Bernard Madoff arrested and charged with fraud

NEW YORK (Reuters) - Bernard Madoff, a Wall Street trader who founded Bernard L. Madoff Investment Securities LLC, was arrested and charged on Thursday with allegedly running a multi-billion dollar Ponzi scheme, U.S. authorities said.

Federal prosecutors accused Madoff, a former chairman of the Nasdaq Stock Market, of running a Ponzi scheme -- a pyramid-type swindle in which very high returns are promised to early investors, who are paid off with money put up by later investors.

Madoff, who estimated investors' losses at about $50 billion, informed senior employees of his advisory firm on Wednesday that "it's all just one big lie" and that it was "basically, a giant Ponzi scheme," according to a criminal complaint against him.

Madoff, 70, allegedly ran the advisory business from within the broker dealer that bears his name. He was charged with a single count of securities fraud and faces up to 5 years in prison and a fine of up to $5 million, according to prosecutors.

"Madoff stated that the business was insolvent, and that it had been for years. Madoff also stated that he estimated the losses from this fraud to be at least approximately $50 billion," Lev Dassin, the acting United States Attorney for the Southern District of New York, said in a statement.

Authorities said that, according to a document filed by Madoff with the United States Securities and Exchange Commission on January 7, 2008, Madoff's investment advisory business served between 11 and 25 clients and had a total of about $17.1 billion in assets under management.

"Bernard Madoff is a longstanding leader in the financial services industry. We will fight to get through this unfortunate set of events," Madoff's lawyer Dan Horwitz told reporters outside a downtown Manhattan courtroom where he was arraigned.

Madoff himself appeared shaken and stared down at ground as reporters peppered him with questions. A long time fixture of New York's financial markets, Madoff was released on his own recognizance after posting a $10 million bond secured by his Manhattan apartment.

The U.S. Securities and Exchange Commission also filed civil charges against Madoff.

"Our complaint alleges a stunning fraud -- both in terms of scope and duration. We are moving quickly and decisively to stop the scheme and protect the remaining assets for investors," said Scott Friestad, the SEC's deputy enforcer.

(Additional reporting by Christian Plumb, Phil Wahba, Michelle Nichols in New York and Rachelle Younglai in Washington; Editing by Andre Grenon)