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Madoff’s family weren’t in on the scam? Baloney…

Madoff sons and brother withdrew millions of dollars from phony trades…yet they claim no knowledge of the fraud, according to a story today on Reuters. Both Mark and Andrew, Bernie Madoff’s sons, worked as the respective heads of New York Stock Exchange-listed and over-the-counter Nasdaq stock trading at the family brokerage firm. So how could Mark and Andrew withdraw roughly $60 million each on trades that they–as Wall Street “experts”  — knew never took place?

Check out the concocted, back-dated “trades” from which Bernie’s brother and sons profited. The trades were a complete fabrication: Below are a few examples cited from the trustee’s lawsuit against the Madoff clan: Trustees-Lawsuit-Against-Madoff-Family-Members.

Despite having no money or securities in his account, brother Peter Madoff ’s investment account at Bernie’s phony hedge fund suddenly showed $15.4 million worth of Microsoft stock had been “purchased” in or about December 2000 and “sold” in or about January 2002. The first evidence of this “purchase” of Microsoft stock does not appear until March 2002. Less than two months later, in May 2002, Peter Madoff redeemed nearly $6 million from this account, which included the gains from the fabricated Microsoft transactions. The purchase and sale of Microsoft shares reflected on Peter Madoff’s account statements were a complete fiction. Never happened.

Repeat: Peter opened an account with zero dollars. He withdrew $15 million on Microsoft trades that took place only on paper. Voila! Phony profits.

Son Andrew’s withdrawals were even more brazen:  In July 1998, almost immediately after one account was opened, Andrew’s statement show thousands of shares of Dell Computer stock purchased January 1997, more than eighteen months before the account was even opened and even thought the account had a zero balance to start. In July 1998, the account statements suddenly reflected two stock splits: one settling on July 30, 1997, and another on March 11, 1998, after the shares were purportedlypurchased, but before the account was purportedly opened. A July 21, 1998 entry on the account statement shows that the Dell shares were purportedly “sold,” generating a gain of $1,985,000. Magic!

Three days later, on July 24, 1998, Andrew redeemed $1.9 million from this account. A few years later, Andrew had still not invested money or securities into this same account. Yet, in March 2002, his statement suddenly reflected that $9.9 million worth of stock in Microsoft had been “purchased” over a year earlier in or about December 2000 and “sold” in or about January 2002, at a massive profit of $5,628,860. Despite the earlier dates of these trades, the first evidence of this “purchase” of Microsoft stock does not appear until March 2002. On April 3, 2002,  substantial portion of the profits of these fake, made-up trades—$5,331,853—was transferred from Andrew’s account at his father’s phone hedge fund to his account at Fidelity.

The sons weren’t in on it? My word. Andrew traded OTC stocks like Microsoft as his day job on the brokerage side of the firm. How could he and his brother not know what was going on on the hedge fund side? Based on the trustee’s review of their accounts, both sons and brother Peter were certainly in on the scam, fully aware of it, and profiting from Daddy’s ability to smooth-talk investors. They stole other people’s money.

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One response

  1. Follow up question: If the account showed 0 dollar balance to begin with, how was the stock or the money transferred into the account in order to be withdrawn later on?

    October 11, 2010 at 9:53 am

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