Bernard Madoff, the Mafia, and Naked Short Selling

[Keith Millea]

Madoff Trustee Launches $19.6 Billion Lawsuit

December 11th, 2010 Via: CBS News:
As Saturday’s deadline looms to file claims in the recovery of assets from Bernard Madoff’s massive fraud, the trustee seeking money for the swindler’s victims has sued an Austrian banker, claiming she masterminded a 23-year conspiracy that facilitated Madoff’s Ponzi scheme and funneled billions of dollars into her “deliberately Byzantine” network of European banks.
The trustee, Irving Picard, is seeking $19.6 billion in damages from Sonja Kohn, whom his lawsuit names as the “mastermind” of Medici Enterprise.
The New York Times reports that the 157-page complaint filed today in Federal Bankruptcy Court in Manhattan is the first by Picard to invoke the Racketeer Influenced and Corrupt Organizations (RICO) Act.
Picard describes a European “labyrinth” of banks, hedge funds, asset management firms, shell companies and offshore trusts, which absorbed billions of dollars from Madoff.
“Sham entities” established and controlled by Kohn, in New York and Europe, “had or have no legitimate business purpose and existed or exist only to receive stolen Customer Property from Madoff,” the complaint states.
The complaint also says Kohn received tens of millions of dollars in “kickbacks” and referral fees from Madoff, and that about half of the funds Picard is suing to recover — $9.1 billion out of $19.6 billion — is directly linked to Kohn and her family members.

Gonna sue her?Well BS,I want to see the wench sitting in a cold cement 6'x10' cubicle with her new friend "Chico"....:flute:

[David Guyatt]

Well now, an "apparent" suicide?

What bad timing. And isn't it strange how many bankers, and others involved in banking scandals, seem to end up commiting suicide...

http://uk.news.yahoo.com/4/20101211/twl-...f21e0.html

Mark Madoff, the son of convicted swindler Bernard Madoff, has been found hanged in his New York City apartment in an apparent suicide, New York City police have confirmed.

"He was found hanged in his appartment. It was an apparent suicide," police spokesman Paul Browne said.

Mark Madoff, 46, was found dead on the two-year anniversary of the arrest of his father. Bernard Madoff is now serving a 150-year prison sentence after confessing to running a decades-long Ponzi scheme that cheated investors out of millions.

Mark Madoff and his brother Andrew Madoff both had worked for their father's financial firm, Bernard L Madoff Investment Securities LLC. They and other family members have been sued by a court-appointed trustee who is trying to recover money for defrauded investors.

Madoff family members have dismissed the allegations as baseless and said they were unaware of the fraud. None has been charged with any criminal wrongdoing.

The Wall Street Journal reported in February that the sons and brother of Bernard Madoff were the subject of criminal tax-fraud cases by federal prosecutors in Manhattan. No charges have been brought.

[David Guyatt]

JP Morgan too:

[SIZE="3"][B]

‘XYZ Corp.’

Picard filed a separate complaint yesterday seeking $3.14 million from an unidentified company. The complaint, against “XYZ Corp.,” was filed under seal in U.S. Bankruptcy Court in Manhattan. The docket entry for the lawsuit listed the demand as “$3135671000,” or $3.14 billion. In an e-mail today, Picard provided the amount of the demand and said that the court record was being corrected.

I wonder who XYZ Corp really is and the significance of the judge sealing their name?

[Dawn Meredith]

I find it most odd that a person would commit suicide with his two year old son alone in the other room.

Dawn

[Peter Lemkin]

I find it most odd that a person would commit suicide with his two year old son alone in the other room.

Dawn

Hung by the leach of the dog that he loved, after his son. I think this was a professional wet job and a warning to others who know about Madoff assets and fraud - "be silent or be dead!"

[David Guyatt]

I find it most odd that a person would commit suicide with his two year old son alone in the other room.

Dawn

Hung by the leach of the dog that he loved, after his son. I think this was a professional wet job and a warning to others who know about Madoff assets and fraud - "be silent or be dead!"

