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| Watchdog queried over Madoff case | Watchdog queried over Madoff case |
| (about 5 hours later) | |
| Alleged hedge fund fraudster Bernard Madoff has had his first court appearance delayed until Wednesday. | |
| As the number of investors reporting potential losses grows, the role of the Securities and Exchange Commission (SEC) is coming under scrutiny. | As the number of investors reporting potential losses grows, the role of the Securities and Exchange Commission (SEC) is coming under scrutiny. |
| Regulators have been criticised for not detecting earlier the alleged $50bn (£33bn) fraud. | |
| Jon Moulton of Alchemy Partners said some investors had complained about Mr Madoff's scheme as early as 1999. | Jon Moulton of Alchemy Partners said some investors had complained about Mr Madoff's scheme as early as 1999. |
| "The SEC did remarkably well" to avoid spotting any problems, he said. | "The SEC did remarkably well" to avoid spotting any problems, he said. |
| Meanwhile, the FBI has set up a hotline for people who invested money in Mr Madoff's fund. | |
| The number is +1 212 384 2359. | |
| Regulatory concerns | Regulatory concerns |
| Leading Spanish, British and Japanese banks have said they could be facing losses of billions of dollars. | Leading Spanish, British and Japanese banks have said they could be facing losses of billions of dollars. |
| US authorities have ordered the liquidation of the trader's brokerage firm, Bernard L Madoff Investment Securities of New York. | US authorities have ordered the liquidation of the trader's brokerage firm, Bernard L Madoff Investment Securities of New York. |
| But many financial commentators have questioned whether the alleged fraud could have been uncovered sooner. | But many financial commentators have questioned whether the alleged fraud could have been uncovered sooner. |
| WHAT IS A PONZI SCHEME? A fraudulent investment scheme paying investors from money paid in by other investors rather than real profitsNamed after Charles Ponzi who notoriously used the technique in the United States in 1919-20 Differs from pyramid selling in that individuals all tend to invest with the same person How Madoff millions vanishedHow to avoid being a victim Steven Bell of GLC fund managers said: "Apparently people reported these concerns to the SEC, they highlighted them." | WHAT IS A PONZI SCHEME? A fraudulent investment scheme paying investors from money paid in by other investors rather than real profitsNamed after Charles Ponzi who notoriously used the technique in the United States in 1919-20 Differs from pyramid selling in that individuals all tend to invest with the same person How Madoff millions vanishedHow to avoid being a victim Steven Bell of GLC fund managers said: "Apparently people reported these concerns to the SEC, they highlighted them." |
| "It's almost like someone saying 'my next-door neighbour's a burglar, go and have a check' and they didn't, apparently," he said. | "It's almost like someone saying 'my next-door neighbour's a burglar, go and have a check' and they didn't, apparently," he said. |
| Jon Moulton, of Alchemy Partners, said: "It would appear as early as 1999 a man... was writing to the SEC telling them that 'Madoff Securities is the world's largest Ponzi scheme', so the SEC did remarkably well to avoid spotting it." | Jon Moulton, of Alchemy Partners, said: "It would appear as early as 1999 a man... was writing to the SEC telling them that 'Madoff Securities is the world's largest Ponzi scheme', so the SEC did remarkably well to avoid spotting it." |
| Dominique Strauss-Kahn, director general of the International Monetary Fund, expressed his shock on Monday that US regulators had failed to identify and prevent the alleged fraud. | Dominique Strauss-Kahn, director general of the International Monetary Fund, expressed his shock on Monday that US regulators had failed to identify and prevent the alleged fraud. |
| Investors losses | Investors losses |
| Mr Madoff, who was arrested on Thursday, has been charged with fraud in what is being described as one of the biggest-ever such cases. | Mr Madoff, who was arrested on Thursday, has been charged with fraud in what is being described as one of the biggest-ever such cases. |
| He ran a fund that paid annual interest of about 10% but prosecutors say it was, in effect, similar to a pyramid scheme, with money from new investors paying off old ones. | He ran a fund that paid annual interest of about 10% but prosecutors say it was, in effect, similar to a pyramid scheme, with money from new investors paying off old ones. |
| Banks and financial institutions across the world had investments with Bernard Madoff, but not all have yet confirmed what their potential losses might be. | Banks and financial institutions across the world had investments with Bernard Madoff, but not all have yet confirmed what their potential losses might be. |
| MAJOR POTENTIAL LOSSES Clients of Santander, Spain - $3.1bnHSBC, UK - $1bnNatixis, France - $605mRoyal Bank of Scotland, UK - $601mBNP Paribas, France - $460mBBVA, Spain - $400mMan Group, UK - $360mReichmuth & Co, Switzerland - $325mNomura, Japan - $303m | MAJOR POTENTIAL LOSSES Clients of Santander, Spain - $3.1bnHSBC, UK - $1bnNatixis, France - $605mRoyal Bank of Scotland, UK - $601mBNP Paribas, France - $460mBBVA, Spain - $400mMan Group, UK - $360mReichmuth & Co, Switzerland - $325mNomura, Japan - $303m |
