Missing $165m: Madoff cleaned London out just before his arrest - Business News - Business - The Independent

Missing $165m: Madoff cleaned London out just before his arrest

Bernie Madoff, the $60bn fraudster, ordered his London office to sell its $165m portfolio of UK gilts only a month before he confessed to the FBI that his business was a "big lie".

The London directors followed his instructions, transferring the sale proceeds to Madoff's New York office. However, it is still not clear where this money went to.

The Independent on Sunday has established that in the middle of November last year Madoff phoned Chris Dale, the finance director of Madoff Securities International (MSI), the London affiliate, and told him to sell the entire gilts portfolio. Madoff then instructed Mr Dale to transfer the money to his New York business, whereupon he would buy US treasuries on London's behalf.

In the telephone call, Mr Dale was told by Madoff that he wanted to make the switch due to worries about the return on gilts because of sterling's fall against the dollar. "He was worried about the British economy and said he preferred his investments in US treasuries," said a source. "This seemed perfectly realistic at the time because of the banking crisis and the pound's weakness."

Madoff's London office, headed by City veteran Stephen Raven, was a proprietary trading business capitalised by the Madoff family money to the tune of $200m (£125m). After the $165 million was transferred, London was left with assets of around $40m. These assets are still frozen by the UK courts, and may become subject to legal claims by investors in the US who have lost millions in the scam.

Madoff Securities directors carried out Madoff's instructions to sell the gilts, taking the certificates out of their bank vault in its Berkeley Street office and selling the bonds through their usual channels. As a member of the London Stock Exchange, MSI regularly cleared through Barclays Capital and the London Clearing House. A few days later, the London Madoff executives received the contract notes and settlement statement confirming the purchase of $165m of US treasuries from its counterpart, Madoff's New York office, BLMIS.

However, a few days after the firm's collapse, Lee Richards, the senior partner of Richards, Kibbe & Orbe, the US liquidator appointed to investigate Madoff, informed the London office that the contract notes and settlement statement for the US treasuries were bogus. It appeared that no US treasuries had been bought.

Neither Mr Raven nor Mr Dale were available for comment. But sources close to the situation claim that no one in the London office was suspicious about Madoff's request to sell gilts for Treasuries as he regularly made similar investment switches of up to $10m between London and New York, though he had never before ordered such an important investment decision.

To date, neither the Serious Fraud Office nor the US investigators have interviewed all the directors and traders operating the London firm.

The US liquidator was not available this weekend to comment on whether the money had been tracked down. But earlier this year, Mr Richards filed details of the complex paper trail surrounding the missing money with the US Southern District Court. It is understood that he has revealed many of the cover-ups operated by Madoff in his multi-billion-dollar Ponzi scam and has established where the funds were sent to. Among the 11 charges against Madoff, two are directly related to international money-laundering, said to cover money transfers mainly between London and New York.

Madoff, who is on a $10m bail, was due to be sentenced on 16 June but this has been postponed to 29 June. After he confessed his giant fraud to his sons, they turned him in and he was arrested by federal agents on 12 December.

In March, Madoff pleaded guilty to running what may turn out to be one of the biggest Ponzi schemes in history. He has maintained throughout that he was the only person involved in the swindle. In Madoff's statement to the New York court earlier this year, he said: "The Madoff London office was a legitimate, honestly run and operated business."

As well as his market-making business, Madoff ran an investment advisory business which drew in billions of dollars from many of America's top investors and celebrities. In the UK, several banks, such as HSBC and RBS, and hedge funds including Man Group and Nicola Horlick's Bramdean, lost millions in the scheme.

News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
Sport
FootballFull debuts don't come much more stylish than those on show here
News
i100
PROMOTED VIDEO
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Travel
travel
News
The ecological reconstruction of Ikrandraco avatar is shown in this illustration courtesy of Chuang Zhao. Scientists on September 11, 2014 announced the discovery of fossils in China of a type of flying reptile called a pterosaur that lived 120 millions years ago and so closely resembled those creatures from the 2009 film, Avatar that they named it after them.
SCIENCE
Life and Style
tech
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Matisse: The Cut-Outs exhibition attracted 562,000 visitors to the Tate Modern from April to September
art
Life and Style
Models walk the runway at the Tom Ford show during London Fashion Week Spring Summer 2015
fashionLondon Fashion Week 2014
News
Kenny G
news
News
peopleThe black actress has claimed police mistook her for a prostitute when she kissed her white husband
Life and Style
techIndian model comes with cricket scores baked in
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Training Coordinator / Resource Planner - City, London

£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...

Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week