Massachusetts Investment Firm Accused of Aiding Madoff; Luxury Yachts Seized

Hedge fund management firm Fairfield Greenwich Group served as a feeder fund for convicted Wall Street swindler Bernard Madoff and lied to investors about its link to Madoff’s massive Ponzi scheme, Massachusetts securities regulators said.

The prominent financial firm invested about $7 billion, about 95% of its total assets, in funds controlled by Madoff and showed “a total disregard for such responsibility which helped the Madoff scheme to stay afloat for so long,” according to regulators.

Secretary of the Commonwealth William F. Galvin, in an administrative complaint filed today, accused Fairfield of misrepresenting the firm’s connection to Madoff, who pleaded guilty last month to running a $65 billion investment fraud that lasted for decades. Madoff faces up to 150 years in prison when he is sentenced in June.

The civil charges against the hedge fund manager are the first regulatory action taken against a fund that provided Madoff with access to clients. The firm is accused of violating the fiduciary duties owed to clients by financial firms and of misrepresenting its “degree of knowledge and comfort with respect to Madoff’s operations.”

Massachusetts securities regulators are seeking restitution for defrauded investors, fees paid to Fairfield by those investors, and an administrative fine.

Madoff Coached Hedge Fund to Lie to SEC

The state accuses Madoff of coaching Fairfield officials in 2005 on how to respond to questions from SEC investigators looking into concerns about Madoff’s investment firm. Questions from that investor, Harry Markopolos, were later credited with exposing Madoff’s scheme.

According to Galvin, Fairfield feed $14.8 million into Madoff’s business just a few days days before the 70-year-old former Nasdaq stock market chairman admitted that his prominent investment business was all a fraud.

And the Plot Thickens …

With the civil charges brought against Fairfield for allegedly feeding clients into Madoff’s scheme, the investigation into the historic rip off is expanding. Madoff has said he acted alone in defrauding thousands of investors, but that claim never convinced federal securities regulators.

Last month, Madoff’s longtime accountant was charged with lying about having conducted independent annual audits of Madoff’s books when in fact he had not. Also, this week a Connecticut judge froze the assets of Madoff’s wife, sons, brother, and some business associates as the probe into his business dealings continue.

Meanwhile, federal marshals in Florida have seized two luxury yachts Madoff owned as part of the ongoing investigation into this crimes. One of the vessels, a 55-foot 1969 Rybovich named “Bull,” was “extremely well kept,” officials said. The other seized vessel is a 24-foot boat, officials said.

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