| Among the potential losers is Spain's largest bank, Santander, which owns the UK High Street banks Abbey, Alliance & Leicester and Bradford & Bingley. | Among the potential losers is Spain's largest bank, Santander, which owns the UK High Street banks Abbey, Alliance & Leicester and Bradford & Bingley. |
| The bank had a direct exposure of 17m euros ($23m; £15m), but clients of its Optimal fund management unit have another 2.3bn euros invested in the firm run by Bernard Madoff. | The bank had a direct exposure of 17m euros ($23m; £15m), but clients of its Optimal fund management unit have another 2.3bn euros invested in the firm run by Bernard Madoff. |
| Japanese financial giant Nomura said it could lose up to $303m. | Japanese financial giant Nomura said it could lose up to $303m. |
| Britain's HSBC said it had investments of about $1bn that could be affected. | Britain's HSBC said it had investments of about $1bn that could be affected. |
| Royal Bank of Scotland said it could potentially lose about £400m if all its investments had to be written off. | Royal Bank of Scotland said it could potentially lose about £400m if all its investments had to be written off. |
| Some of the biggest private losers seem to have been members of the Palm Beach country club, where many of Mr Madoff's wealthy clients were recruited. | Some of the biggest private losers seem to have been members of the Palm Beach country club, where many of Mr Madoff's wealthy clients were recruited. |
| Charities suffer | Charities suffer |
| However, the collapse of Mr Madoff's firm is also having an impact far beyond the world of the wealthy private investors - many charities have been hit. | However, the collapse of Mr Madoff's firm is also having an impact far beyond the world of the wealthy private investors - many charities have been hit. |
| FROM THE TODAY PROGRAMME More from Today programme | FROM THE TODAY PROGRAMME More from Today programme |
| The New York-based JEHT foundation, said it was freezing all its grants and would shut by the end of January. The group is funded by one couple, Jeanne and Kenneth Levy-Church, whose personal investments were managed by Mr Madoff. | The New York-based JEHT foundation, said it was freezing all its grants and would shut by the end of January. The group is funded by one couple, Jeanne and Kenneth Levy-Church, whose personal investments were managed by Mr Madoff. |
| Other victims include film director Stephen Spielberg's Wunderkinder Foundation charity. | Other victims include film director Stephen Spielberg's Wunderkinder Foundation charity. |
| Mark Mulholland, a lawyer representing some of those who invested in the scheme, warned that the fraud could be bigger than the Enron scandal of 2001. | Mark Mulholland, a lawyer representing some of those who invested in the scheme, warned that the fraud could be bigger than the Enron scandal of 2001. |
| "We think the impact on the financial community is ultimately going to be bigger than Enron. This is staggering, it's extraordinary, it's breathtaking what has happened here," he said. | "We think the impact on the financial community is ultimately going to be bigger than Enron. This is staggering, it's extraordinary, it's breathtaking what has happened here," he said. |
| High returns promised | High returns promised |
| US prosecutors say Mr Madoff, a former head of the Nasdaq stock market, masterminded a fraud of massive proportions through his hedge fund and investment advisory business. | US prosecutors say Mr Madoff, a former head of the Nasdaq stock market, masterminded a fraud of massive proportions through his hedge fund and investment advisory business. |
| The collapse of Madoff is likely to accelerate the disappearance of hedge funds Robert Peston Read Robert Peston's blogSend us your comments | The collapse of Madoff is likely to accelerate the disappearance of hedge funds Robert Peston Read Robert Peston's blogSend us your comments |
| Mr Madoff is alleged to have used money from new investors to pay off existing investors in the fund. | Mr Madoff is alleged to have used money from new investors to pay off existing investors in the fund. |
| A federal judge has appointed a receiver to oversee Mr Madoff firm's assets and customer accounts, while the 70-year-old banker was released on $10m bail. | A federal judge has appointed a receiver to oversee Mr Madoff firm's assets and customer accounts, while the 70-year-old banker was released on $10m bail. |
| Mr Madoff founded Bernard L Madoff Investment Securities in 1960, but also ran a separate hedge fund business. | Mr Madoff founded Bernard L Madoff Investment Securities in 1960, but also ran a separate hedge fund business. |
| According to the US Attorney's criminal complaint filed in court, Mr Madoff told at least three employees on Wednesday that the hedge fund business - which served up to 25 clients and had $17.1bn under management - was a fraud and had been insolvent for years. | According to the US Attorney's criminal complaint filed in court, Mr Madoff told at least three employees on Wednesday that the hedge fund business - which served up to 25 clients and had $17.1bn under management - was a fraud and had been insolvent for years. |
| He said he was "finished", that he had "absolutely nothing" and "it's all just one big lie", and that it was "basically, a giant Ponzi scheme", the complaint said. | He said he was "finished", that he had "absolutely nothing" and "it's all just one big lie", and that it was "basically, a giant Ponzi scheme", the complaint said. |
| If found guilty, US prosecutors say he could face up to 20 years in prison and a fine of up to $5m. | If found guilty, US prosecutors say he could face up to 20 years in prison and a fine of up to $5m. |