nov 1, 1992 - SEC Shuts Down Avellino & Bienes

Description:

A tip from a Seattle investment adviser suspicious of Avellino & Bienes' promise of steady returns of up to 18 percent leads to an SEC investigation into whether the two men are running a Ponzi scheme.

By now, Avellino & Bienes has more than 3,200 Madoff clients and has funneled $441 million to Madoff. But the two men are not licensed as investment advisers; according to Michael Bienes, Madoff didn't want them to register. "We were always captive to him," he explains to FRONTLINE. "He owned us."

On Madoff's recommendation they hire attorney Ira Sorkin -- a former SEC official who will later represent Madoff himself after his 2008 arrest. Sorkin tries to figure out a way to keep the men in business, but before he comes up with a solution the SEC runs out of patience and orders Avellino & Bienes to return Madoff investors' money and pay $350,000 in fines.

In an interview with The Wall Street Journal, published shortly after the SEC crackdown on Avellino & Bienes, Madoff claims ignorance about his two front men operating illegally. He returns the lion's share of the money to them to distribute to their clients, although he shortchanges them $18 million.

"Many people point to [Madoff's ability to return the majority of the money] and say that [his business] must have been legitimate because he was able to raise that much money," says New York Times reporter Diana Henriques. "But we don't know how he raised it. We don't know where he got it."

Bienes says that he and Avellino got out of the investment advisory business after the '92 SEC probe. But sources tell FRONTLINE the two men continued to move money to Madoff through other front men -- a charge Bienes emphatically denies. Both men continue to invest their own money with Madoff, amassing fortunes.

https://www.wsj.com/articles/SB122909929808301893

Added to timeline:

Date:

Images: