Trial begins against co-conspirators in Madoff Ponzi scheme

Wronged investors hoping to quickly recoup their losses in a securities fraud lawsuit might need to adjust their timeframe expectations. Securities fraud lawsuits can move slowly, if the Department of Justice’s investigation of the associates of former financial figure Bernard Madoff is any indication.

Madoff is currently serving a 150-year prison sentence. However, DOJ officials have been gathering evidence against Madoff’s former colleagues for the past five years. Their effort includes lining up witness testimony, needed to explain to jurors the role that each accused individual allegedly played in Madoff’s Ponzi scheme. Only recently did the DOJ reach the point of readiness: The trial against Madoff’s secretary and four other individuals commenced earlier this week.

Many Ponzi schemes are short-lived, since the fraud can only continue as long as new investor contributions can be found to pay off earlier investors. When the number of older investors overwhelms incoming cash flow -- to the extent that older investors can no longer be paid -- the pyramid scheme generally collapses.

In this case, however, DOJ prosecutors claim that Madoff’s Ponzi scheme operated since the 1970s and defrauded almost $20 billion from thousands of investors in that time period.

As a securities fraud attorney might caution, it can be difficult for the untrained eye to spot a Ponzi scheme. The investment opportunity may sound -- or even be -- legitimate at the outset. However, if a stockbroker or agent misrepresented details, the investment may begin to fail. At that point, a pyramid scheme may be launched to help keep the investment afloat.

Source: miamiherald.com, “NYC fraud trial to begin for 5 ex-Madoff employees,” Larry Neumeister and Tom Hays, Oct. 7, 2013

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