that their fortunes had vanished. And because outside hedge funds and other investment companies are involved in the Madoff case, retirees and other (younger) people counting on pension income are apt to be left holding the bag.

    Thanks for the note.

    Patrick

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  3. In what can only be described You have got to be kidding category, comes this news bit: The Estate of Charles Ponzi is suing the Federal Government for slander in using the word Ponzi in relation to describing the Bernie Madoff case as a Ponzi. You can’t make this stuff up folks. Here’s part of the story:

    “Ponzi Estate Sues Federal Prosecutors for Slander:
    (SYOP 12/18/08) A spokesman for the Charles Ponzi estate revealed that the Ponzi family had lost untold millions in investments made with Madoff Securities and has sued in federal court demanding federal prosecutors, securities and exchange officials, the media as a whole cease and desist any further usage of Mr. Ponzi’s name and legacy in referencing Bernard Madoff’s purported crimes.

    “It isn’t bad enough that the family was duped out of millions, but for federal officials and reporters to continue to associate Mr. Ponzi’s creative investment strategy to Bernard Madoff’ outright scam does great harm by defaming Mr Ponzi’s reputation,” said Ponzi estate attorney, Rob D’Frawd. “Compared to Bernard Madoff, Charles Ponzi was Mother Teresa.”

    Going to be interesting to see how this one turns out. Guess it is true, “there is no honor among thieves.”

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