50 billion dollars.

When do you decide "wow, this is a ton of money!" and disappear?

Because for me, it would have been 49 billion dollars earlier. That's "buy your own island" money.

The government has got to start seizing assets of the ownership when these kinds of things happen. They will seize everything some stupid schmuck owns if he was dealing drugs. Defraud billions of investors hiding behind the supposed credibility of Wall Street and your assets are still yours.

This revelation that someone with that kind of reputation was doing this and how un-regulated things are now is extremely scary. Who knows how many more of these scams are out there.

There is a comment on the Business Week article that mentioned that the fed gave Blackrock a chunk of the bail out even after Blackrock was frozen because they didn't have enough to pay out investors. If you google Blackrock and bail out it pulls up a bunch of links how Blackrock and Pimco are getting some sort of preference in the bail out. We had one of our 401k funds forcibly changed to Blackrock when the managers axed another fund. I looked at Blackrock at that point and moved the money right away.

Pimco is pretty shady too. It seems like the fed is purposely doing things that won't end well.

@Shadowfire: I could settle for 500 mil

@metsarethe...: I'd settle for five bucks and a pack of Cheese-Its.

My standards for success are quite low.

Is there some reason that crimes like this are not capital?

Oh, I thought ya'll were talking about Chris Pirillo's wife...

@AlexDitto: I don't need the cheez-its.

At least he wasn't a Rockefeller.

Who says crime doesnt pay? Michael Milken is being considered for a pardon and even without it, is still a multi millionaire. Yet a drug dealer is sentenced far harsher

@bohemian: yeah, but drugs kill people. In this situation, you only lose your money, not your life...

But i understand what your point...the penalties must be more severe.

A few billion here, a few billion there...soon, you're talking about real money.

They're saying the NASDIQhead ran a Ponzi scheme? The whole of Wall Street is a Ponzi scheme, dependent upon continuous growth. It has to end sometime.

@TechnoDestructo: Let's use a white rope to make a white collar.

@BoomerFive: I'd settle for a Cheese-It.

The scary thing is that even legitimate, although battered, hedge funds could quickly collapse because of that schmuck Madoff.
Igniting cries of "save the poor, sophisticated investors and needy sovereign fund managers!"

Hmm, I smell a bailout coming up!

The story I found exceptionally interesting was the one where people were putting money in the fund *because* they thought it was crooked. The returns were too good to be true, (too high, too consistent) but they thought it was insider trading, not ponzi.

@Shadowfire: He probably had to pay most or all of that to old investors to make the gains look legitimate... I'd be surprised if he made out with 50 million personally from this scheme. What is shocking most of all is that a ponzi scheme would even work for a minute as a giant hedge fund.

@bohemian: Drug dealers don't make a lot of contributions to political parties. High profile embezzlers do.

@P41:

What's this you say? People doing unethical things to make a quick buck? You've got to be kidding!

I don't get it, where did all the money go? I understand that he had to pay old investors and whatever, but what the investors put in should still be there.

Is this missing $50 billion the made up "gains" from the fund? Or was it paid out to some fat cats who took all their money out?

Either way, it's $50 BILLION! I don't think I can even spend that much in my entire life even if I wanted to!

@Shadowfire: Actually, depending on the size of the private island, they can be had for much, much less than $1 billion. [www.privateislandsonline.com]

Really, a good island runs you about $2-10M US. 250 foot yachts will run you about $200M! A luxurious mansion in the hollywood hills will run you $3-10M. So, they're priced quite low. But then you have to worry about compsognathi running around terrorizing your daughter.

@bohemian: Very true, after all, the first letter of RICO stands for "Racketeering". The shoe fits. But the Fed won't do it, since after all, the whole of Wall Street is basically a Ponzi-ish gambling scheme, too... You'd have to go after all of them: AIG, Bear Stearns, Goldman Sachs, WaMu, Chase, BoA, Lehyman Brothers, ...

@rolla: Yeah because nobody has ever been killed over a fuck ton of money before.

@rolla:

Umm, you tell some schmuck he lost everything. You've just committed a violent crime in my eyes. You've threatened them just as much as a punk robbing a robbing a liquor store threatens the clerk. Except you're usually doing it on a scale that defies comparison to the punk with the gun. You don't think they're comparable? How many of these people will commit suicide, fall into drug patterns, have to seek psychiatric treatment, suffer divorces, et al. from this idiot's actions.

White collar crime is still crime and we're foolish to act like there is less effect or a "lesser" violence to it. ALL crime is violent. ALL crime is an imposition of oneself above another by the perpetrator. ALL prisons should be 23 hour a day lock down, maximum scurity prisons. No mollycoddling. No differences. The only compassion in the justice system SHOULD be the jury.

The current situation is as ridiculous as the one between men and women "offenders" that get caught popping some teenager. Woman does it? Slap on the wrist (especially if she's got looks) Guy does it? He's a farking pedophile burn him, BURN HIM! They're the same crime, but treatment is unequal.

@snoop-blog: I know people who've killed over twenty bucks before.

I'm just waiting for the light to shine on Eddie Lampert and the whole Kmart/Sears scheme. I suppose it will come right after he spends the last of the Cash reserves he got with the sears acquisition on stock buybacks in the new company he formed.

