Legendary Wall Street Trader Faces Fraud Charges

By Evan Mix

Published on December 23, 2008

Bernard L. Madoff, a prominent stock trader and fixture on Wall Street for more than four decades, was arrested at his Manhattan home on Thursday, December 11 by federal agents and charged with defrauding investors of billions of dollars. He is free on a $10 million bond.

Madoff's investment company, Bernard L. Madoff Investment Securities, operates over two dozen funds worth as much as $17 billion. The funds were marketed to wealthy individuals, hedge funds, and others, promising low fees and consistently high returns.

Just days before his arrest, Madoff admitted privately to two of his senior employees that the company was a long-running Ponzi scheme - a setup in which investors are paid supposed dividends that are actually just cash received from other investors. Madoff told them that he had nothing left, and that he planned to surrender to the authorities after distributing hundreds of millions of dollars to his employees, friends, and family. He was arrested before he could do so.

According to the SEC, Madoff told FBI agents that he expected to go to jail, that he had actually lost money on his trades, and that he had paid his investors with nonexistent money. He faces up to 20 years in prison and fines of up to $5 million.

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