December 13, 2008	Saturday	Zilhaj 14, 1429

NEW YORK, Dec 12: The arrest on Thursday of a legendary Wall Street broker on charges that he swindled 50 billion dollars tore a giant hole in the already ragged reputation of the US financial industry.

Authorities announced the arrest of Bernard Madoff, a brokerage veteran who once epitomised the fabulous profit-making on Wall Street and now epitomises the sector’s even more spectacular decline.

According to prosecutors, Madoff, 70, confessed to employees at his brokerage that he had been running a so-called Ponzi scheme, or pyramid fraud, which had collapsed with losses exceeding 50 billion dollars.

As in the downfall of Lehman Brothers, American International Group and other seemingly invulnerable institutions, Madoff’s troubles are seen as symptomatic of staggering mismanagement, over-leveraging and greed at the heart of Wall Street.

Al Goldman, Wachovia Securities chief market strategist, described Madoff’s disgrace as a “big bombshell.”.

“At least half of his clients were hedge funds, banks and wealthy individuals. Probably a lot of leverage was involved. This will seriously hurt investors’ confidence,” he said.

With 50 years in the business, Madoff was more than just an investor. He was an integral player.

A self-made success, he rose to become chairman of the Nasdaq stock market and founder of his own company, Bernard L. Madoff Investment Securities LLC.

“On Wall Street his name is legendary,” the New York Times wrote on Thursday.

“He built a trading powerhouse that had prospered for more than four decades. At age 70, he had become an influential spokesman for the traders who are the hidden gears of the marketplace.”

This year he reported to the Securities and Exchange Commission that his private investor advisory business -- the focus of the alleged pyramid scheme -- was managing more than 17 billion dollars in assets.

The implosion of that scheme was likely triggered when nervous clients asked to withdraw funds, as they have been demanding from hedge funds around the world. Except there was no money to withdraw.

According to the criminal complaint in which he is charged with securities fraud, Madoff told employees that he was “finished”, that he had “absolutely nothing”.

He told the employees he would surrender himself to the authorities after using his remaining 200-300 million dollars to pay selected employees and family and friends, the complaint said. In a further twist, The Wall Street Journal reported that Madoff was turned in by his sons.—AFP