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Tag: Wall Street investment schemes

  • Seniors In Gallery Of Ponzi Rogues; Grandpa Breaks Bad

    bowdoinmadoffnadel

    We noted Sunday that a startling number of senior citizens have been implicated in Ponzi schemes or accused of monumental financial misdeeds. Featured in this graphic are (left to right): Andy Bowdoin, president of fundamentally defunct AdSurfDaily Inc. of Quincy, Fla.; Bernard Madoff, head man at fundamentally defunct Bernard L. Madoff Investment Securities of New York; and Arthur Nadel, principal in several fundamentally defunct hedge funds in Sarasota, Fla.

    Bowdoin is 74. Prosecutors said he fleeced investors in a $100 million Ponzi scheme by selling unregistered securities and calling them “advertisements.”

    Madoff, who might have presided over the biggest Ponzi scheme in world history, is 70. Losses could reach $50 billion.

    Nadel, 76, was arrested yesterday in Tampa, after being on the lam for two weeks. An estimated $300 million is missing from hedge funds he managed in Sarasota.

    Authorities said all three men lived well while investors were being taken to the cleaners. Just prior to a federal seizure of his assets in August, Bowdoin put a gleaming new Lincoln in the driveway — after setting up a sham entity, diverting ASD money to it in a bid to hide assets, and using ASD cash to fuel personal spending in the hundreds of thousands of dollars by family members and preferred investors, prosecutors said.

    Bowdoin has surrendered claims to approximately $100 million in cash and other assets seized by the Feds. In a second forfeiture complaint that is unresolved, prosecutors seek to take control over other assets tied to the firm, including cars, a 20-foot Triton Cabana boat, jet skis and other property purchased with the proceeds of an illegal enterprise.

    Irving Picard, the trustee in the Madoff case, has filed papers to reject expensive automobile leases. While Madoff was engaging in a Ponzi scheme, Picard said, investors were footing the bill for three Mercedes, a Range Rover, a Lexus and a Cadillac.

    madoffleases

    Lease costs for the Mercedes units alone exceeded $4,200 a month, while the lease for the Range Rover cost $1,153 monthly. The Lexus ($888/month) and the Cadillac ($884/month) were relative bargains compared to the other vehicles.

    Prosecutors now say Nadel also took money from company funds and used it for family businesses. The receiver in the Nadel case, Burton Wiand, said in court filings that one of the family business owns as many as five airplanes.

    Other seniors in Ponzi trouble include Richard Picolli, 82, operator of the alleged Gen-See Ponzi in western New York. Prosecutors said he mostly targeted Catholics.

    Meanwhile, Ronald Keith Owens, 73, was just sentenced in Texas to 60 years in prison for running a “prime bank” Ponzi scheme promising huge returns out of the Bahamas and elsewhere.

    Elsewhere, James Blackman Roberts, 71, of Heber Springs, Ark., was just sentenced to 15 years in prison for running a $43.5 million Ponzi scheme.

  • Joseph Forte Charged With $50 Million Ponzi Fraud

    First the SEC sued fund manager Joseph Forte, accusing him of running a Ponzi scheme that fleeced investors out of tens of millions of dollars.

    Now Forte has been charged criminally with mail fraud. Authorities said his victims included a church, a charity and a private school.

    The SEC sued Forte, 53, of Broomall, Pa., on Jan. 7, accusing him of running a $50 million Ponzi scheme over a period of 12 years. The U.S. Postal Inspection Service entered the case, filing an affidavit for an arrest warrant after learning Forte used the mails to defraud dozens of investors.

    Authorities said the scheme collapsed when Forte no longer could make redemptions because he wasn’t getting enough money from new investors to pay off earlier investors.

    “Between 1996 and 2008, Forte raised tens of millions of dollars in investment capital from roughly 80 investors, including at least one charitable foundation, one church, and one private school,” said George Clark, a postal inspector, in an affidavit.

    “Several investors have advised government agents that they had been directed to the fund through ‘word of mouth’ and were attracted to the fund’s reported gains which ranged from at least 18% to 37%,” Clark said.  “At no time did the fund report a loss to investors, even though Forte consistently lost money on his actual investments.”

    Forte provided fraudulent information to an accountant to advance the scheme, Clark said. The accountant prepared clients’ statements based on the bogus information, using the mails to send the statements. The accountant has not been charged.

    Feds: ‘False’ In Its Entirety

    Forte’s Ponzi scheme was just an exercise in creative writing, authorities said. While he told clients the fund had more than $154 million, it actually had $150,000.

