Madoff Investment Securities BMIS in Manhattan

It was more than a giant financial scandal to undermine the confidence of Wall Street investors. In the wake of the arrest of Bernard Madoff by the FBI, a group of angry investors met Friday at the foot of the Lipstick Building, at the corner of 54th Street, which houses the headquarters of Bernard l. Madoff Investment Securities (BMIS) in Manhattan. "I have absolutely more nothing." "This is only a huge lie", entrusted himself to the investigators the former boss of the Nasdaq, Bernard Madoff, 70 years, according to the text of the complaint filed by the Securities and Exchange Commission (SEC), in the margins of the criminal complaint. The admission of the founder of the Fund, denounced by his own sons probably for cover the amount of the losses of BMIS would amount to 50 billion dollars, well more than its 17.1 billion in assets under management. But, according to some experts, the total amount of the fraud would fall in a range of 20-25 billion.

"If this is confirmed, the Madoff case might be a more important than Enron, Tyco and Boesky scandal, much larger than Bayou, believes Doug Kass, Manager of Seabreeze Partners Hedge Fund. It attacks the heart of the confidence of investors already collapsed and remains very fragile. "The eve of his arrest, the founder of BMIS had already confessed to his two sons, working in a branch of the society, that his business was based on a gigantic scam based on the famous"Ponzi scheme ". In essence, investors initially were paid with money from recent investors, almost all of the assets of the firm being fictitious.

Anger of investors

This is the entire spectrum of finance who is affected: investment funds, Fund of "hedge funds", banks, local and particular communities. Alternative Fund Bramdean Nicola Horlick (former Manager feature of the Société Générale in London), Union Bancaire Privée (UBP), Optimal Investment Services (subsidiary of Santander) and Pioneer Alternative Investments (subsidiary of the Italian UniCredit) are part of the first casualties reported. Funds of funds Fairfield Greenwich, Tremont Capital and Maxam Capital would be exposed to height of several hundreds of millions of dollars. Personally, the President of GMAC Financial Services, General Motors investment activity is also affected. On the "wall street Journal", BNP Paribas and Nomura are also affected. Exposed via its activities of markets, BNP Paribas, which has loaned funds invested in Madoff, maximum could lose up to 350 million euros.

More than half of the investors of BMIS were hedge funds, the rest of the customer being made up of banks and private fortunes, which included friends or neighbours. "Most investors were captains of industry, business, Fund of funds, universities or foundations who used Madoff as a source of liquidity to high-performance management," explained this weekend an alternative Fund Manager. The two main losers so far listed would be Walter Noel, the founder of Fairfield Greenwich Group, including a branch, Fairfield Sentry, high of 7.3 billion of assets, invested with BMIS, and a branch of Kingate Management, Kingate Global Fund, with $ 2.8 billion of assets under management. Alone, the Swiss financial institutions should bear losses of at least 5 billion, according to "Time".

Other identified clients of Bernard Madoff, also include Rye Select and Sterling Equities funds that manage to the New York Mets baseball team. The anger of investors is greater that already, in 2001, operation of Madoff, which guaranteed constant returns to its customers and has recorded only five months of negative returns on 156 months, had raised some doubts in the American press. An article from "Barron's" of 2001 had already questioned its transparency in surprising the "lack of volatility" of its results. The Madoff case is likely to strengthen the criticism on the ability of supervision of the SEC.