Bernard Madoff, the Mafia, and Naked Short Selling

[Joanne98]

Bernard L. Madoff was once the chairman of the NASDAQ stock exchange. He was one of the most important market makers on Wall Street. And he managed what was, by some estimates, the largest hedge fund on the planet.

Yes, Bernard Madoff was an impressive man. That much was clear even before we learned that his $50 billion Ponzi scheme may have been orchestrated in cahoots with the most powerful, sophisticated, and indiscriminately murderous organized crime syndicate the world has ever known.

Charles Gasparino (citing “speculation” from investigators) reported last week on CNBC that the Russian Mafia might have been partners in Madoff’s larcenous fund business. Or perhaps the Mob had an even greater interest in Madoff’s market making operation, as some of our sources have told us in recent weeks.

Either way, there is a certain cachet.

But it wasn’t just pierogies and pistol-packing wiseguys in purple suits. Mr. Madoff was also a dedicated public servant, volunteering countless hours at the Securities and Exchange Commission.

Indeed, Madoff seems to have written many of the SEC’s rules. For example, Madoff was the principal author of an SEC rule that exempted market makers (i.e. Madoff) from various regulations governing short sellers (i.e. Madoff’s friends).

Madoff’s rule ensured that market makers (Madoff) could, among other things, engage in so-called “naked short selling.” To sell “naked” is to sell stock that one does not actually possess. That is “phantom stock,” according to the SEC Chairman and many others.

Sometimes, short sellers (who profit when shares lose value) offload massive amounts of phantom stock to drive down prices, destroy pubic companies, or even crash the market. That is why there used to be restrictions.

At any rate, I don’t think Madoff had an office at the SEC. He certainly was not employed there. But the SEC was glad to have Madoff write a rule exempting Madoff from the rules. The formal name of the rule is, “the option market maker exception to Rule 203(b)1,” but the SEC was so thankful that it named the rule after the great man himself.

It was called, “The Madoff Exception.”

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http://www.deepcapture.com/bernard-madoff-the-mafia-and-naked-short-selling/

[Joanne98]

1. More on the SEC ruling here...

http://emsnews.wordpress.com/2009/01/21/all-in-the-family-ix-kaztenjammer-kids/#more-1084

[Jambalaya]

2. RubliCON

This may be of no particular interest to most,or even to some, but did you know that Chuck Norris owns/owned a gambling Casino in Russia? Called the Beverly Hills Casino. Originally set up back in late 80's -early 90's. May still be in existence.Norris is continuously linked to casino venues and promos.

This I found odd,considering he was stumping with Huckabee-big Fundie-this past Presidential cycle.

Maybe they should have developed a game show-Betting on Ballots...

[Joanne98]

3. Madoff-hit Luxembourg funds halt redemptions

Jan 21st, 2009 | BRUSSELS, Belgium -- Sixteen Luxembourg-based funds that have put euro1.9 billion ($2.46 billion) into a massive pyramid scheme allegedly operated by U.S. financier Bernard Madoff have stopped investor withdrawals, the country's fund industry said.

The Luxembourg Fund Industry Association, or ALFI, named only three of the funds whose losses have been made public: LuxAlpha, Luxinvest and Herald (Lux).

Luxalpha board member Rene-Thierry Magon de la Villehuchet committed suicide last month when he lost $1.4 billion (euro1 billion) that he had invested with Madoff. Both Luxalpha and Luxinvest were promoted by Swiss bank UBS. HSBC and clients of Austria's Medici bank placed money with Herald.

In the U.S., hedge fund assets fell by $100 billion (euro77 billion) in October alone as investors withdrew their money and funds were forced to sell stock, exacerbating the severe volatility that pounded global markets during the month. Some funds have reacted by banning any more withdrawals.

http://www.salon.com/wires/ap/business/2009/01/21/D95RI72O0_eu_luxembourg_madoff/index.html