Trust – Sorry, What is that?

The latest on the Wall Street is the self-admitted Ponzi scheme by The former head of the NASDAQ, Mr. Bernard L Madoff. It is going to cost his clients fortunes. A U$50 billions scam! Almost the same stuff as it was nearly a century ago when Charles Ponzi was arrested in 1920 for conning investors through his Old Colony Foreign Exchange Company.

Trust- Sorry what does that mean, Sir?

The Securities and Exchange Commission in Washington alleges that Madoff delivered consistently strong returns by secretly using the principal from new investors to pay out to other investors in the scheme, a version of what is known as “pyramid fraud”

It’s a new wrong doing in a series of frauds that has resulted into the current crisis we are in. Wall Street, A place where “Greed is Good”, is never short of example. Rogue traders, crooked chief executives and common conmen steal money all the time on Wall Street. This time it is slightly different as this involves big boys who lost money.

Elite Swiss banks, prominent billionaires, asset management companies and wealthy retirees have lost billions in the scandal. Charities are also not left alone, and are reeling from pain.

But what about the fund managers who were entrusting all the funds to him, Ascot Partners fund is one of those that placed nearly all the $1.8 billion it’s partners had given him to invest had instead been entrusted to Bernard L. Madoff, and charged a fee for doing so.

  • HSBC, the giant European lender, put a number Monday on its potential exposure to the recent scandal involving Bernard L. Madoff. And that number had nine zeros in it!!
  • The Tremont Group, a hedge fund investment firm, had $3.3 billion in exposure to the now-collapsed money manager run by Bernard L. Madoff, making it one of the largest “feeder funds” that steered investors into the scheme.
  • Royal Bank of Scotland saying it could lose about 400 million pounds (450 million euros, 600 million US dollars) as a result of the scam.
  • Shares in Spain’s Santander bank plunged some five percent in early trading on Monday after the lender said that one of its funds had exposure of more than three billion dollars to the scandal-hit firm Madoff Investment Securities.
  • French Natixis bank, already brought low by subprime losses, put its maxiumum potential exposure at 450 million euros.
  • Japanese financial giant Nomura said it could lose up to 303 million dollars and officials said South Korean financial institutions including an insurer and six asset management firms had a total exposure of 95.1 million dollars.
  • In Switzerland, Geneva private banks could lose up to five billion dollars (3.7 billion euros) in the scam, Swiss newspaper Le Temps reported. The Union Bancaire Privee alone “risks losing at least a billion,” the report said.

We are still going through the pains of LehMan, Bears and more. Who knows what’s more is in the store.

No one has as much interest in your money as much as you do. Safeguard it, and grill your financial advisers with the questions and  don’t entrust your funds unless and until you get the answers that convince you. And always, always remain skeptical. Continue to enhance your financial knowledge and look out for red flags.

It is your money.

Profitable Trading, OP






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