NEW YORK - A FEEDER fund that sent billions of dollars into Bernard Madoff's gigantic Ponzi scheme was charged on Wednesday with lying to clients about the risks they faced.
Fairfield Greenwich Group was charged with fraud by securities regulators in Massachusetts in an administrative complaint.
Regulators from the Massachusetts Secretary of the Commonwealth said they would seek a court order requiring restitution from Fairfield to victims.
Fairfield funneled more than US$7 billion (S$10.5 billion) in funds to Madoff Investment Securities before it was revealed to be a Ponzi scheme in which phony profits were paid to existing clients by stealing from new customers.
Just over half of the US$14 billion that Fairfield had under management at the end of last year was tied up with Madoff Investments, according to the company.
Fees earned by Fairfield for generating investments in Madoff's fund reached some US$100 million annually, regulators said.
Senior individuals in the firm also received huge compensation as a result of these fees.
One of Fairfield's founders, Jeffrey Tucker, testified that he earned US$100 million over 10 years from dealings with Madoff.
Regulators said that other documents dating to 2008 indicated that senior employees may have earned considerably more, with one partner earning in excess of US$45 million 2007 and Mr Tucker earning US$30 million dollars in that year.
'Fairfield and its key personnel claim to have had no idea whatsoever that Madoff was anything other than the legitimate broker and brilliant market-timer they promoted him as,' regulators said.
'They were blinded by the fees they were earning, did not engage in meaningful due diligence, and turned a blind eye to any fact that would have burst their lucrative bubble.' -- AFP