    “The last statement received by investors for the third quarter of 2008 indicates that the fund had a return of 18.88% for the quarter and that the Joseph Forte LP fund’s total value as of September 30, 2008 was $154,700,189,” Clark said.

    In truth, Clark said, the value of Forte’s trading account was only $150,000. The account was closed in October, but Forte continued to collect  money from clients until Dec. 19, Clark said.

    “According to Forte, all reported returns were false in their entirety and were simply numbers that [he] fabricated,” Clark said. “Forte admitted that in every quarter from 1996 through the end of 2008, the reported returns were false.

    “Forte told investigators that he believed that he would realize gains at some point and that he would be able to return to investors their principal plus their reported returns,” Clark continued. “Between 1996 and 2008, however, Forte never earned the returns that he had reported. In fact, an examination of records between 1998 and 2008, indicates that over that time period, Forte’s trading account suffered aggregate trading losses of $3.3 million.”

    Despite the losses, Clark said, new investors continued to give Forte money because he shielded the losses and reported high rates of return. Forte did not even execute trades for sustained periods of time, simply gathering money and depositing it in a bank.

    “[F]rom December 2004 to December 2008, there were 26 months in which Forte made less than three trades, including 16 months in which Forte made no trades whatsoever,” Clark said.

    Forte told Clark that he  halted his actual trading for long periods of time to practice using his “trading models.”

  • 2008 Concluded With ‘Ponzi-Equals-Pain’ Message

    Bernard Madoff
    Bernard Madoff

    Dear Readers,

    Our best to you with the dawning of the new year — and our thanks for making this Blog one of your stopping points.

    If you have a moment in the coming days, think about leaving a comment that answers this question: What will you remember most about 2008?

    One of the things we’ll remember most is the AdSurfDaily, LaFuente Dinero and Golden Panda Ad Builder case. As mentioned in a previous post, we never intended to do more than a few posts on the subject.

    The ASD case kept itself in the news, though, mostly because of the behavior of some of its more ardent supporters. Andy Bowdoin’s own declaration that Satan was at work — as well as comparing what the company was confronting to the 9/11 terrorist attacks — set the standard for some of the oddities that followed.

    There were Kool-Aid campaigns to Bill O’Reilly of Fox News; letter-writing campaigns to the

    Elie Wiesel, Ponzi Victim
    Elie Wiesel, Ponzi Victim

    Inspector General for the Justice Department; petition drives to the U.S. Senate; a call for a million-person march on Washington; prayer campaigns; name-calling; rants; a gleeful forum party after the Sept. 30-Oct. 1 evidentiary hearing concluded; claims that the prosecutors, Secret Service agents and judge were brainless.

    None of these messages was consistent with a comprehensible PR strategy or the behavior one normally would expect from a company that called itself a professional advertising firm. The presence of numerous other autosurfs also didn’t help. ASD’s claim of offering an exciting, new business model was just plain silly. Scam.com and other sites have been covering autosurfs for years.

    Another thing that didn’t help ASD were the Ponzi allegations against financier Bernard Madoff. The accusations alone brought the word “Ponzi” into widespread public use. The Wall Street Journal and Bloomberg News, in particular, have been providing exceptional coverage of the Madoff case. Practically everyone knows what a Ponzi is now, something that could affect juror pools in the ASD case. Madoff has become a national disgrace, a punch-line for late-night comics and a source of global disgust and heartache.

    “Ponzi” has become a radioactive word. In short, “Ponzi” = “pain” — the kind of pain that destroys people, dreams, fortunes and the good works of charities, endowments and universities.

    The word “Ponzi” became central to many lives in 2008. It is our sincere hope that 2009 will be defined by a much better word:

    Prosperity.

    Our warm wishes to you.

    Sincerely,

    Patrick

  • Madoff Displayed Charms Of A Practiced Huckster

    Bernard Madoff was charged with securities fraud Dec. 11. The story about the alleged $50 billion Ponzi scheme hasn’t been out of the news since then — not even for a few hours.

    Over the weekend we reported that the assets of the Elie Wiesel Foundation had been wiped out in the alleged Madoff fraud. Not even Nobel Prize winners are immune from the charms of a practiced huckster.

    Madoff insisted his trading formula was “proprietary.” Investors say he told them to keep their relationship “secret,” that nobody needed to know he was handing their money — and yet people couldn’t keep the secret, which is how Madoff got more clients. Some charities already have closed, throwing employees out of work, canceling important research and projects and making the world a little darker place.

