MANHATTAN (CN) – The SEC claims Cohmad Securities raised “billons of dollars from hundreds of investors under a shroud of secrecy,” for Bernard Madoff’s Ponzi scam. In a second federal complaint, it claims California investment adviser Stanley Chais took “well over $250 million in fees for his purported ‘services'” then lost everything when Madoff’s scheme collapsed.
The SEC accuses Cohmad of “knowingly or recklessly participating in Bernard L. Madoff’s Ponzi scheme by raising billions of dollars from hundreds of investors under a shroud of secrecy.” In this case, it also sued Maurice J. Cohn, Marcia B. Cohn and Robert M. Jaffe. It claims the defendants were paid more than $100 million through Cohmad, and that Maurice Cohn and Jaffe also got “millions of dollars in direct payments” from Madoff.
“For more than two decades, the Defendants enabled Madoff’s fraud by helping to conceal that Madoff was, in fact, aggressively marketing his investment product even while he was projecting a false aura of exclusivity and privilege that came to be associated with the opportunity to invest with the great Madoff,” the complaint states. “Madoff’s secret marketing operations were housed within the offices of Bernard L. Madoff Investment Securities Corporation LLC (‘BMIS’), under the façade of a separately registered broker-dealer, defendant Cohmad. As reward for their stunning marketing success, Defendants were paid more than $100 million through Cohmad. In addition, Maurice Cohn and Jaffe also received millions of dollars in direct payments from BMIS.”
In the second case, the SEC claims Stanley Chais was “one of the largest feeders into Madoff through three funds, each of which invested each of which invested all or substantially all of its assets with Madoff.” The three feeders were the Lambeth Company, the Brighton Company, and the Popham Company, according to the complaint.
The complaint continues: “Despite having clear indications that Madoff was conducting a fraud, Chais persisted in distributing account statements to the Funds’ investors based on Madoff’s purported returns, while charging the Funds well over $250 million in fees for his purported ‘services.’ As of November 2008, Madoff was representing that the Funds collectively held over $900 million, all of which was wiped out with the collapse of the Madoff Ponzi scheme.
“Unlike the thousands of other investors who lost money in the Madoff scheme, Madoff’s enterprise ultimately proved to be extremely profitable for Chais. Thus, through his personal interests in the Funds, as well as his interests and the interests of his family members in over 50 other accounts that Chais held with Madoff, for the period 1995 through 2008, Chais and his family members withdrew approximately a half a billion dollars more than they invested with Madoff.”