$ 50 Billion Fraud ? A New Low for Wall Street ?

A $ 50 Billion Fraud ? A new low for Wall street ? Probably, this is what Obama meant when he stated " It is going to get worse, before it is going to get better "... My worry is how much worse it can get and when it is going to get better. How many more skeletons are going to tumble out of those Wall steet cupboards..

From the Wall Street Journal:
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 telling two senior employees that his investment advisory business was "a giant Ponzi scheme."In separate complaints filed Thursday, the Securities and Exchange Commission and the federal government alleged that Mr. Madoff had bilked his investors out of tens of billions of dollars.The Securities and Exchange Commission, in a civil complaint, accused Mr. Madoff of an "ongoing $50 billion Ponzi scheme," asking a judge to seize the firm and its assets."Our complaint alleges a stunning fraud that appears to be of epic proportions," said Andrew M. Calamari, associate director of enforcement in the SEC's New York office. Out of more than $17 billion in assets under management by Mr. Madoff's firm at the start of 2008, essentially all the assets appear to be missing, the SEC alleged.In a separate criminal complaint, Federal Bureau of Investigations agent Theodore Cacioppi said Mr. Madoff's investment advisory business had "deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in losses of approximately billions of dollars."...The FBI complaint quotes two senior Madoff employees as saying that Madoff Investment Securities' proprietary trading and market-making activities are run separately from its investment advisory business. The complaint said investors' losses came from the firm's asset-management arm, which Mr. Madoff ran on a separate floor of the firm's offices. These employees said Mr. Madoff kept the financial statements from the firm under lock and key and was "cryptic" about the firm's investment advisory business, according to the complaint....The criminal complaint says Mr. Madoff told the two that he believed losses from his fraud exceeded $50 billion. That figure couldn't be confirmed.....Earlier this month, the criminal complaint says, Mr. Madoff told one of the senior employees that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations."...Mr. Madoff told investors that he returned an average of 15.7% per year going back to January 1996, according to Hennessee Group LLC, an adviser to hedge-fund investors. Between January 1996 and December 2004, when Mr. Madoff's fund provided monthly returns, there were only three reported down months. Most months chalked up returns between 1% and 1.5%Mr. Madoff told investors that his strategy was trading in and out of large-cap stocks and buying options on those shares. When the firm did not see opportunities in the market the strategy was to shift to U.S. Treasuries, according to fund marketing documents and people familiar with his strategy.
From Bloomberg:Madoff faces as much as 20 years in prison and a $5 million fine if convicted. His New York-based firm was the 23rd largest market maker on Nasdaq in October, handling a daily average of about 50 million shares a day, exchange data show. It specialized in handling orders from online brokers in some of the largest U.S. companies, including General Electric Co. and Citigroup Inc.
According to RealMoney.com columnist Doug Kass, general partner and investment manager of hedge fund Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd., today's late-breaking report of an alleged massive fraud at a well known investment firm could be "the biggest story of the year." In his view, it is bigger than Enron, bigger than Boesky and bigger than Tyco. It attacks at the core of investor confidence -- because, if true, and this could happen ... investors might think that almost anything imaginable could happen to the money they have entrusted to their fudiciaries.