NEW YORK, June 23 – US financial regulators on Monday charged a brokerage firm and several individuals with funneling billions of dollars to help finance Wall Street swindler Bernard Madoff\’s massive Ponzi scheme.
The Securities and Exchange Commission (SEC) filed a complaint in a US district court in New York against Cohmad Securities Corporation, its chairman Maurice Cohn, his daughter and chief operating officer Marcia Cohn, as well as registered representative Robert Jaffe for securities fraud.
Jaffe and the Cohns, the SEC said, "collectively raised billions of dollars from investors for Bernard Madoff\’s Ponzi scheme," which is estimated at between 50 and 65 billion dollars.
"They ignored and even participated in many suspicious practices that clearly indicated Madoff was engaged in fraud," the SEC added in its filing.
The defendants, it said, were paid over 100 million dollars by Madoff for raising billions of dollars and bringing in more than 800 investor accounts over two decadess.
Jaffe participated in Madoff\’s pyramid scheme "by soliciting investors and bringing more than 1 billion dollars" into Bernard L. Madoff Investment Securities LLC (BMIS), according to the SEC.
Madoff, it said, "compensated Jaffe with outsized returns in Jaffe\’s personal accounts that he knew, or was reckless in not knowing, were manufactured by BMIS employees entering fictitious, backdated trades onto trade confirmations and account statements for his personal accounts at BMIS."
Cohmad was paid an annual percentage of the funds that its representatives brought into BMIS offset by withdrawals from the investor accounts, an arrangement the SEC said indicated to the defendants that Madoff\’s company "was not providing any real returns to investors."
In some years, the referral business accounted for up to 90 percent of Cohmad\’s revenue, the regulatory body said.
The defendants, it added, specifically targeted "affluent but financially unsophisticated investors."
Madoff, 71, is scheduled to be sentenced on June 29 for his role in conning investors, many of them elderly retirees who thought their life savings were in safe hands, into depositing billions of dollars that were then used to pay fictitious returns.
The former Nasdaq stock exchange chairman faces up to 150 years in prison. He has been in jail since March after admitting guilt in the scheme, the biggest in Wall Street history.
Just one week away from the verdict, the SEC spoke out more vocally about the case, in the wake of accusations that it did not launch an early investigation into Madoff\’s scheme, despite several complaints.
"Madoff had a clever marketing strategy. He cultivated an aura of success and secrecy surrounding BMIS, projecting to a social network of wealthy friends and investors that he was highly successful and did not need to market or solicit to obtain investments," the financial regulator said.
"Madoff played hard-to-get, shunning one-on-one meetings with most individual investors and arbitrarily refusing prospective investors for what appeared to be whimsical or snobbish reasons."
Several other feeder funds have been placed on the hot seat in recent months. US court-appointed trustee Irving Picard in April brought charges against two of the funds, both registered in the British Virgin Islands.