Bernard Madoff's $50 Billion "Ponzi Scheme"
On December 11, 2008, former Nasdaq chairman Bernard Madoff was arrested and charged with running a colossal Ponzi scheme. The founder of Bernard L. Madoff Investment Securities LLC has admitted to spearheading the scheme, losses from which reportedly total an astounding $50 billion. Named for notorious con artist Charles Ponzi, a Ponzi scheme is a scam in which early investors are paid off with funds from later investors.
Madoff carried out his massive swindle through a hedge fund whose popularity spread as he gained a reputation for producing consistently remarkable returns, even in down markets. The tentacles from this fund reached around the globe, affecting banks, financial institutions and brokers. Everything came crashing down when, in late 2008, clients requested some $7 billion in redemptions. Madoff struggled to come up with the money necessary to meet these obligations and eventually confessed to his wrongdoing before the scam was uncovered.
The reverberations from Madoff's Ponzi scheme have bankrupted thousands of people connected to Madoff's investment advisory business, including investors, institutions, schools and charities, as well as other hedge funds. Many of the parties affected, including some who declared bankruptcy, have since joined forces and filed suit. Information on various Madoff lawsuits can be obtained by contacting an investment fraud attorney.
Bernard Madoff Lawsuits
Within days of Bernard Madoff's bombshell announcement, class action attorneys and individuals alike began filing lawsuits against Mr. Madoff and other parties, including several hedge funds connected to Madoff. Bernard Madoff lawsuits were numerous, varied and complex, implicating just about any person or entity tied to his scheme — from his wife to the feeder funds who allegedly aided him. Even the SEC, which should have uncovered the scam years (if not decades) ago, has come under fire.
Mr. Madoff allegedly perpetrated his elaborate scam through a web of deceptive practices — specifically, phone calls and the transmission of fraudulent documentation such as:
- Financial statements
- Sales documents
- Monthly account statements
- Releases
- Prospectuses
- Confirmation letters
Among the offenses Bernard Madoff is alleged to have committed are the following:
- Mail fraud
- Wire fraud
- Securities fraud
- Fraudulent misrepresentation
- Negligent misrepresentation
- Unjust enrichment
- Breach of contract
- Breach of fiduciary duty
- Violation of racketeering statutes
While many of these are criminal offenses, they served as the basis for civil lawsuits against Bernard Madoff and other parties who acted negligently or were involved in his successful attempt to commit consumer fraud. In addition to compensatory damages, at least one class action lawsuit sought punitive damages because the fraudulent acts were "willful, wanton and aimed at the public generally." For more information on the various lawsuits filed against Bernard Madoff, contact a securities fraud attorney.
Madoff "Feeder Funds"
In addition to the individuals who enthusiastically invested their funds with Mr. Madoff, many average investors inadvertently lost their life savings because hedge funds or other funds they invested in diverted their money into Mr. Madoff's hedge fund. These so-called "feeder funds" reportedly include, among others:
- Ascot Partners
- Fairfield Greenwich Group
- Fix Asset Management
- Kingate Global Fund
- Maxam Capital Management
- Optimal Funds (Grupo Santander)
- Tremont Capital Management
If you have investments that have been linked to these or other firms connected to Madoff's Ponzi scheme, you may have grounds for a lawsuit against the fund managers or intermediaries responsible for recommending or placing your money in Bernard Madoff's fund. For further information, contact an attorney who specializes in securities fraud. 
[Last revision: April 2009]
Bernard Madoff is a former chairman of the National Association of Securities Dealers Automated Quotations, more commonly known as Nasdaq.