$5b Pyramid scheme fraud

December 13, 2008

, GENEVA, Dec 13 – Swiss bankers face losses of up to five billion dollars from the failure of a pyramid scheme run by New York broker Bernard Madoff, a Geneva newspaper reported Saturday.

Le Temps said Union Bancaire Privee, a major asset management institution specialising in hedge funds, could be exposed to the tune of one billion dollars.

UBP refused to comment on the report, which said that 90 percent of fund management companies operating in Geneva invested in Madoff products.

Le Temps said that Banque Benedict Hentsch could be in a particularly difficult position through its links to Fairfield Greenwich of the United States, which had half its assets with another fund, Fairfield Sentry, partially managed by Madoff.

It said Hentsch had acknowledged an exposure of 35 million euros (47 million dollars) out of the total 1.5 billion that it manages.

Le Temps and another daily, 24 hours, said that clients were unlikely to see their money again even if they tried every possible legal avenue.

Madoff was arrested Thursday after allegedly confessing to employees that he had been running a so-called Ponzi scheme, or pyramid fraud, which had collapsed with losses exceeding 50 billion dollars.

He had told the US Securities and Exchange Commission this year 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 the scheme was likely triggered when nervous clients asked to withdraw funds, as they have been demanding from hedge funds around the world.

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