    Lawsuits are flying left and right: New York University, for example, sued Ezra Merkin, accusing him of entrusting investment money to Madoff while not performing due diligence.  Merkin is a funds manager and also the chairman of GMAC, the lending arm of General Motors Corp.

    Ponzi: There’s not another five-letter word quite like it. High net-worth individuals in Palm Beach are selling real estate and yachts to get by. Members of the Jewish faith have been particularly hard-hit. This case is many things. One of them is affinity fraud, something that is proliferating online.

    Madoff is infamous now, his Hollywood story of rising from humble life guard to corporate baron in tatters. Someone apparently stole a $10,000 statue depicting a life guard from Madoff’s Florida home. Madoff odds and ends are beginning to appear on eBay.

    The Bernard Madoff case is a cautionary tale. At it’s base, however, it’s a simple tale of moving shells and playing word games to hide forbidden math. Forbidden math doesn’t sell because it takes away the dream.

  • Elie Wiesel Foundation Wiped Out In Madoff ‘Ponzi’

    Elie Wiesel
    Elie Wiesel

    In a stunning announcement, the Elie Wiesel Foundation For Humanity said it lost “substantially all” of its assets in the alleged Bernard Madoff Ponzi scheme.

    It has been known for two weeks that significant foundation money was under Madoff’s management. But the foundation now says it had entrusted $15.2 million to Madoff, in essence the entirety of its assets.

    “We are deeply saddened and distressed that we, along with many others, have been the victims of what may be one of the largest investment frauds in history. We are writing to inform you that the Elie Wiesel Foundation for Humanity had $15.2 million under management with Bernard Madoff Investment Securities. This represented substantially all of the Foundation’s assets,” the foundation said in a statement.

    “The values we stand for are more needed than ever. We want to assure you that the Foundation remains committed to carrying on the lifelong work of our founder, Elie Wiesel. We shall not be deterred from our mission to combat indifference, intolerance, and injustice around the world.

    “At this difficult time, the Foundation wishes to express its profound gratitude for all your support,” the foundation said.

    Elie Wiesel is a Holocaust survivor, a prominenet writer and the recipient of the 1986 Nobel Prize for Peace. He and his wife, Marion, launched the Elie Wiesel Foundation for Humanity after Elie received the Nobel Prize.

  • Madoff Case Sparks Talk Of ‘Clawbacks’

    Bernard Madoff
    Bernard Madoff

    BLOG UPDATE 2:19 P.M. EST (U.S.A.): La Tribune, a French business newspaper, is reporting that a founder of Access International Advisors, a hedge fund with large sums invested with Bernard Madoff, has been found dead in his New York City office building.

    Rene-Thierry Magon de la Villehuchet, 65, was found this morning. The French newspaper called it a suicide, as have other media outlets, but the medical examiner hasn’t listed a cause of death.

    Here, below, our earlier post . . .

    In the CEP autosurf Ponzi scheme case, a court-appointed receiver filed dozens of lawsuits against program “winners,” forcing them to return profits on the theory there can be no winners in an illegal enterprise. The receiver, William F. Perkins, placed CEP in bankruptcy and then methodically went about the task of clawing back money for the estate.

    Perkins, who effectively is running CEP as a debtor-in-possession, has negotiated settlements with a number of winners.

    Last month he triumphed over CEP’s owners, Clayton Kimbrell and Trevor Reed, in a civil trial for fraud and breach of fidiciary duty.

    Judge James E. Massey ordered Kimbrell and Reed to return about $1.5 million in fraudulent transfers they made to themselves, family members, employees and other CEP principals.

    Some of the clawback cases against CEP winners still are being heard, about 17 months after the initial filing. More than 20 trials against individual defendants are scheduled next month in U.S. Bankruptcy Court in Atlanta.

    CEP was declared a Ponzi by a federal judge, while Madoff remains an alleged Ponzi operator who told authoritites that the Ponzi could amount to $50 billion in losses.  The July 2007 SEC complaint against CEP said about $12 million flowed through the firm in an illegal securities offering.

    Perkins maintains a CEP website from which visitors may access all the court documents. It’s well worth a visit.

    Talk in the Madoff case has turned to what the court-appointed receiver might do to recover cash. Owing to the size of the alleged scheme, things could get downright ugly. In theory, people who made withdrawals could be ordered to return them — and this group includes individual investors, money managers and charities.

