Bernard Madoff Trading Business For SaleDec 26, 2008 | Parker Waichman LLP
The trustee appointed to oversee the liquidation of Bernard Madoff's investment business has hired an investment bank to handle the sale of Madoff's trading unit. According to The New York Times, several potential buyers have already been contacted to gauge their interest in the business, while other firms have already expressed an interest.
The 70-year-old Madoff was arrested on one count of securities fraud on December 11. Madoff - once a chairman of the Nasdaq stock exchange - is the founder and primary owner of Bernard L. Madoff Investment Securities LLC. The firm is primarily known for its business in market-making, or serving as the middleman between buyers and sellers of shares. However, 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 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.” Madoff reportedly told employees that his fraud could cost investors as much as $50 billion.
As federal regulators continue to work to uncover the true extent of Madoff's alleged fraud, a trustee appointed by a federal bankruptcy judging is seeking to liquidate some of his assets in the hopes of recovering some funds for defrauded investors. The New York Times said the trustee hopes to finish a sale of Bernard L. Madoff Investment Securities before too many of its 120 employees decide to leave the firm.
According to the Times, the firm had approximately $300 million in assets in 2000, and ranked among the top trading and securities firms in the nation. It is being liquidated under the Securities Investor Protection Corporation, the government-chartered fund set up to help protect investors of failed brokerage firms. The Times report said some potential buyers included other brokerage shops looking to add or expand an equities trading platform and private equity firms.
Meanwhile, angry investors continue to file lawsuits in the hopes of recouping some of their losses. The New York Times is also reporting that New York University has sued J. Ezra Merkin, a money manager who had invested $94 million of the college’s funds in Madoff's investment advisory business. The lawsuit alleges Merkin and two of his funds invested the money with Madoff "without notification or proper due diligence".