Brokerage Firms Turn to Forensic Accountants to Determine Risk of Investment Advisors Running Ponzi Schemes. What Were the Actual Losses in Madoff’s Fraud? Here is a deceptively complex and subtle legal question involving Ponzi schemes and fraud: What are “losses” in the legal sense of the word? The question arises in the case of Bernie Madoff, whose offices cranked out account statements like they were junk mail. As it turns out after the fact, that was all they were — merely junk mail. And that key fact is the major determinant of what the actual losses were. By the end of his multi-decade fraudulent run, the final account statements (November 30 2008) issued to all his “clients” totalled the sum of $73.1 billion dollars.
The people conned by Madoff believed they were worth a collective $65 billion dollars more than their accounts were worth. The initial amount of cash put up: ~$20 billion dollars, beginning in the early 1960s and continuously from there forward. The bankruptcy court in this case made the basic determination that the losses were ONLY the cash that was initially given to Madoff & Co. Here’s the New York TImes: Affinity fraud: Fleecing the flock. Insider trading: Tipping the scales. Fraud fighter John Chapman fights Ponzi schemes: 10 Minutes With ... Lonnie Timmons III, The Plain Dealer"Anything that sounds too good to be true probably isn't true," says John Chapman, an investment fraud investigator. John S. Chapman earned his juris doctorate degree from Case Western Reserve University in 1984. He founded John S. Chapman & Associates, LLC in 1998. He frequently appears before arbitration tribunals of the Financial Industry Regulatory Authority, where he has represented hundreds of investors in disputes with stockbrokers, financial advisers, investment advisers, broker-dealer firms and others.
How did you happen to build a practice dedicated to helping victims of investment fraud? Investment fraud is a silent epidemic in this country. Are we currently at an all-time investment-fraud high? About 150 Ponzi schemes -- the most common type of investment fraud -- collapsed in the year after the Bernie Madoff scheme broke. Will banks ever be held accountable for their role in the mortgage crisis? Unfortunately, nowhere near the full extent. Utah Business. It’s been about four years since Val Southwick, the Bernie Madoff of Utah con artists, received his ticket to the state penitentiary for the biggest fraud scheme in Utah history.
Today, Southwick sits quietly in a cell in Gunnison, serving out his nine consecutive sentences. Although he pled guilty and expressed remorse at his sentencing, he routinely declines media interviews and is mum about his fraud conviction and the tactics that supported his grand deception. Despite the imprisonment of Southwick and other con men like him, much has remained the same—Utah is still fertile soil for all sorts of white-collar crimes and, especially, for affinity fraud. “We haven’t learned our lesson,” says Utah Division of Securities Director Keith Woodell. “The message hasn’t sunk in deep enough.” Many fraudulent investment deals fly under the radar when the economy is good and investors are plentiful, only to collapse when the economy turns sour. “That’s huge. “It enrages me,” says McAdams.