Scam victims: Finance giants count losses
List of potential victims in what is said to be a massive Ponzi scheme run by money manager Bernard Madoff continues to grow.
LONDON (CNN) -- Some of the biggest and best-known names in global finance are calculating they may have lost nearly $3 billion in an alleged $50 billion "pyramid scheme" that led to the arrest of a New York financier last week.
HSBC, one of the world's largest banking groups, could lose $1 billion, it announced Monday.
The Royal Bank of Scotland (RBS) told CNN its hedge funds had exposure of up to 400 million British pounds ($600 million) to funds managed by securities broker Bernard Madoff.
France's BNP Paribas (BNPQ.Y) said Sunday its maximum potential loss was about 350 million euros ($468 million).
Spain's Banco Santander (STD) said it had a direct exposure of 17 million euros ($23 million) while clients of its hedge funds had 2.33 billion euros ($3.1 billion) at risk in Madoff's firm. Spain's second-largest bank, BBVA (BFR), said it could lose up to 300 million euros ($404 million).
Japan's Nomura (NMR) on Monday said it had 27.6 billion Japanese yen ($303 million) of exposure, but that the impact on its capital would be limited.
The Financial Times reported that HSBC could be one of the largest victims, with potential exposure of about $1 billion to the investment manager's collapsed venture. HSBC (HFC.PRB) later confirmed its exposure could be as much as $1 billion.
Madoff, a former chairman of the Nasdaq exchange market, was arrested Thursday on a single securities fraud charge of operating a $50 billion Ponzi scheme from his investment advisory business. A federal court in Manhattan Friday issued a temporary order freezing Madoff's assets and appointing a receiver over him and his firm, his global securities broker company, Bernard L. Madoff Investment Securities (BMIS).
A Ponzi, or pyramid scheme, is an investment fraud in which high profits are promised to investors from fictitious sources. Early investors are paid off with funds raised from later ones.
U.S. District Court Judge Louis Stanton said the order appeared necessary to prevent Madoff or an agent from moving funds out of the court's jurisdiction and to "preserve the status quo" for whatever may come from future proceedings.
Madoff, 70, made an initial court appearance Thursday and was released on a $10 million bond.
According to the complaint filed with the U.S. District Court of Southern New York, two senior employees of BMIS told investigators that Madoff ran the advisory business from a separate floor of the securities firm offices. One of the senior employees said that Madoff kept the advisory business' financial records under lock and key and was "cryptic" about its business.
A document filed by Madoff with the Securities and Exchange Commission early this year said the advisory business served between 11 and 25 clients and had about $17.1 billion in assets, the complaint said.
But on Wednesday, the complaint said, Madoff told senior employees that the advisory business was a fraud, that he was "finished," had "absolutely nothing," that "it's all just one big lie" and that it was "basically, a giant Ponzi scheme."
Madoff said the business had lost about $50 billion and that he planned to turn himself in to authorities in a week. But, the complaint said, he told the employees he wanted to distribute the $200 million to $300 million he had left to certain selected employees, family and friends.
Madoff faces a maximum penalty of 20 years in prison and a $5 million fine if he is convicted.
Madoff's attorney, Daniel J. Horwitz, said Thursday, "Bernie Madoff is a long-standing leader in the financial services industry. He intends to fight to get through this unfortunate set of events."
Madoff founded his securities firm in 1960 and expanded to a worldwide client base. He served as Nasdaq's chairman in 1990, 1991 and 1993, according to Nasdaq Senior Vice President of Communications Bethany Sherman.