That is so banker "suicided" it's not funny. Does anyone remember the strange death of Amschel Rothchild strangled to death by the cord of his bathrobe in the Bristol Hotel, Paris, in 1996? That was ruled "suicide" by the police at the time, but we later learned he was killed on orders of a Russian Mafiosi.

[Jan Klimkowski]

The ever curious Golem XIV questions why national regulators are not drawing the obvious conclusions from the identities of those accused in the Madoff swindle.

The insider "Whistleblower IRL" has some observations in the Comments section.

http://golemxiv-credo.blogspot.com/2010/...lands.html

[David Guyatt]

The ever curious Golem XIV questions why national regulators are not drawing the obvious conclusions from the identities of those accused in the Madoff swindle.

The insider "Whistleblower IRL" has some observations in the Comments section.

http://golemxiv-credo.blogspot.com/2010/...lands.html

Golem VIV's piece was intriguing, especially as it focused on the apparent dereliction of duty of bank regulators. And I suppose it might, therefore, be a timely reminder of the following, extracted from post no. 1 of this thread:

Charles Gasparino (citing “speculation” from investigators) reported last week on CNBC that the Russian Mafia might have been partners in Madoff’s larcenous fund business. Or perhaps the Mob had an even greater interest in Madoff’s market making operation, as some of our sources have told us in recent weeks.

Either way, there is a certain cachet.

But it wasn’t just pierogies and pistol-packing wiseguys in purple suits. Mr. Madoff was also a dedicated public servant, volunteering countless hours at the Securities and Exchange Commission.

Indeed, Madoff seems to have written many of the SEC’s rules. For example, Madoff was the principal author of an SEC rule that exempted market makers (i.e. Madoff) from various regulations governing short sellers (i.e. Madoff’s friends).

Madoff’s rule ensured that market makers (Madoff) could, among other things, engage in so-called “naked short selling.” To sell “naked” is to sell stock that one does not actually possess. That is “phantom stock,” according to the SEC Chairman and many others.

Sometimes, short sellers (who profit when shares lose value) offload massive amounts of phantom stock to drive down prices, destroy pubic companies, or even crash the market. That is why there used to be restrictions.

At any rate, I don’t think Madoff had an office at the SEC. He certainly was not employed there. But the SEC was glad to have Madoff write a rule exempting Madoff from the rules. The formal name of the rule is, “the option market maker exception to Rule 203(b)1,” but the SEC was so thankful that it named the rule after the great man himself.
It was called, “The Madoff Exception.”

The Russian mafia have, I believe, enjoyed the hospitality of Austrian banks ever since the arrival in Russia of Boris Yeltsin. Indeed, I seem to recall stories of articulated lorries arriving at Austrian banks in the dead of night, filled with bank notes for deposit (and laundering of course).

And the fact that a crook like Madoff who, it seems, was in league with mafia types was sufficiently inside the door of the US regulator, the SEC, that he could write some of their rules.

[David Guyatt]

What is behind J P Morgan "spinning" on Madoff?

The smell of guilt in the morning perhaps?

For those who are unaware, the Serious Fraud Office is so politicized that fraud is less important to them than doing their masters bidding. One should never associate the word "law" (let alone "justice") with them. They're simply muscle to be used and abused.

http://www.guardian.co.uk/business/2011/...confession

Bernard Madoff: JP Morgan warned UK authorities before confession

Unsealed court documents allege bank told the UK's Serious Organised Crime Agency of concerns in October 2008, two months before the fraudster admitted his empire was a sham

Dominic Rushe in New York
guardian.co.uk, Thursday 3 February 2011 23.09 GMT
Article history


JP Morgan is being sued for $6.4bn over its role in Bernard Madoff's business empire

The UK's Serious Organised Crime Agency (Soca) was warned about Bernard Madoff in October 2008, two months before the fraudster confessed that his investment empire was a sham, according to a lawsuit unsealed in New York.

