A prominent Wall Street trader was arrested on charges of massive fraud that may cost investors $50 billion. Wall Street Journal reporter Tom Lauricella discusses what may be the largest fraud scheme in the history of Wall Street.
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Bernard Madoff came to be known as something of a powerhouse in the world of hedge funds and investments. Madoff's asset management firm was known for the promise of high returns, but federal authorities arrested and charged him yesterday, saying those returns were a fiction.
Investigators say Madoff was allegedly paying out new money that he took in from other investors. The scheme may have totaled tens of billions of dollars, perhaps as high as $50 billion.
Tom Lauricella has been covering this story for the Wall Street Journal, and he joins us from New York.
Tom Lauricella, this is a fascinating rags-to-riches story. First, give us some background of where he came from and what he built up.
TOM LAURICELLA, the Wall Street Journal: Sure. Bernie Madoff is probably not a household name for most investors, but on Wall Street and among sort of elite, moneyed investors in New York, and sort of in Florida, Palm Beach area, he's a legend, almost a hero.
He was a pioneer in trading stocks outside the exchanges, helped build up what became the trading platform that became the Nasdaq stock market.
And while he's mainly known for sort of his work on the nuts and bolts, inner workings of the stock market, he also had another business where he was managing money for very wealthy clients, for hedge funds, institutions.
And what he was known for was putting out these incredibly steady, reliable returns, earning people a little bit of money month after month and, most importantly, never losing money.