Suicide hotlines in Greenwich, Conn., could be lit up today as investors in the posh suburb begin to realize how much they’ve lost in the rip-off scheme perpetrated by Wall Street legend Bernard Madoff.
While the extent of Madoff’s madness will take a while to suss out, it is known that Madoff managed money for a wide range of investors, including prominent New Yorkers, university endowments and charities.
But Madoff’s scam – which Madoff himself estimates is as large as $50 billion – could extend beyond those directly affected, as the ripples of his ruse spread.
“There are a number of ramifications,” said Doug Kass, founder of hedge fund Seabreeze Partners. “For one, it will serve to cripple an already-skeptical community of individual and institutional investors that have held our money managers in high regard only to be disappointed time and again.”
Added a Wall Street trader, “It’s yet another big straw on the camel’s back at a time when everyone’s screaming for liquidity.” He predicted redemptions, or requests to pull out money from hedge funds, could surge as a result of Madoff’s misdeeds.
Given that Madoff’s investment-advisory arm, which is at the center of the alleged Ponzi scheme, managed just $17 billion in assets, observers suspect the only way his scam could have reached $50 billion was through massive borrowing.
A number of respectable institutions, from banks to firms that manage funds of hedge funds, will likely be damaged by yesterday’s stunning revelations.
Groups known to have worked with Madoff in the past include alternative-asset manager Fairfield Greenwich Group, the Nomura Bank of Japan, and Swiss asset-management firm NPB New Private Bank.
Sources tell The Post that Madoff managed money for Fairfield Greenwich through a $7 billion hedge fund called Fairfield Sentry, which Nomura and NPB offered to clients.
According to a document obtained by The Post, the fund reported earnings of 4.5 percent at the end of October. Another document says the fund has a 15-year track record of producing 11 percent returns.
Fairfield Greenwich officials declined to comment.
Madoff’s trading strategy, known as “split-strike conversion,” has raised eyebrows in the past, sources said. The complex strategy involves trading in and out of large-cap stocks and buying put options on baskets of stocks.
“I think a lot of people already were very suspicious,” said one hedge-fund executive. “If you look at the performance, it looks too good to be true. And if it looks too good to be true, chances are it is.”
With Mark DeCambre