    Lawyers are apt to use terms such as “fictitious profits” and “fraudulent conveyance” to describe redemptions by investors before the Ponzi collapse. The prospects are horrifying because investors didn’t know anything untoward was occurring behind the scenes, and many of them likely have spent all or part of the money.

    See this Bloomberg News story.

    If the case follows the CEP model, Madoff and insiders — if any — could be forced to return illegal transfers. Prior to his arrest, Madoff said he wanted to distribute up to $300 million to employees. If such transfers were made — recently or in years past in the form of bonuses — it’s possible that the money could be ordered returned even if spent.

    Ugly doesn’t even begin to describe the battles that could ensue. Charities that relied on Madoff to manage money used for good deeds and took dedemptions could be targeted to pay the money back. There is the potential for pain in many, many places, and it’s possible the clawbacks could go back six years.

    Blinded to the reality that Ponzi schemes can have devastasting consequences, some autosurf supporters still are arguing that the government has no business sticking its nose in where it doesn’t belong.

    Incredibly, an autosurf whose launch is set for next year has targeted nonprofits in early promotions. Promoters have suggested it’s a great way to publicize the business and get cash flow.

    AdSurfDaily, which has ceased to operate in the wake of the government’s August seizure of nearly $100 million, promoted at least one nonprofit, funding it with $100,000 in “ad packs” and asking members to contribute.

    “ASD President, Andy Bowdoin, has generously donated 100,000 ad packages to this organization,” the ASD Breaking News site said on July 5, about a month prior to the seizure.

    ASD encouraged members to send donations for the charity to ASD headquarters and even to transfer “donations from your [ASD] Cash Balance.”

  • SEC Says It Missed Chance To Unravel Madoff Scheme; Probe Indicates Madoff Cooked Books And Falsified Docs

    Christopher Cox
    Christopher Cox

    BLOG UPDATE 12:12 P.M. EST (U.S.A.): A bail hearing for Bernard Madoff rescheduled for today has been canceled. Madoff was ordered last week to produce two additional co-signers to guarantee his $10 million bail, but was unable to come up with them. A federal judge, with consent of the prosecution, now has ordered Madoff placed on electronic monitoring and home detention, with a curfew between 7 p.m. and 9 a.m. His wife, Ruth, was ordered to surrender her passport.

    Here, below, our earlier post . . .

    The Securities and Exchange Commission said late yesterday that it had received “credible and specific” leads about alleged wrongdoing by Bernard Madoff a decade ago and failed to respond properly.

    Meanwhile, the agency has found evidence that Madoff kept multiple sets of books to help his securities firm pull off a Ponzi scheme that could cost investors $50 billion or more.

    In a dramatic concession, SEC Chairman Christopher Cox ordered an internal investigation of the agency to include a probe of contacts the agency had with Madoff family members.

    Shana Madoff, Madoff’s niece, is married to Eric Swanson, a former SEC attorney who once was a supervisor in an SEC unit that made an inquiry into Madoff’s business practices. Shana Madoff is the Madoff firm’s compliance attorney and the daughter of Peter Madoff, Bernard Madoff’s brother, and the firm’s chief compliance officer.

    Swanson, through spokesmen, told the New York Times that he did not begin to date his wife until years after the SEC inquiry and was not a participant in an inquiry during their romantic lives. Swanson and Shana Madoff married in 2007.

    Cox ordered SEC employees who had anything beyond “insubstantial personal contacts with Mr. Madoff or his family” to recuse themselves from the probe.

    “Since commissioners were first informed of the Madoff investigation last week, the Commission has met multiple times on an emergency basis to seek answers to the question of how Mr. Madoff’s vast scheme remained undetected by regulators and law enforcement for so long,” Cox said.

    “Our initial findings have been deeply troubling,” Cox continued. “The Commission has learned that credible and specific allegations regarding Mr. Madoff’s financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the Commission for action. I am gravely concerned  by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them.”

    Rather than use formal investigative powers and subpoena power, Cox said, the agency “relied upon information voluntarily produced by Mr. Madoff and his firm.”

    Madoff might have been cooking the books, Cox said.

    Records investigators have viewed in recent hours are “increasingly exposing the complicated steps that Mr. Madoff took to deceive investors, the public and regulators,” Cox said. “Although the information I can share regarding the ongoing investigation is limited, progress to date indicates that Mr. Madoff kept several sets of book and false documents, and provided false information regarding his advisory activities to investors and to regulators.”

