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Madoff reaches a deal with feds

A receiver will secure assets owned by the financier and his company. Investors fear he swindled them out of billions.

Attorneys Stephen Weiss (right) of Seeger Weiss L.L.P. and Brad Friedman of Milberg L.L.P. represent dozens of Madoff's clients.
Attorneys Stephen Weiss (right) of Seeger Weiss L.L.P. and Brad Friedman of Milberg L.L.P. represent dozens of Madoff's clients.Read moreLOUIS LANZANO / Associated Press

NEW YORK - Federal regulators reached a deal yesterday with the Wall Street financier accused in a $50 billion swindle to freeze his company's assets and appoint a receiver to manage its financial affairs. The agreement came as some investors feared their life savings were wiped out.

The deal, agreed to separately by Bernard L. Madoff and his company, was approved later in the day by a federal judge, said Alexander Vasilescu, trial chief of the federal Securities and Exchange Commission. Vasilescu said the receiver would secure the assets, funds and location of Madoff's businesses to preserve assets and "determine the scope of the misconduct."

The collapse of Bernard L. Madoff Investment Securities L.L.C. came just hours before his arrest Thursday on a single securities-fraud count. Madoff, who allegedly told his employees he was running a "giant Ponzi scheme," was freed on $10 million bail.

Lawyers for distraught investors worried they had lost all their savings packed a courtroom in the federal building yesterday, awaiting a hearing on the disposition of Madoff's remaining assets. The hearing was canceled after the agreement was reached.

Stephen A. Weiss, who said he had spoken to at least 30 investors, said many of them were devastated. "They were living comfortable lives and serene retirements, and by the late afternoon their lives were thrown into a spiral of horror," Weiss said.

One investor, Lawrence Velvel, 69, dean of Massachusetts School of Law, said he and a friend may have lost millions of dollars between them.

"This is a major disaster for a lot of people," Velvel said in a telephone interview from his office in Andover, Mass. "You work all your life, you finally manage to save up something, and somebody who's entrusted with it, it turns out suddenly he's a crook. Lots of people are getting fully or partially wiped out."

Velvel said he wanted to know where government regulators, as well as accountants and others at Madoff's company, were when the money was being lost.

According to a criminal complaint filed with the court, Madoff told senior employees of his firm Wednesday that he had blown more than $50 billion with fraudulent financial moves, that he was "finished" and that he had "absolutely nothing." The FBI said yesterday that family members turned Madoff in after he confessed his fraud to them.

The complaint said Madoff handled investments for as many as 25 clients in his private investment business, but lawyers for investors yesterday said the number likely runs much higher.

Madoff's lawyer, Dan Horwitz, said his client was "a long-standing leader in the financial-services industry with an unblemished record" and would "fight to get through this unfortunate event."

Madoff, a former Nasdaq stock market chairman, founded his firm in 1960, using $5,000 he earned in part as a lifeguard on Long Island beaches. In the industry, he had a reputation for safe investments and steady returns that made individual investors eager to place their money with him and made competitors suspicious of his success.