Times Online – The Financial Services Authority is facing a multimillion-pound compensation claim from a group of investors who say that the City watchdog failed to stop the activities of a suspected rogue trader.

Former clients of GFX Capital Markets, which has collapsed with estimated losses of £44 million, say that the FSA knew of serious concerns about its boss, Terry Freeman, but allowed him to continue trading.

The accusation comes as the regulator is struggling to cope with the most serious loss of public confidence in its decade-long history. It was accused of being negligent in its monitoring of Northern Rock, the mortgage lender that was nationalised last year, and the regulator’s chairman, Lord Turner of Ecchinswell, has been forced to draw up radical plans to improve its ability to police the City.

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New York (HedgeCo.Net) – Just days after what could prove to be the largest Wall Street sham in history, investors that were burned by Bernard Madoff are coming forward in droves.

Spanish bank Santander, along with French bank BNP Paribas both detailed their exposure to the alleged ponzi scheme on Sunday.  Santander estimated it had just over $3 billion tied up in the firm, while BNP Paribas has about $470 million at stake. 

"While BNP Paribas has no investment of its own in the hedge funds managed by Bernard Madoff Investment Services, it does have risk exposure to these funds through its trading business and collateralized lending to funds of hedge funds," BNP said in a statement.

Santander’s exposure came from a sub fund of their Optimal Fund, called Optimal Strategic US Equity, which used Madoff Securities for their investments. 

A handful of hedge funds have also come forward in the wake of the scandal.  Fairfield Greenwich Group released a statement on Friday saying they were still trying to assess their losses, but estimated they had about $7.5 billion, or half of its total assets, tied up in Madoff’s firm as of November.  Founding Partner Jeffrey Tucker said they were “shocked and appalled by this news.”

Tremont Capital Management also had a hefty amount invested with Madoff through their fund of funds.  “Needless to say, our level of anger and dismay over the apparent betrayal by Mr. Madoff and his organization of his 14-year relationship with Tremont is immeasurable,” Tremont stated in a letter to investors on Friday.

Also coming forward on Friday was Maxam Capital Management, who reported losing $280 million through Madoff-linked investments. 

Bernard Madoff, owner of Bernard L. Madoff Investment Securities and part founder the Nasdaq stock market, was arrested and charged on Thursday with orchestrating a $50 billion scam that targeted some of the most reputable hedge funds and affluent individuals in the business.  The 70-year-old allegedly ran a large ponzi-scheme where new money coming in is used to pay off existing investors, creating the false notion of peak performance and admirable returns. 

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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New York (HedgeCo.Net) – French officials have arrested a trader who allegedly lost more than $1 billion in complex derivative trades.  Boris Picano-Nacci of mutual bank Caisse d’Epargne was taken in for questioning last week, days after the loss forced the bank’s top three executives to part ways. 

Prosecutors in Paris are currently investigating whether or not they can nail the 33-year-old trader for a possible breach of trust. 

A copy of the bank’s internal investigation was said to have been obtained by French news magazine Nouvel Observateur, when they published the findings on Wednesday.   
According to that report, Caisse d’Epargne found lax internal controls and several alerts that had been disregarded.

The bank has stated that this was an error made by a small team of traders, who made a bad bet on the direction of the stock market while exceeding their trading risk limit. 

French Finance Minister Christine Lagarde revealed that an initial investigation had uncovered “serious holes” in the bank’s controls. 

This is the second trading scandal to rock a French bank this year.  Societe Generale made headlines in January for its $7 billion loss thanks to 31-year-old rogue trader Jerome Kerviel.

Caisse d’Epargne is currently planning a merger with French mutual lender Banque Populaire.    

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com

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