Bernard L. Madoff Investment Securities LLC Case 12/12/2008

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Company Name(s): 
Bernard L. Madoff Investment Securities
Case Name: 
Bernard L. Madoff Investment Securities LLC Case 12/12/2008
Case Status: 
Lawsuit Filed
Case Status: 
Judgment Issued
Lawsuit Overview
Type of Lawsuit: 
Securities Purchaser Class Action
Date Filed: 
Court of Filing: 
United States District Court in the Eastern District of New York

Judgment Issued - 12/18/2008

According to the United States Securities and Exchange Commission (“SEC”), on December 18, 2008, the Honorable Judge Louis L. Stanton, a federal judge in the Southern District of New York, entered a preliminary injunction order, by consent, against Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC (”BMIS”). The preliminary injunction continues to restrain Madoff and BMIS from violating certain antifraud provisions of the federal securities laws. Also, by consent, Judge Stanton ordered that assets remain frozen until further notice, continued the appointment of a receiver for two entities owned or controlled by Madoff in the United Kingdom (while defendant BMIS remains subject to oversight by a SIPC trustee), and granted other relief. The preliminary injunction order continues the relief originally obtained on December 12, 2008, in response to the SEC’s application for emergency preliminary relief that sought a temporary restraining order, an order freezing assets, and other relief against Madoff and BMIS based on his alleged violations of the federal securities laws.

Lawsuit Filed - 12/12/2008

On Friday, December 12, 2008, a shareholder of Bernard Madoff Investments has filed one of the first proposed securities class action lawsuits on behalf of all others similarly situated in United States District Court in the Eastern District of New York against Bernard L. Madoff, the investment adviser who reportedly allegedly called his firm “one big lie” before being arrested (free on a $10 million bond), Bernard L. Madoff Investment Securities LLC and others. The shareholder alleges that “ the case arises from one of the most damaging Ponzi schemes in the history of Wall Street and in the United States, a massive fraud through which individual defendant Madoff and his accomplices swindeled investors out of monies estimated to exceed $50 billion”, which according to another article: “could turn out to be one of the largest frauds in U.S. history.”

According to the complaint the plaintiff alleges that Mr. Madoff’s firm, Bernard L. Madoff Investment Securities, was falsely represented to investors as “a legitimate enterprise operating as a lawful broker and dealer, when in truth and in fact BMIS was a fraudulent Ponzi scheme, which could remain solvent only by paying out interest and dividend commitments through the distribution of investor principal.”

Reportedly investors of Madoff Investement packed a Manhattan courtroom Friday afternoon for a scheduled hearing hoping to get answers about what happened to their cash, but the hearing was canceled and immediately froze all of the company’s and Mr. Madoff’s assets. Mr. Madoff reportedly confessed to his two sons, who work for him, that the business bearing his name was a fraud that cost clients $50 billion. Madoff’s firm was the 23rd-largest market maker on Nasdaq in October, handling an average of about 50 million shares a day, exchange data shows.

The news headlines in relation to the alleged $50 Billion Dollar fraud scheme by Madoff and his firms seem reveal the devastating financial loss spread throughout the world: The French investment bank Natixis reportedly said on Monday, December 15, 2008, it stands to lose up to 450 million euros (605 million dollars) in the scandal. The Credit Suisse/Tremont Hedge Fund Index fell 4.15% in November, far more than the preliminary decline of 0.7% issued last week, as the finalized numbers include funds invested in Bernard L. Madoff’s funds. The Swiss private bank Reichmuth & Co., based in the Swiss city of Lucerne, reportedly warned investors in its Reichmuth Matterhorn fund of hedge funds that they face losses of as much as $330 million related to Bernard Madoff’s investment advisory business. In a letter to clients Reichmuth & Co said the “performance impact” on its fund would amount to a decline of 8.6 percent in the value of its assets. Chief Executive Officer Christof Reichmuth said in an interview: ‘The fund totals about $3.9 billion” and “It’s unbelievable that no auditor, no administrator, no fund manager noticed this fraud”. HSBC Holdings Plc said it has $1 billion at risk after providing financing to funds that invested with Bernard Madoff. Swiss insurer Baloise said it will have to write down $13 million as a result of the alleged multi billion dollar fraud. BNP Paribas, France’s biggest listed bank, reportedly said on Sunday it could face a potential 350 million euro ($464.3 million) loss from exposure to Bernard Madoff’s investment activities; Italy’s Banco Popolare said, that the ‘bankruptcy of Madoff fund will mean maximum loss of 8 million euros ($10.77 million) to bank’s proprietary portfolio’ and ‘the maximum loss on funds distributed to institutional and private customers is about 60 million euros”; Santander estiamtes its client exposure at over 2.33 billion euros ($3.09 billion); and Le Temps said Union Bancaire Privee, a major asset management institution specializing in hedge funds, could be exposed to the tune of $1 billion; Monday morning in Tokyo, Nomura Holdings Inc. said its exposure to investments with Mr. Madoff totaled 27.5 billion yen ($302 million; Royal Bank of Scotland Group Plc said it may lose as much as 400 million pounds ($601 million) on investments tied to Bernard Madoff; and Man Group, the world’s largest publicly traded hedge fund manager, said its exposure was through RMF, which has approximately $360 million invested in two funds that are directly or indirectly sub-advised by Madoff Securities.