  • Bowdoin/Madoff Alleged Ponzis: Just ‘Andy’ And ‘Bernie’

    UPDATE 1:03 PM EST (U.S.A.): Quoting Stephen Harbeck, president and chief executive officer of the Securities Investor Protection Corp. (SIPC), Bloomberg News is reporting that Bernard Madoff’s financial records are “utterly unreliable.” We’ve added a link at the bottom of the post.

    Here, below, our earlier post . . .

    If you’ve been following the Ad Surf Daily/Andy Bowdoin Ponzi scheme case, you’re missing out if you haven’t been following the Bernard Madoff case.

    The cases are similar in that both ASD and Bernard L. Madoff Investment Securtites have been accused of using incoming funds to pay off older participants, thus the “Ponzi” terminology. Affinity fraud also is an element: ASD was popular among people who defined themselves Christians, and Madoff’s offer appealed to members of the Jewish community.

    Both ASD and Madoff had a worldwide client base (in Madoff’s case, European financial managers appear to have steered clients’ money to Madoff, while ASD sold directly to clients in Europe and elsewhere). Both companies also had Florida clientele, with ASD conducting “rallies” for less-affluent people to drum up business in the state and Madoff preferring the Country Club approach in Palm Beach.

    One principal difference is that ASD defined itself as an “advertising” company that offered “rebates” on ad purchases of up to 125 percent of the customers spend in about four months. Put $10,000 in ASD, and four months later you’d have $12,500. Madoff didn’t uses wordplay in the ASD sense in a bid to avoid regulatory scrutiny, but clients expected their investments to grow 10 percent to 12 percent a year, based on Madoff’s published “results.”

    Another difference is the degree of the alleged Ponzi. ASD, whose assets were seized by the U.S. government in August, is expected to top out at roughly $100 million; prosecutors in the Madoff case fear losses could top $50 billion, based on Madoff’s own words.

    Yet another difference is customers’ views in the hours after the word “Ponzi” was associated with Bowdoin and Madoff: Many ASD customers blasted the government, arguing that things would have been just fine had prosecutors not meddled in ASD’s affairs. Madoff’s investors, however, were furious with Madoff. They wanted to know why the government hadn’t detected the fraud earlier and stopped it before it mushroomed globally.

    What’s strikingly similar about the cases, though, is the degree to which Bowdoin and Madoff traded on their innate charisma: Bowdoin in a folksy, Southern way, and Madoff in a confident, aloof way with a pinch of “regular Joe” thrown in. Bowdoin was “Andy” to his fans; Madoff was “Bernie.”

    People waited in line to give them money and let them do their magic. ASD collected tens of millions of dollars from “advertisers” in just several weeks last summer. Some ASD members took out second mortgages and cashed out savings to qualify for matching bonuses at rallies. In Madoff’s case, some people felt genuinely humble that a Wall Street titan had agreed to manage their money.

    Roger and Diane Peskin of Bethlehem, Pa., entrusted $3 million earned over a lifetime to Madoff, after having waited six months for the privilege of having their money accepted by Madoff. The couple also took $400,000 from the sale of their home and passed it along to Madoff, according to the Allentown Morning Call.

    Unlike Bowdoin, Madoff hadn’t been accused of previous securities felonies. But he traded on a lifetime of supposed business acumen, something Bowdoin did as well. Bowdoin got in trouble with the government after some of his promoters made the claim that he’d received a special award from President Bush for career accomplishments. It turned out the award Bowdoin received was the “Medal of Distinction,” which is handed out by the National Republican Congressional Committee for campaign contributions. An Ohio drug addict got the same award. He, too, claimed close ties to the White House.

    Madoff was hailed a trading legend. He’d been chairman of Nasdaq and had a supposed reputation for transparency — except, apparently, when it came down to his own securities company, which people now say was run in secretive fashion.

    Person after person has claimed they’d performed “due diligence” on both Bowdoin and Madoff. Since prosecutors seized ASD’s assets in August, however, the company hasn’t published an audited balance sheet. U.S. District Judge Rosemary Collyer ruled last month that ASD had not demonstrated it was a legal business and not a Ponzi scheme at a Sept. 30-Oct. 1 evidentiary hearing. It is not known if the firm even employed an auditor.

    Madoff, it turns out, seems to have used a three-person auditing firm that operated out of a 13-by-18-foot office in a suburban plaza. He, too, seems to have a problem on the accounting front. Like ASD, it raises the question if due diligence claims are credible in the absence of verifiable financial data.

