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Madoff's brokerage to be liquidated as more banks reveal exposure to $50billion fraud
The brokerage run by Bernard Madoff, who has been accused of running a $50 billion Ponzi scheme using his investment advisory business, will be liquated by the Securities Investor Protection Corp., the organisation said late on Monday.
- Agencies
- Published: 08:31 December 16, 2008
- The building where the offices of Bernard L. Madoff Investment Securities LLC are located stands in New York, US.
- Image Credit: Bloomberg
New York/London: The brokerage run by Bernard Madoff, who has been accused of running a $50 billion Ponzi scheme using his investment advisory business, will be liquated by the Securities Investor Protection Corp.
SIPC, a government-sponsored group that protects clients when brokerages fail, named a trustee to return cash and securities to Madoff's clients, according to a statement by the Washington-based organisation.
Madoff was arrested on December 11 and accused by prosecutors and regulators at federal court in Manhattan of operating a long- running Ponzi scheme at his company's business advising rich people, hedge funds and institutions.
Under the scheme, existing investors are paid out with money from new clients, not from actual investment returns.
SIPC President Stephen Harbeck said “the scope of the misappropriation and the state of the defunct firm's records will make this more difficult than'' most brokerage insolvencies, according to the statement.
Harbeck said it was “unlikely'' that SIPC and the trustee, Irving Picard, will be able to transfer client accounts to another brokerage firm.
Meanwhile, Banks and investment funds around the world revealed they invested billions of dollars in companies controlled by Madoff.
The latest bank to join the list is Britain's HSBC Holdings Plc, which said it had invested about $1 billion, making it one of the biggest victims of the alleged $50 billion fraud.
Royal Bank of Scotland Group Plc said its potential loss could amount to about 400 million pounds ($595 million), assuming the value of its assets in Madoff's firm were nil.
Japan's Nomura Holdings Inc said earlier it had 27.5 billion yen ($302 million) in exposure related to Madoff, though the impact on its capital would be limited.
Aozora Bank Ltd. has 12.4 billion yen ($137 million) at risk related to Bernard Madoff's investment funds, the company said in a statement on Tuesday.
No major banks in the United States have said they were exposed.
So far more than $10 billion is at direct and indirect exposure to the alleged fraud by Madoff, according to a tally by financial companies.
A hearing in the case was scheduled for Friday, said Madoff's lawyer, Ira Sorkin.
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