Madoff's $50bn scam may be the first of many

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Evening Standard, Chris Blackhurst

THERE is no simpler fraud than a "Ponzi" scheme. You take the money from one client, then use the cash from another to pay them a return, while keeping something back for yourself. Provided the clients keep growing in number there isn't a problem - you can keep on churning for ever.

And provided they don't ask any questions. That's one of the mysteries about the Madoff affair: why sophisticated investors on this side of the Atlantic, such as Banco Santander, HSBC, RBS, Man Group and Nicola Horlick's Bramdean Alternatives, not to mention some of the savviest market players in the US, took what he was doing on trust.

The reason was that his CV made him unimpeachable. He was the former chairman of the Nasdaq exchange, not some new, unknown operator. He was making a profit, which means people are less likely to wonder what is happening to their money.

They were entitled to assume, too, that the authorities had paid him a visit and been over his books. That they didn't is another oddity. But the Securities and Exchange Commission let him be - possibly because he had previously been one of them, as it were, as head of Nasdaq.

http://www.thisislondon.co.uk/standard/article-23601815-details/Madoff%27s+$50bn+scam+may+be+the+first+of+many/article.do

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1. Spot the next Madoff is our new parlour game

IT BEGAN with the names of corporate victims who had lived high on debt, such as Viacom CEO Sumner Redstone, casino king Sheldon Adelson and Lehman president Joe Gregory. They lost houses, planes or boats worth millions. Who knew they financed their mansions with debt?

Now it's our turn. Friday's unveiling of Bernie Madoff's alleged $50 billion pyramid scheme is only the tip of the iceberg of lost fortunes emerging from the depths. Madoff's fall has shaken this town to its core. The 70-year-old financier was lionised here. He gave millions to charity and made himself so hard to get to if you wanted to invest with him that his allure proved too tempting for many. The names of prominent locals whose fortunes have in all likelihood disappeared is long. "How could so many rich, smart people have been taken in?" people are frantically emailing each other. But they were.

So now we're confronted with a new reality. With it comes a new kind of unpleasant gossip. Can they really afford their lifestyle? is the question being asked about you, about your friends and about your friends' friends?

http://www.thisislondon.co.uk/standard/article-23601706-details/Spot+the+next+Madoff+is+our+new+parlour+game/article.do

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2. 'British banks lose £1billion in Wall Street fraud' - is that UK taxpayers'

recapitalization dosh?

TWO of Britain's leading banks are thought to have lost more than £1 billion in the world's biggest fraud, it was revealed this afternoon.

HSBC said its exposure to the Bernard Madoff Wall Street swindle was “in the region of” £688 million.

Royal Bank of Scotland said its loss will be about £400 million. Half of any losses incurred by RBS will fall on the taxpayer following the government bail-out last month.

Dozens of other leading City institutions, including its biggest hedge fund, Man Group, sponsor of the Booker prize, and Nicola Horlick's Bramdean Asset Management have been stung.

Spanish bank Santander, owner of Abbey, Alliance & Leicester and the savings business of Bradford & Bingley, said its potential exposure was more than £2 billion.

http://www.thisislondon.co.uk/standard/article-23601812-details/British+banks+lose+1billion+in+Wall+Street+fraud/article.do