The allegation was made in a suit filed against JP Morgan, one of Madoff's banks, on behalf of the fraudster's victims.

According to the suit, filed by the court-appointed trustee Irving Picard, executives at JP Morgan allegedly told Soca that they were concerned about "investment performance achieved by its [Madoff's business] funds which is so consistently and significantly ahead of its peers, year-on-year, even in the prevailing market conditions, as to appear too good to be true meaning that it probably is".

The lawsuit, which cites internal emails, claims that employees in the bank's "equity exotics & hybrids" desk found that the so-called feeder funds which brought in new investors knew little about Madoff's operations and asked few questions. "It's almost a cult [Madoff] seems to have fostered," one employee observed.

The suit is damning of JP Morgan's alleged role in the scandal. It claims that Soca was informed by JP Morgan "only in an effort to protect its own investments" and the bank did nothing further to stop the fraud even though it had informed the authorities.

"While numerous financial institutions enabled Madoff's fraud, JP Morgan was at the very centre of the fraud and thoroughly complicit in it," according to the suit. It details ways in which Picard alleges the bank sought to make money from investment funds that fed money to Madoff.

According to the court filing, a senior executive at the bank was told Madoff had "a well-known cloud" over his head and was suspected of running a Ponzi scheme 18 months before his empire collapsed leaving thousands of investors penniless. The 114-page suit claims the bank did not pay attention to billions of dollars passing through the fraudster's main JP Morgan account.

The $6.4bn (£4bn) lawsuit against JP Morgan is one of nearly 60 Picard filed late last year seeking more than $40bn from investors, hedge funds and banks that he alleges made money with Madoff including HSBC, UBS and Citigroup.

Lawyers for JP Morgan had managed to have the details contained in the suit sealed until now. At the time David Sheehan, a lawyer representing the trustee, said: "JP Morgan was wilfully blind to the fraud, even after learning about numerous red flags surrounding Madoff."

A spokeswoman said the bank had no comment but in December, when the suit was initially filed, a spokesman said: "Any suggestion that JP Morgan supported Madoff's fraud is utterly baseless and demonstrably false. Contrary to the trustee's allegations, JP Morgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff."

The caption to this article was amended on 4 February 2011. The original said JP Madoff was being sued for $6.4bn. This has been corrected.

[Jan Klimkowski]

JP Morgan appears to be engaged in a damage limitation exercise.

Here's Market Ticker's Karl Denninger's take on JP Morgan's, ahem, role:

Systemic And Intentional Fraud, Part Deux?

And in a follow-up to the sordid accusations against BONY and State Street, we have this!

J.P. Morgan Chase & Co. ignored or dismissed warning signs about the Madoff fraud even as it earned hundreds of millions of dollars from its relationship with his firm, according to a lawsuit unsealed Thursday.

Uh yeah, I've speculated on this before. How do you have a custodial account relationship with a huge fund like Madoff's that never clears an actual trade and yet not have any idea that something funny is going on - and that "funny" thing might be criminal?

Well, as it turns out, the bankruptcy trustee believes that not only did JP Morgan suspect something was wrong, they were pretty sure of it and yet continued and enabled the relationship for the purpose of making a profit.

"While numerous financial institutions enabled Madoff's fraud, JPMC was at the very center of that fraud, and thoroughly complicit in it," according to the 115-page lawsuit, filed under seal in December by Irving Picard, the trustee seeking to recover money for Mr. Madoff's victims and made public on Thursday.

The profit, in this case, was more than a billion dollars.

JP Morgan denies wrongdoing and knowledge. We'll see.

I'd argue that it's pretty tough to move the sort of money around that Madoff did and not have any idea how it's happening. But that's me - after all, we are talking about a total "take" here of $50 billion, right? That's the total scam that Madoff supposedly was responsible for, which strongly implies that this amount of money had to either come or go somewhere, and if it came and went without leaving any sort of trace in the market then I think we got ourselves a little bit of a problem.

Picard's lawsuit was filed under seal in December.

http://market-ticker.org/akcs-www?post=179151