Tags: zuckerman | shadow | banking

Zuckerman: Shadow Banking System is Over

By    |   Wednesday, 31 Dec 2008 11:43 AM

Mort Zuckerman has a lot of hindsight these days. A chunk of assets in a charity he controlled turned out to have been invested totally with Bernard L. Madoff Investment Securities.

He lost that money when Madoff's alleged Ponzi scheme unraveled. He didn't lose any of his personal wealth in the collapse.

And although it will take a while for all the dust to settle from the fraud that Madoff allegedly perpetrated, Zuckerman says one effect of the fraud is already evident.

"This shadow banking system of money-market funds, investment funds, private equity funds, and hedge funds that has been largely unregulated, that is no longer going to be possible," he told Business Week in an interview.

Madoff is scheduled to submit a list of his personal assets to the Securities and Exchange Commission, including property that could be made available for restitution. Madoff also will provide the names and locations of entities, bank accounts, brokerage accounts, investments, or assets held by his business.

Zuckerman, the owner of the New York Daily News and U.S. News & World Report, said he had $30 million invested with Ascot Partners, a hedge fund run by J. Ezra Merkin.

Zuckerman said he didn't know Merkin had invested the entire amount with Madoff. He said he never heard of Madoff nor met him. He though Merkin was diversifying.

He found out the hard truth from a letter he received from Ascot.

"There are dozens and dozens of people who thought they were investing in a multiple and diverse group of funds,” he said.

“If you were going to invest all this money in another fund, it seems to me you should have told everybody that you were doing this so that they could decide whether or not that person was the person with whom they wanted to invest."

Zuckerman defended the trust he put in Merkin to decide which funds in which to invest his money.

"This is somebody whom I had known who had managed money, particularly for philanthropic funds. I wasn't looking for this charitable fund to make a lot of money. I wanted it to make some money, of course, but most of all, to preserve the principal.”

“It wasn't to be a high-risk investment."

Newsday reports that, if convicted, the 70-year-old Madoff could face life in prison. If he manages to cooperate and recover money, then a lesser sentence is possible, say legal experts.

"Given the amount of the alleged loss, the nature and extent of his cooperation will be the key to his effort to reduce the sentence," former Manhattan federal prosecutor Carl Loewenson told the newspaper.

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Mort Zuckerman has a lot of hindsight these days. A chunk of assets in a charity he controlled turned out to have been invested totally with Bernard L. Madoff Investment Securities. He lost that money when Madoff's alleged Ponzi scheme unraveled. He didn't lose any of his...
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2008-43-31
Wednesday, 31 Dec 2008 11:43 AM
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