A year on from Madoff - a timeline
A year ago today news broke of the estimated $50bn (€34bn) Ponzi scheme masterminded by Bernard Madoff, which sent shockwaves through the markets and rattled investors. Financial News has picked out the key events in the saga over the past 12 months.
• December 12, 2008: Bernard Madoff arrested by federal agents a day after allegedly telling two senior employees that his business was "a giant Ponzi scheme." The scheme involved the asset management unit of his investment firm Bernard L. Madoff Investment Securities.
On the same day the first investors, including Bramdean Asset Management, Pioneer Investments and Man Group, came forward and disclosed their exposures to Madoff.
Nicola Horlick of Bramdean Alternatives, said: “I can’t believe what’s happened. Madoff acted like a market marker on Wall Street, and when he felt conditions were risky he only invested in T-bills. He was fully regulated. Everyone had faith in his products.”
(For a full list of those that released the amount of exposure or were reported to have, please see our related content.)
• December 17: An article from Barron's magazine published in 2001 was uncovered, which questioned how Madoff's secretive hedge fund delivered its steady returns.
• December 18: The Wall Street Journal reports the Securities and Exchange Commission discovered in 2006 that Madoff had misled the agency about how he managed customer money but the Ponzi scheme was not uncovered.
• December 22: Liquidator Grant Thornton was appointed to move in on Madoff's UK fund Madoff Securities International and unravel the business, this included staff redundancies.
• December 24: French fund manager René-Thierry Magon de la Villehuchet, who lost more than $1bn of his clients’ money to Madoff, was found dead after committing suicide in his Manhattan office.
• December 29: Madoff memorabilia put up for sale on eBay - including t-shirts, umbrellas and binoculars that bore the Madoff insignia. Today, 76 items relating to Madoff are for auction, including several books penned after the event http://bit.ly/8Ld3H9
• January 6, 2009: The House Committee on Financial Services held a hearing titled “Assessing the Madoff Ponzi and the Need for Regulatory Reform.” The SEC’s inspector general, David Kotz and SIPC general counsel Stephen Harbeck spoke at the hearing.
• January 9: The UK Serious Fraud Office followed the lead of the SEC and launched an investigation into Madoffs UK operations.
• In the same week Yale University endowment chief investment officer David Swensen describes funds of hedge funds as “a cancer”, after the sectors reputation was damaged by the scandal.
• January 16: A Luxembourg court ordered UBS to pay back €30m ($44m) to French financial firm Oddo & Cie. The Swiss bank had invested the money in Madoff's funds on behalf of Oddo's clients.
• February 16: The first pension scheme files claims against Madoff. The Pension Fund for Hospital and Health Care Employees - Philadelphia and Vicinity files a class action against Austin Capital Management.
• February 26: Investors spooked by the fraud pulled $600bn from funds of hedge funds in 2008, according to Hedge Fund Research data.
• March 4: Madoff surrenders his rights to his investment business.
• March 12: Madoff pleads guilty to charges of fraud, his bail is revoked and he is sent to jail to await the rest of his trial. He tells a US court: "As the years went by, I realised my risk, and this day would inevitably come. I cannot adequately express how sorry I am for my crimes."
• March 19: Madoff's accountant David Friehling is taken into custody on charges of securities fraud.
• March 28: Victims of the Ponzi scheme are offered free meal at Nino’s 208, a New York restaurant just a few blocks from Madoff’s former offices.
• April 7: Money manager Ezra Merkin is charged on allegations of betraying investors after funnelling $2.4bn from universities and non-profit organisations into Bernard Madoff's firm.
• April 10: Irving Picard, a court-appointed trustee of Madoff's firm and charged with recovering assets for investors, files the first lawsuit to retrieve funds from investors who managed to redeem their money before the company collapsed.
• May: Picard sues Erza Merkin for $558m (€416.6m) in phony investment profits that Merkin allegedly withdrew from Madoff's fund.
• June 17: Madoff banned from working in the securities industry by the SEC.
• June 30: Madoff sentenced to 150 years in prison for his crimes, which were described by presiding judge Denny Chin as "extraordinarily evil".
At his sentencing, Madoff apologises to victims and acknowledges the “legacy of shame” he has left his family. His wife Ruth admits to feeling “embarrassed and ashamed” and “betrayed and confused”.
Also, New York Attorney General Andrew Cuomo launches an auction to sell Merkin's art collection to compensate Madoff investors.
• July 19: David Frieling, Madoff's accountant pleads not guilty to fraud charges.
• July 30: Madoffs wife Ruth sued by Irving Picard for $44m after living a "life of splendour".
• August 12: Frank DiPascali, a key lieutenant of Madoff, pleads guilty to 10 counts of fraud, conspiracy, perjury and money laundering.
• August 24: The 50 largest funds of hedge funds lost between 25% and 30% of assets as investors withdrew funds between the end of September and the end of June, according to research published last week by industry magazine The Hedge Fund Journal.
• November 26: UBS and Ernst & Young are sued by investors who lost money in the LuxAlpha Sicav-American Selection fund, a Madoff feeder vehicle run by Access International Advisors.
• December 2: Irving Picard charges Boston philanthropist Carl Shapiro and his family foundation for earning $1bn in fake profits from investments in Madoff spanning 40 years.
Write to lwillington@efinancialnews.com
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