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Korea Could Lose $100 Mln From `Madoff Scheme`

Posted December. 15, 2008 10:08,   


Investors are scrambling to assess potential losses from perhaps the biggest financial scam to hit Wall Street, something which is also believed to affect Korean financial institutions.

Former NASDAQ Stock Market Chairman Bernard Madoff was arrested last week on charges of running a "Ponzi scheme," which is similar to a pyramid scheme in that it offers investors unusually high returns. Early investors are paid with money collected from later investors.

While running Bernard L. Madoff Investment Securities LLC that he founded, Madoff ran a hedge fund that U.S. prosecutors said racked up 50 billion U.S. dollars in fraudulent losses.

Korea Life Insurance said yesterday that it made a direct investment of 30 million dollars in a hedge fund Madoff created. The Korea Teachers Pension Corp. indirectly invested 12.4 billion won (9.01 million dollars) through private equity funds.

Korea Investment Trust Management and Hanwha Investment Trust Management are also calculating their potential losses.

The exact losses by Korean financial institutions from Madoff are expected to be reported today. Experts say the combined amount of investment by the institutions will surpass 100 million dollars. All of the investors are institutions and no individual losses have been reported.

U.S. media said numerous celebrities, financial institutions and foundations have suffered huge losses from Madoff’s scheme.

His victims included New York Mets owner Fred Wilpon, former Philadelphia Eagles owner Norman Braman and GMAC Chairman J. Ezra Merkin. Madoff’s scheme could thus prove to be the largest financial scam in world history.

BNP Paribas of France and Nomura Holdings of Japan are also known to be victims of the fraud.

higgledy@donga.com jefflee@donga.com