SEC Eyes More Madoff Ponzi Schemes

SEC Said to Probe More Ponzi Schemes After Madoff Disclosures
Bloomberg News By David Scheer - January 2, 2009

Jan. 2 (Bloomberg) -- U.S. regulators working to untangle Bernard Madoff’s alleged $50 billion Ponzi scheme are probing other money managers suspected of using similar tactics, two people with knowledge of the inquiries said. The U.S. Securities and Exchange Commission is pursuing at least one case in which investors may have been cheated out of as much as $1 billion, according to one person, who declined to name the manager and asked not to be identified because the probe isn’t public. Regulators may discover additional Ponzi arrangements as declining stock markets prompt investors to withdraw their cash and they question how their money is being managed. This week, the SEC said it halted what the agency described as a $23 million scam targeting Haitian-Americans, and said the Florida- based operators had tried as recently as last month to bring in more investors. Investigators haven’t found evidence the suspected frauds are of the same magnitude as in the Madoff case, which would be the biggest of its kind in history, the people said. In a Ponzi scheme, early investors are typically paid with money from later participants.

Madoff, 70, was charged Dec. 11 at federal court in Manhattan with securities fraud after allegedly telling his sons his New York-based investment advisory business had been “one big lie” and that he was “finished.” The SEC, which sued him, is seeking to unravel the extent of the losses and recoup money for investors. A catalog of Madoff’s assets provided by his attorneys to the SEC on Dec. 31 hasn’t revealed any major sources of additional cash, a person familiar with the matter said. Madoff said before his arrest that he had as much as $300 million remaining, according to the agency’s complaint. SEC spokesman John Heine declined to comment. The case is Securities and Exchange Commission v. Madoff, 08-cv-10791, U.S. District Court, Southern District of New York (Manhattan). To contact the reporter on this story: David Scheer in New York at dscheer@bloomberg.net.