    Bowdoin has yet to be charged criminally, but his attorneys say that might be coming. Madoff has trouble on the civil and criminal fronts, his reputation in tatters. He had a list of celebrity clients. Jewish charities already have been forced to suspend operations, and the town of Fairfield, Conn., has lost a bundle in its pension fund — money that was supposed to take care of civil servants in their retirement years.

    Andy Bowdoin is not Bernie Madoff, and Bernie Madoff is not Andy Bowdoin. Regardless, they are two men from very different backgrounds who had one thing in common: The power to draw money like a magnet and to disarm doubters by putting their individual charms on full display — Bowdoin in Internet videos that reminded people of a sort of Southern Mr. Rogers, and Madoff in Wall Street’s power corridors and the country clubs of Palm Beach: Bernie being Bernie, and Andy being Andy, their critics disarmed, their investors’ financial lives now in shambles.

    Bloomberg News: Madoff’s Financial Records ‘Utterly Unreliable’

  • SIPC To Liquidate Bernard L. Madoff Investment Securities

    A federal judge has appointed a trustee to liquidate Bernard L. Madoff Investment Securtites under the auspices of the Securities Investor Protection Corp. (SIPC).

    SIPC went to court earlier today to seek liquidation. Irving H. Picard will serve as trustee. The law firm of Baker & Hostetler will serve as counsel to Picard.

    “I will work with SIPC to do what the law allows to ameliorate losses to customers,” Picard said.

    It will not be an easy job because insurance likely won’t put a dent in the staggering losses, which may total $50 billion or more.

    Stephen Harbeck, president and chief executive officer of SIPC, said Picard was the person for the job, but cautioned that the scope of the misappropriation and the state of Madoff’s records will make the task harder than most prior brokerage-firm insolvencies.

    “It is unlikely that SIPC and [Picard] will be able to transfer the customer accounts of the firm to a solvent brokerage firm,” Harbeck said.

    The state of the firm’s records “may preclude a transfer of customer accounts,” SIPC added in a News Release. “Also, because the size of the misappropriation has not yet been established, it is impossible to determine each customer’s pro rata share of ‘customer property.’”

    SIPC insures accounts up to $500,000 per customer. The insurance covers only money missing from brokerage accounts. It does not insure against investment losses.

    Learn more about SIPC.

  • Giant Wall Street ‘Ponzi Scheme’ Collapses; Potential Losses In Madoff Fraud Pegged at $50 Billion Amid ‘One Big Lie’

    And you thought AdSurfDaily members had problems, having been told their money was part of a $100 million Ponzi scheme.

    Former Nasdaq Chairman Bernard Madoff has been accused of running a monumental Ponzi scheme that sustained itself for years based on his reputation. Socialites from Palm Beach, New York’s celebrity elite, endowments, European banks and investment houses and others may sustain $50 billion — that’s billion, with a “b” — in losses.

    Madoff acknowledged 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,” the SEC said.

    “We are alleging a massive fraud — both in terms of scope and duration,” said Linda Chatman Thomsen, director of the SEC’s Division of Enforcement. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors, and we are working closely with the criminal authorities to hold Mr. Madoff accountable.”

    The FBI charged Madoff, 70, criminally. He faces up to 20 years in prison and a fine of $5 million.

    “Madoff stated that the business was insolvent, and that it had been for years,” the Justice Department said. “Madoff also stated that he estimated the losses from this fraud to be at least approximately $50 billion.”

    One of the interesting things about this case is that people raised questions about Madoff’s investment-advisory business years ago, saying the company’s bountiful returns regardless of the market environment were inexplicable.

    An employee, however, told investigators Madoff shielded the company’s true financial picture from clients and employees, a common theme in Ponzi schemes.

    “Madoff kept the financial statements for the firm under lock and key, and Madoff was ‘cryptic’ about the firm’s investment-advisory business,” the Justice Department said.

    It all collapsed this week, when Madoff ran out of shells to move. He had been a fixture on Wall Street for decades.

    In a bizarre move, 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.”

    Financiers described the alleged Ponzi scheme as one of epic proportions. The ripple effect could be considerable because at least some of the money was tied to hedge funds managed by investment companies.

    “The Madoff firm had more than $17 billion in assets under management as of the beginning of 2008,” the Justice Department said. “It appears that virtually all assets of the advisory business are missing.”