@P41: The greed and lack of ethics on the part of some investors is a major factor in any investment scam. The whole mortgage/subprime credit debacle was fueled by people wanting something for nothing and thinking they'd found a foolproof way to get it.

@Trai_Dep:
Goldfish crackers or no deal

@P41: Isn't that waht the sacammers count most on? The whole mortgage/subprime credit debacle is was based in large part on those people who want something for nothing and thnk they've found a sure way to get it.

Seriously, what happens if it ends up that this isn't the only one and that there are a bunch of these kinds of funds that are just elaborate ponzis? If you have a huge swath of the rich, businesses and municipalities losing their shirt and some average investors that lose all of their retirement, then what?

Now combine that with the big three all dying at the same time. They take all of their vendors and employees with them. The two situations combined could collapse a big percentage of jobs and leave just about everyone with no retirement money left.

We have been told for the last 25 years that your 401k and IRA are your retirement. They wanted to turn social security into a hybrid 401k. Now it might be a situation were almost everyone has lost all or most of their retirement. At the same time boomers are getting ready to retire.

@AlexDitto: I do aim a bit higher. Ten bucks, a case of Fat Tire Beer and a box of Triskets. If not Triskets I'd settle for Goldfish.

@P41: Actually, if they went into it heads up knowing what they were doing ("something's shady but I'm not gonna ask") and if they timed their exit well, they could get in and out without being hurt.

But timing an exit on something like this is strictly luck, unless you have a way of knowing something.

@Hands:

Oh I think you'd be surprised; I'm sure drug dealers that deal in the $50 Billion dollar arena probably contribute more than you think.

@wildhalcyon: Hey, I call that a bonus security force.

to P Smith: Technically, Wall Street is not a Ponzi scheme. Wall street is a speculative bubble, in that in a bear market, each investor hopes that the next investor will pay more than they did and then the first will make a profit. As long as people think the stock will rise, everyone makes money -- until the bubble bursts and the stock falls. But each investor goes in knowing (or should be knowing) that the bursting bubble is out there.

Ponzi schemes, on the other hand, investors believe their funds are actually invested in something and receive statements from time to time indicating that their funds are indeed there. The statements are fraudulent, and only when the investors ask for their money back is the scheme detected.

Not quite the same thing.

@bohemian: I will BET on this not being the only one. I will bet on MOST of them being pure snake oil.

As for the poor boomers - p on 'em. I was born in the last year of the boom and they actively blocked me my whole life. Over the years, I saw that they were following a lemming mentality that was not sustainable, so even after I finally got a break, I didn't join in on the financial shenanigans.

So here I am with no debts other than my mortgage and 100% liquid in assets and haven't lost a penny. I know how to live on my income, and live well on it. I counted on NEVER being able to retire, and have structured my life to accommodate this as much as possible. Now that the playing field is leveling and they are playing MY game, I finally have the advantage I was denied in my youth. I will capitalize on it.

@tinmanx:

Exactly - it's not like he has $50BN sitting around - if he did, it wouldn't be a Ponzi scheme. The vast majority of the $ have been already paid out to investors who thought they were getting the returns promised to them. He gave up because too many investors wanted to pull their money out, which made it impossible for him to continue.

Just another great reason to continually get educated about investments. Open a discount brokerage account and handle your own money. Nobody cares about your money more than you. Despite what the "so-called" experts want you to believe, investing is not hard.

Hey ben, just remember that "Everything that sucks is dying" doesn't necessarily mean that everything dying sucks.

@lore: The Fed beat you to it.

Oh it's worse than just this. If the government guts budgets of the governing body, or finds ways to redirect budgeted funds for something else, then points their finger at those governing bodies and says, "See! They don't work!" This is what we get left with.
It's insane too. We get banks betting off the books, we get oil and power companies operating in false markets behind closed doors. We get "We'll buy your *old* gold jewelry", effectively stealing from the poor and the aged. We get "Right to Work" states that really means consumers have *NO* rights and no recourse. (Read the Appeal, it's the truth.)
Now we have utility companies, including brand name wireless companies, as well as others turning to badgering existing customers for late payments that don't exist, using a new technique of 'billing into the future' so they can scam monies into their failing bank accounts. We effectively get the death of a fair system of capitalism, all for the cheap price of PAC money for the career politician.
The worst yet to come...

$50 Billion? $50 Billion?

All of a sudden $15 Billion for the auto bailout seems like a deal!

@bohemian:

Don't worry, I here this criminal may spend as much as 5 years behind bars and he will learn his lesson when he has to pay a $17,000,000 fine!

"...everything that sucks is dying?"

On the contrary. Congress is still going strong...and is far more powerful now than it was three months ago.

@MikeWas: Yes. Soon the Chancellor will overtake the Senate, and the Jedi will be but a memory. It is all going according to plan.

@wildhalcyon: Freakin compsognathasaurs (sp?)...... It is far more terrifying to be eaten by hundreds of tiny bites than a single large T-rex bite.

@TechnoDestructo: At least in the US, the SCOTUS has held that you can not use capital punishment for a crime where someone did not die. I do agree with the sentiment though as one fraud like this has a much wider and, to some extent, socially destructive effect.

@Trai_Dep: If every hedge fund in the country went belly up and never revived, the country would be better off.