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Authorities in the US had custody yesterday of two alleged fraudsters, dubbed "mini-Madoffs", as a sweep against financial wrongdoing intensified.
Arthur Nadel, 76, a Florida fund manager who tried to fake suicide this month, turned himself in after two weeks on the run, and investigators in New York charged a separate fund manager with defrauding 1500 investors out of US$370 million ($698 million) in a Ponzi scheme similar to the one run by Bernard Madoff.
The breakthroughs came as regulators from the Securities and Exchange Commission pleaded for more money from Congress, saying that a lack of resources explained how the organisation had repeatedly failed to spot that Madoff, a former Nasdaq chairman, was operating the biggest fraud in Wall Street history.
Nadel, who ran a firm in Sarasota called Scoop Management, was reported missing by his family on January 14.
He left behind a suicide note that expressed guilt for losing clients' money and said someone might try to kill him, but police never believed he went through with the plan to kill himself.
Instead, they noted that he transferred at least US$1.25 million to a secret bank account. They traced his cellphone use as he fled to Louisiana. At the same time, employees found the shredded remains of a note for his wife, Peg, which set out instructions on how to withdraw money before all his trust accounts were blocked. "If you want to survive this mess, what follows is for your eyes only," the letter began, according to a criminal complaint filed yesterday.
The authorities believe Nadel had more than 100 investors in his six hedge funds, which he told them were valued at more than US$300 million. In fact, there was less than US$1 million left.
A New York FBI spokeswoman said Nadel would make an initial appearance in a federal court in Florida.
"Arthur Nadel surrendered in the company of two lawyers to FBI agents in Tampa," she said yesterday.
Meanwhile, FBI officers in New York arrested Nicholas Cosmo, at the end of a day of drama when the offices of his Agape World hedge fund business in Long Island had been besieged by furious investors.
Screaming through locked, glass doors, they had demanded that Cosmo "stand up for your money".
Last week, when Cosmo had first told some investors that he was suspending redemptions, he had to be escorted from the building by a police guard.
The FBI now believes that his US$370 million investment business was a Ponzi scheme, where existing investors were paid using money from new clients. He had claimed that he would use the money raised to make loans, but investigators say only US$10 million was used for that purpose, and that US$100 million went into a trading account that he controlled.
Both Nadel and Cosmo have murky pasts. Nadel had been disbarred from being a lawyer in 1982 after taking money from an escrow account. Cosmo had been sentenced to 21 months in prison for fraud in 1999.
- INDEPENDENT
