Former Nasdaq chairman arrested by FBI agents over alleged €38 billion fraud

Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a €38 billion "Ponzi scheme" in what may rank among the biggest fraud cases ever.

The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that US prosecutors said racked up $50 billion of fraudulent losses.

Mr Madoff told senior employees of his firm on Wednesday that "it's all just one big lie" and that it was "basically, a giant Ponzi scheme," with estimated investor losses of about €37.6 billion, according to the US Attorney's criminal complaint against him.

A Ponzi scheme is a swindle offering unusually high returns, with early investors paid off with money from later investors.

On Thursday, two agents for the US Federal Bureau of Investigation entered Mr Madoff's New York apartment.

"There is no innocent explanation," Mr Madoff said, according to the criminal complaint. He told the agents that it was all his fault, and that he "paid investors with money that wasn't there," according to the complaint.

The €37.6 billion allegedly lost would make the hedge fund one of the biggest frauds in history. When former energy trading giant Enron filed for bankruptcy in 2001, one of the largest at the time, it had $63.4 billion in assets.

US prosecutors charged Mr Madoff, 70, with a single count of securities fraud. They said he faces up to 20 years in prison and a fine of up to €3.7 million.