Madoff Fraud Will Hit Hedge Funds Hard

$50B Ponzi scheme will stagger funds, send investors to exits
By Clay Dillow,  Newser Staff
Posted Dec 12, 2008 10:20 AM CST
Bernard L. Madoff, founder of his own eponymous financial firm, called it "one big lie" and "a giant Ponzi scheme" before his arrest yesterday. He may have lost as much as $50 billion in client funds.   (Yeshiva University)
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(Newser) – Even as hedge funds face their worst yearly returns ever, they may take another collective $10 billion hit on money invested in Bernard Madoff’s namesake firm, which was revealed to be a giant Ponzi scheme yesterday, Bloomberg reports. Madoff was arrested and charged with fraud after admitting that his investment business was “one big lie” that lost up to $50 billion in clients' money.

Fairfield Sentry, a historically solid fund, may be the hardest hit, with $7.3 billion invested with Madoff. Bermuda-based Kingate Management had $2.8 billion invested, as did countless individual investors, who could face a complete loss. Meanwhile, James Cramer says the scam could have a dramatic impact on Wall Street, "bigger than Boesky."