Madoff Investment Fraud Sends Ripples Through Investment Circles
It's said to be one of the, if not the, biggest investment fraud scandals on Wall Street. As the dust begins to clear around Bernard L. Madoff's audacious multi-billion dollar Ponzi scheme, investors, investigators, and securities attorneys are wondering how they failed to spot the signs of the scam of the century.
The scam, which has already inspired some wry humor– "Madoff 'made off' with my money"– is no laughing matter and has insiders worried that the giant Ponzi scheme that Madoff was allegedly operating could have major repercussions on hedge fund companies, many of which invested in his scheme. A Ponzi scheme is basically a scam that borrows more money from investors to pay off earlier investors. It's a scheme that, in reality, doesn't last very long because there's only so many investors a fraudster can fool before it all begins to fall apart. But insiders are surprised at how Madoff's scheme lasted for several years.
Part of the reason could be that he owned his own securities company, Bernard L. Madoff Securities Firm, and that allowed him to bypass most of the normal routes that hedge funds use to manage their money. Hedge funds, for instance, stash their portfolios at banks; Madoff managed his accounts within his own firm, ensuring there was no transparency over what he was doing with the money. Because he has a reputation as a Wall St. genius, he attracted investments from the wealthy who poured money into his scheme.
Not all were taken in with the giddy returns that the scheme steadily provided over the years. Some investment advisors steered their clients away from investments with Madoff, and have been proved right. Apparently, the lack of transparency, and the fact that Madoff's firm's accounts were handled by a nondescript accounting firm alerted them to potential dangers. You could argue that if some investment advisors were so suspicious of Madoff's activities, why didn’t the others become doubtful? Was it ignorance, carelessness or greed that caused them to gamble with their clients' money in a giant pyramid scheme?
Madoff's investment fraud has victims across all spectrums of the social and economic scene. There were wealthy individuals who invested privately, large investment companies who bought into a slice of the pie, and retirees who parked funds for their golden years. At least one charity has announced that it will have to close down after all its savings were wiped out with the collapse of Madoff's scheme.
Some investors have already kick started the process of securities litigation to recover their funds. Madoff, for his part, has admitted that what he operated was a Ponzi scheme, and that he fully expected to go to prison.
Securities Fraud and Implications for Investors
In a year that's seen millions of investors, directly or indirectly, duped by Wall Street shenanigans, including the mortgage backed securities fraud, hedge fund scams, stock fraud, and other kinds of investment fraud, investors have been the unfortunate victims. Many face a bleak future with wiped out savings, and are confronted with the prospect of battling well-connected, big name companies that have gambled away their money.
Investment Fraud Lawsuits
When investors have been duped of their money by unethical practices, including failure to be upfront about the methods used for investment, and the failure to make suitable recommendations to clients about safe places to invest their money, investment advisors, hedge fund companies, and stock brokers can be named in securities and investment fraud lawsuits. Money may be recovered from the insurers of accounting firms, as well as SIPC insurance. For all this, you need the expertise of an experienced securities fraud attorney.
If you've lost money in the Madoff investment scam or other investment fraud, contact a securities fraud attorney at the business litigation law firm of Arnold & Itkin LLP for a free evaluation of your claim. We can help you understand your options for claiming compensation for your loss.
