Based upon the recent sharp increase in website visitors and both the public and private feedback, Toomre Capital Markets LLC ("TCM") appears to have become one of the better resources for information regarding the Bernard L. Madoff Investment Securities, LLC fraud scandal. TCM's two principals, Lars Toomre and Aldon Hynes, are geeks at heart and tend to be better with numbers and technology than names and social relationships. Of course, though, the Madoff fraud abounds with so many investors, organizations, charities, lawyers and other entities that have names and relationships that cumulatively quickly become overwhelming.

Hence, Lars and Aldon thought that this website's readership might appreciate some visualization to assist in gaining a better understanding of some of the many principals and relationships that are a part of the Madoff fraud scandal. Most of the labels on the visualization below link back to other content on this website. This first graph (of what may become several) depicts what we acknowledge is incomplete information about the major "feeder funds" that contributed investor dollars to the Bernie Madoff's investment operation:

Visualization of Madoff Securities "Feeder Funds":

TCM would appreciate receiving comments in the section below about information that should be incorporated into the above graph. We will endeavor to update both this post and to produce additional social network graphs about other portions of the complex Madoff fraud social network map. Reader comments and thoughts are not only welcome, but also highly encouraged.

The Sunday January 25th 2009 edition of The New York Times has an article in its Real Estate section entitled Every Man for Himself. This article details how one Richard Murphy in 2007 paid $33 million for the 25-foot-wide town house at 7 East 67th Street.

At the time, this purchase was the highest price on record for an Upper East Side town house built on a standard 25-foot-wide lot. The home has 12,000 square feet of space on seven levels, including the basement. Apparently Mr. Murphy has been considering listing it now for $36 million. "But brokers were skeptical that he would get that price, with one suggesting it might eventually sell for $30 million at most, about 10 percent less than he paid." This story is indicative of how even Manhattan real estate is beginning to sag under the weight of Wall Street layoffs, hedge fund retrenchment and the economic recession.

Toomre Capital Markets LLC ("TCM") took particular note of this story because of the firm Mr. Murphy until very recently worked for: Fairfield Greenwich Group, the "feeder fund" group with the largest exposure to Bernie Madoff's fraudulent investment business. Fairfield Greenwich is reported to have had approximately $7.5 billion invested with Madoff at the time of his arrest. The article notes that Mr. Murphy is listed as one of the defendants, along with other Fairfield Greenwich partners, in lawsuits brought by disgruntled and aggrieved investors.

According to this court document, The New York Times may have gotten Mr. Murphy's first name wrong. The name listed in the lawsuit with other Fairfield Greenwich partners is Charles Murphy, who lives at 202 Round Hill Road in Greenwich, Connecticut — a short distance from 175 Round Hill Road and the home of Fairfield Greenwich Group founder, Walter Noel. Their Fairfield Sentry fund is said to have had substantially all of its approximate $7.2 billion in assets invested with Bernie Madoff.

Walter Noel and his wife Monica are parents to five daughters. The picture in the upper left of this post is from their 2005 Christmas card and show clockwise from the left, Lisina, Corina, Walter, Monica, Ariane, Marisa, and Alix. Each of the five daughters is now married and many of the son-in-laws became involved in Fairfield Greenwich Group business. Four of the five son-in-laws along with Walter Noel are named in the above referenced lawsuit.

Corina, the eldest, married a Columbian named Andres Piedrahita, who became a partner of Fairfield Greenwich. Corina and her husband apparently relocated to London some years ago and subsequently spent considerable time in Spain as well while raising funds from European and Latin American investors. Rumor has it that Andres Piedrahita "may have done something fatally stupid by placing 2x-3x-laundered Columbian Drug Cartel money into the FFG-Madoff sinkhole". The court document referenced above includes Andres Piedrahita as one of the defendants. According to that document, Mr. Piedrahita is being represented by Andrew Levander, the same lawyer who also happens to be representing Ezra Merkin and his "feeder funds" in lawsuits by other distraught Madoff investors.

The Friday January 23rd 2009 edition of The Wall Street Journal included an article entitled Probers Work Backward on Madoff written by Kara Scannell and Amir Efrati. This article summarizes the unusual case in the Bernie Madoff scandal where the principal figure was the first to confess to his criminal behavior. Normally, prosecutors and investigators work their way up the chain to the principle figure(s). In the Madoff case, they have been forced to work backwards to figure out who else could have helped Mr. Madoff, who said that he acted alone.

According to the article, the SEC recently issued subpoenas to a Madoff lieutenant, one JoAnn "Jodi" Crupi, and a brokerage firm affiliated with Mr. Madoff. Ms. Crupi is represented by lawyer Eric R. Breslin. Regulators are focused on documents about her compensation and her dealings with certain firm clients, including some charities. They also have asked for access to her personal computer. This last request makes Toomre Capital Markets LLC ("TCM") wonder whether regulators suspect that there were communications with clients from private e-mail accounts (as reportedly happened earlier in the timeline of this scandal).

Also, apparently regulators are preparing to issue a second subpoena to another Madoff associate, Frank DiPascali. He is represented by lawyer Marc Mukasey of the firm Bracewell & Giuliani LLP in New York. Mr. DiPascali has been reported to be Mr. Madoff's senior assistant (or even chief financial officer) and, according to Bloomberg News, investors' "Go-To" guy in the operation of the investment management business. According to investor Tim Murray of Minnesota, Mr. DiPascali was a “street-smart New Yorker” who fielded calls about the millions of dollars he entrusted to the firm. “To a Madoff customer with a discretionary account, he is the guy,” said Mr. Murray, 57, a real-estate developer. “There is nobody else.”

Ms. Crupi and Mr. DiPascali both worked on the now infamous 17th floor where the investment management portion of Bernie Madoff's business was kept separate from the broker/dealer market making operations. Like many who have learned of this fraud, authorities do not believe Mr. Madoff's assertion that he acted alone in pulling off such a large fraudulent scheme that seems to have stretched back at least three decades and involved literally thousands of investors. Those investors received monthly and quarterly account statements that are now believed to be fraudulent. One of the open questions is: Who helped Bernie Madoff prepare such detailed and ultimately fraudulent statements?

Stanley Chais, 82, is a private investor who has been active in a wide range of Israeli and American Jewish charitable activities over the past 30 years. Apparently, over the past thirty years, Mr. Chais has combined his business activities with a wide range of philanthropic endeavors for the benefit of Jewish communities in the United States, the former Soviet Union (FSU) and Israel. He believes that “all Jews are responsible for each other", and therefore, he, who can afford it, should support areas that promote learning and culture.

Stanley Chais also is the head of a limited partnership or investment management firm, Brighton Co. of Beverly Hills, California, that apparently served as a "feeder fund' to Bernie Madoff's investment scheme. It had invested and hence lost about $250 million with Bernie Madoff. From The Los Angeles Times, one might learn that apparently Mr. Chais previously served on more than one charitable boards with Bernie Madoff. Stanley Chais and his firm also have been sued by one Michael Chaleff of Arlington, VA, a former Justice Department lawyer. Mr. Chaleff's lawyer, a certain Reed Kathrien, with the Oakland firm of Hagens Berman Sobol Shapiro, indicates that many of Brighton's investors were in the investment business and lost small fortunes "because they'd been in [the investment funds] for 10 or 20 or 30 years."

According to the suit, Mr. Chaleff was part of a 50-member investment group called CMG that lost $75 to $80 million it gave to Brighton Co. Mr. Chais apparently managed about 10 such groups of investors and substantially all of those collective funds were invested in Bernie Madoff's fraudulent scheme.

The class-action suit filed on Mr. Chaleff's behalf alleges that the Brighton firm was "aware of, or recklessly disregarded, the misuse and mismanagement of investment funds." Subsequent to Bernie Madoff's arrest, Stanley Chais indicated that he had not only personally invested with Madoff, but also had "facilitated" others who desired to do likewise. He also claimed that he and his family also were "swindled" and had lost "a huge amount of money."

A bit ominously for Mr. Chais, both the Securities and Exchange Commission and the California Department of Corporations reported that they could not find any records of Chais registering as an investment advisor or broker. Also of concern, Mr. Chais apparently took a piece of the partnership's profits as management fees, usually according to one investor about 3.8%, from a partnership that was a "kind of private, hush-hush fund" geared toward "private arbitrage accounts." That same investor indicated that he and his wife thought the partnership funds were invested in currencies, stocks and other securities. More ominously, Bernie Madoff's name and his investment firm never were mentioned.

Bernard Madoff allegedly defrauded many investors over many years. One of the key reasons why his alleged fraud was able to continue for so many years was that Madoff was able to claim that he only had a few investors, most of which were so-called "feeder funds". As Toomre Capital Markets LLC ("TCM") noted in the post Update on Bernie Madoff Scandal and Feeder Funds, the five largest admitted feed funds were Fairfield Greenwich, Tremont Capital, Banco Santander, Bank Medici and Ascot Partners. Two days ago, TCM wrote more about the legal travails of Ezra Merkin and his Ascot Partners and Gabriel Capital hedge funds in the post Ezra Merkin and Madoff Feeder Funds Face More Lawsuits.

The largest of the Madoff "feeder funds" was Fairfield Sentry Fund run by Walter Noel's hedge-fund firm Fairfield Greenwich Group. All told that firm had approximately $7.5 billion invested with the alleged fraudster Bernie Madoff. On Monday January 12th 2009, the latest (and at least the third) civil complaint was filed against this "feeder fund" manager. This suit was filed on behalf of investors by noted lawyer David Boies, who also represents "Hank" Greenberg (formerly the CEO of AIG) and who previously argued before the U.S. Supreme Court on behalf of presidential candidate Al Gore in the 2000 election litigation regarding the State of Florida re-count fiasco. Mr. Boies is now representing two trusts and a holding company based in the Cayman Islands as well as Carlos Gauch of Mexico.

The complaint states “Most, if not all, of the assets of the plaintiff class had invested with defendants were stolen through the Madoff Ponzi scheme.” Boies further wrote “These losses could have been avoided if defendants had fulfilled their duties” and “if they had adequately investigated and monitored Madoff. ” Through the complaint, the plaintiffs are seeking the return of their investments and fees as well as damages.

The defendants are the firm's founder Walter Noel, Andres Piedrahita and Jeffrey Tucker. They are accused of breach of fiduciary duty, negligence and unjust enrichment, among other counts. Other defendants apparently include the Dublin branch of Netherlands-based Citco Bank Nederland NV, which maintains Fairfield Sentry’s escrow account, according to the complaint. The inclusion of Citco (primarily known as a fund administrator for a great percentage of the largest hedge funds) is noteworthy because it suggests that Mr. Boies is attempting to go after other "deep pockets" that might be able to contribute to the funds available to aggrieved investors. This suit is referenced as Inter-American Trust v. Fairfield Greenwich Group, 09-cv-301, U.S. District Court, Southern District of New York (Manhattan).

At high noon on Monday January 12th 2009, a Federal magistrate will announce his decision about whether fraudster Bernie Madoff will remain free on bail confined to his penthouse apartment on Manhattan's Upper East Side. The magistrate might instead agree with Federal prosecutors who have argued in briefs filed last week that Bernie Madoff is a "danger to society" and hence he should be remanded until his trial where he almost assuredly will be convicted of at least one criminal act and then probably imprisoned for the remainder of his life.

Remand is an unusual order in most white-criminal cases. However, a fraud of approximately $50 billion and the mailing of "sentimental heirlooms" (in some cases worth more than a million dollars in a single mailing) in violation of court order are also highly unusual. Toomre Capital Markets LLC ("TCM") suspects that public pressure to see "crook" Madoff imprisoned and Madoff's reported decision to cease cooperating with investigators and prosecutors will lead the magistrate to order Bernie Madoff off to jail.

As Bernie Madoff contemplates his possible last few hours of freedom, one of his enablers (and feed fund managers), Ezra Merkin, apparently faces fresh lawsuits seeking as much as $100 million that investors claim he squandered (certainly without their knowledge nor possibly their consent) on Madoff's $50 billion Ponzi scheme. According to The Guardian in the article Hedge Fund Billionaire Sued For Investing in Madoff Scheme written by James Doran, Mr. Merkin, 55, was forced to close his $1.5 billion Gabriel Capital hedge fund in December 2008 after disclosing massive losses from investing in Madoff's business.

As TCM wrote in the post Update on Bernie Madoff Scandal and Feeder Funds last week, Mr. Merkin has already been sued by both New York Law School and New York University ("NYU"). NYU claims its investment was placed with Madoff without permission. "Until 12 December 2008, we had no knowledge that NYU's funds were instead being managed by Bernard Madoff," said an affidavit from NYU filed in New York state supreme court.

Four weeks ago, the alternative investment world was shocked by the arrest of Bernie Madoff after he allegedly confessed to running an investment Ponzi scheme that according to his own admission swindled investors out of close to $50 billion. In the days since, there has been daily news of this or that individual, family, foundation, organization or charity having suffered devastating losses because of Madoff's fraudulent behavior. In recent days, the receiver appointed by the courts to try to recover investor funds has sent out potential claim forms to more than 8,000 entities that had invested funds through Madoff in the last twelve months.

Before news of this scandal broke, Toomre Capital Markets LLC ("TCM") had tangentially heard of Bernard Madoff Investment Securities, primarily in connection with its market making in small illiquid NASDAQ common stocks and its early adoption of technology to support electronic trading. We had no sense, though, that Bernie Madoff was running an investment advisory business nor that he potentially had so many funds under management from such a wide and diverse group of entities.

Apparently, his annual registration statement filed in 2007 for the investment management subsidiary indicated that he had $17 plus billion under management from less than two dozen investors. While one never can be sure of what is truth with regard to what Bernie Madoff said or did, based on information that has come out since, both of these numbers appear to be wrong. TCM suspects that Madoff purposely understated both the amount of assets supposedly under management and the number of investors so as to reduce the chance of inspection from the SEC and FINRA.

The real numbers for his annual registration statement apparently should have been somewhere around $35 billion and (depending upon how one defines the term "customer") more than 5,000 investors. Had such numbers been reported to regulators on his investment advisor registration form, there is no doubt that Madoff's investment operation itself would have been subjected to a rigorous regulatory review, especially since there previously had been no review conducted and it only registered for the first time in 2006.

One of the curious items about the Madoff scandal is how there could be such a difference what he reported as customers and what the press has reported as victims of the Madoff fraud. The key lies in the various feeder funds that in essence bundled funds from multiple investors and then deposited most, if not all, of those funds with Bernie Madoff. These feeder organizations included Fairfield Greenwich, Tremont Capital, Banco Santander, Bank Medici and Ascot Partners. Most of these feeder funds have now been sued by one or more of their investors.