'Superwoman' stung by hedge fund guru's '$50bn trading scam'

Investors threw money at Bernard Madoff in the expectation of spectacular returns. But now he has been charged with fraud

From Florida golf clubs through Long Island's playground of the rich and famous, all the way to the City of London's boardrooms, investors large and small are reaching to check their wallets, scared they may have become victims of Wall Street's biggest fraud.

Many wealthy clients face financial ruin following the arrest of 70-year-old Bernard Madoff, a Wall Street grandee and one of its most respected and well-connected money managers, on charges of operating a $50bn (£33.5bn) investment scam. Many more expect to emerge with substantial losses and beetroot faces.

In London, the most startling confession came from Nicola Horlick, probably the most famous British fund manager, known as Superwoman for balancing her high-flying finance career with bringing up five children. Her fund, Bramdean Alternatives, had almost 10 per cent of its assets – about £10m – invested with Mr Madoff, money Ms Horlick admitted yesterday she was "uncertain" she would ever see again. Bramdean shares lost a third of their value.

In an interview just a few months ago with the Financial Times, Ms Horlick had praised Mr Madoff. "He is someone who is very, very good at calling the US equity market," she said. "This guy has managed to return 1 to 1.2 per cent per month, year after year after year."

If that sounded too good to be true – well, of course it was.

On Wall Street yesterday, veteran players were still catching their breath, as details emerged about the scam. Madoff Investment Securities in New York claimed to manage $17bn directly on behalf of clients, and through derivatives an estimated $50bn was banking on Mr Madoff's performance. But the complex trading he claimed to be carrying out was a sham, the returns he claimed to be making were fake, and the money he was paying out to clients was funded only by getting more cash in the other door from new victims.

The money-management business was "all just one big lie" and "basically, a giant Ponzi scheme" he told his two sons, Andrew and Mark, when they confronted him on Wednesday night. They turned him in, and the FBI came to arrest him at his Manhattan home on Thursday morning. He had "no innocent explanation" for his behaviour, he told an FBI officer.

If Mr Madoff's estimate of $50bn in losses turns out to be correct, the scam will dwarf anything carried out by the eponymous Charles Ponzi in the 1920s. It would be more than four times larger than the fraud which brought down WorldCom, the telecoms giant, in 2002, the biggest bankruptcy in US history. It is not known yet just how many years the trader may have been cooking his books, but it might also end up as one of the longest to have gone undetected.

Mr Madoff founded his trading firm in 1960 with $5,000 he made from working as a lifeguard on Long Island. By the Seventies, he was one of the industry's best-loved and most respected characters, rising to be a founder of the Nasdaq stock market, which he used to chair. He split his time between Manhattan and Long Island and Palm Beach in Florida, where fellow country club members would see it as a badge of status to have money invested with him. He was a popular choice for the East Coast rich, for charitable foundations, and for professional investors alike. In the centre of the hedge fund world, in Greenwich, Connecticut, many "fund of funds" funnelled money to Madoff investment vehicles. As the scurrilous New York Post put it yesterday, "Suicide hotline in Greenwich could be lit up."

Andrew and Mark Madoff had long worked in the share-trading part of their father's business, but he kept his asset-management activities separate and secret, with books kept under lock and key, and investment returns audited by a backwoods firm rather than one of the major accounting names.

With the credit crisis forcing wealthy investors to cash in their holdings, Mr Madoff appeared under increasing stress in recent weeks. Sitting in his Manhattan study on Tuesday night, he told his sons that clients with $7bn wanted their money back – but that there was no money. I'm "finished", he told them. I have "absolutely nothing".

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
Russell Brand discusses Trident and the NHS in an episode of the The Trews.
news
News
The cartoon depicts the UK (far left) walking around a Syrian child refugee
newsIn an exclusive artwork for The Independent, Ali Ferzat attacks Britain's lack of 'humanity'
Life and Style
tech
Arts and Entertainment
film
Sport
footballManager attacks Sky Sports pundit Jamie Redknapp after criticism of Diego Costa's apparent stamping
News
video
Life and Style
food + drink
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

Recruitment Genius: Web Developer - PHP

£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Day In a Page

Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness
Homeless Veterans appeal: Homeless in Wales can find inspiration from Daniel’s story

Homeless Veterans appeal

Homeless in Wales can find inspiration from Daniel’s story
Front National family feud? Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks

Front National family feud?

Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks
Pot of gold: tasting the world’s most expensive tea

Pot of gold

Tasting the world’s most expensive tea
10 best wildlife-watching experiences: From hen harriers to porpoises

From hen harriers to porpoises: 10 best wildlife-watching experiences

While many of Britain's birds have flown south for the winter, it's still a great time to get outside for a spot of twitching
Nick Easter: 'I don’t want just to hold tackle bags, I want to be out there'

'I don’t want just to hold tackle bags, I want to be out there'

Nick Easter targeting World Cup place after England recall
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore