U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20834 / December 19, 2008
Securities and Exchange Commission v. Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC (S.D.N.Y. Civ. 08 CV 10791 (LLS))
SEC Obtains Preliminary Injunction, Asset Freeze, and Other Relief Against Defendants
The United States Securities and Exchange Commission announced that on December 18, 2008, the Honorable Judge Louis L. Stanton, a federal judge in the Southern District of New York, entered a preliminary injunction order, by consent, against Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC ("BMIS"). The preliminary injunction continues to restrain Madoff and BMIS from violating certain antifraud provisions of the federal securities laws. Also, by consent, Judge Stanton ordered that assets remain frozen until further notice, continued the appointment of a receiver for two entities owned or controlled by Madoff in the United Kingdom (while defendant BMIS remains subject to oversight by a SIPC trustee), and granted other relief. The preliminary injunction order continues the relief originally obtained on December 12, 2008, in response to the Commission's application for emergency preliminary relief that sought a temporary restraining order, an order freezing assets, and other relief against Madoff and BMIS based on his alleged violations of the federal securities laws.
The SEC's complaint, filed on December 11, 2008, in federal court in Manhattan, alleges that the defendants have committed a $50 billion fraud and violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act of 1940. The complaint alleges that Madoff last week informed two senior employees that his investment advisory business was a fraud. Madoff told these employees that he was "finished," that he had "absolutely nothing," that "it's all just one big lie," and that it was "basically, a giant Ponzi scheme." The senior employees understood him to be saying that he had for years been paying returns to certain investors out of the principal received from other, different investors. Madoff admitted in this conversation that the firm was insolvent and had been for years, and that he estimated the losses from this fraud were at least $50 billion.
The Commission continues to seek, among other things, a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and civil money penalties.