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Madoff Could Face UK Charges

Mar 30, 2009 | Parker Waichman LLP The investigation into Bernard Madoff’s historic Ponzi scheme has revealed serious international implications.  Madoff’s so-called investment business had operations in London, which, say United Kingdom prosecutors, played “a significant role” in the multi-billion dollar fraud perpetrated by Madoff, reported

Madoff—once a chairman of the NASDAQ stock exchange—is the founder and primary owner of Bernard L. Madoff Investment Securities LLC who pleaded guilty to 11 fraud counts earlier this month.  Madoff’s firm is primarily known for its business in market-making, or serving as the middleman between buyers and sellers of shares.  Madoff also oversaw an investment-advisory business that managed money for high-net-worth individuals, hedge funds, and other institutions.  According to the FBI complaint against Madoff, that business was largely a Ponzi scheme.

The FBI also said Madoff “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.”  Last November, Madoff told his investors his fund held over $64 million—leading investors to believe he was operating a serious investment firm, Bloomberg pointed out.  In reality, Madoff only had a fraction of that amount.

According to David Jones, spokesman for U.K.’s Serious Fraud Office (SFO), in 2008, about $1 billion was transferred between Madoff’s U.S. and U.K. operations, reported Bloomberg.  The SFO, said Bloomberg “prosecutes complex white-collar crimes” and began its investigation into the case this January.  The Telegraph said that officers from the U.K.’s Serious Organised Crime Agency (SOCA), which it described as the British “FBI,” is collaborating with the U.S. Department of Justice (DOJ) to investigate Madoff’s activities; the U.S. Attorneys Office and SOCA are also working with the SFO.

Bloomberg reported that Madoff is accused of moving over $250 million over six years through his New York-based firm to his London operations and back into accounts in the U.S.  Bloomberg also reported that just prior to his arrest, the London unit paid $2 million to Ruth Madoff, Bernard Madoff’s wife.

Madoff International was staffed with about 25 traders, managers, and support workers, and was owned almost exclusively by Madoff, serving as his proprietary trading unit, said Irving Picard, reported Bloomberg.  Picard was appointed trustee by the Securities Investor Protection Corporation to “unwind” Madoff’s businesses in response to a February filing with a London court, said Bloomberg, which added that, according to Picard, the New York and London operations “may well be inextricably intermingled.”  U.K. liquidators focusing on “apparently unwarranted payments to third parties” have interviewed London staff and instructions that they communicate with Madoff Securities through personal, not company email, Picard said.

Prosecutors say the London accounts were used to have it appear as if Madoff were buying international securities on behalf of his clients as well as to buy property and services for his and his family’s personal use, said the Telegraph.

Picard has found about $1 billion in Madoff assets, which includes $75 million recently found in an account held in Britain’s territory of Gibraltar, said the Telegraph, which said that the DOJ believes that over $65 billion in monies belonging to “thousands and thousands” of investors was laundered through Madoff’s American accounts over a 30-year period, noting that the full extend of Madoff’s fraud might never be known.

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