World's Biggest Investment Fraud?

World's Biggest Investment Fraud?

An investment fraud in the US, which may cost big Bank Institutions as investors around $50bn (£35bn) has been uncovered in the US.

Last week, leading Wall Street name, Bernard Madoff, was arrested and charged with fraud.  

What has happened?

Allegedly, Mr Madoff was running an illegal ‘Ponzi’ Scheme, a type of pyramid investment scheme where existing investors are paid their growth and income not from real investment returns but from new money coming in i.e.  new money being invested in the same scheme by new, unsuspecting investors.  It is so called as a Ponzi Scheme, named after Charles Ponzi, who used such a scam back in the 1920’s.

Bank losses

The scale of potential losses for this scheme is a little different to that of the 1920’s, with large European and UK banks such as HSBC, RBS, France’s BNP Paribas and Spain’s Banco Santander (owners of Abbey, Alliance & Leicester and Bradford & Bingley), having invested up to $2bn between them in the scheme.  

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