New York – JTA: Yeshiva University Has Lost Tens Of Millions In Madoff Ponzi Scheme

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    New York – Yeshiva University has suffered major losses related to the securities fraud of Bernard Madoff, sources close to the university said.

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    Madoff, the founder of Bernard L. Madoff Investment Securities LLC, was arrested Dec. 11 after admitting to his board that a hedge fund he ran was essentially a $50 billion fraudulent scheme.

    To see full list of potential victims who lost money click here

    Until resigning from both posts last week following his arrest, Madoff served as treasurer of Y.U.’s board of trustees and chairman of its Sy Syms School of Business.

    Sources close to the university, the flagship institution of Modern Orthodoxy, told JTA that the school has lost tens of millions of dollars if not more. Y.U. released an official statement saying it would not officially address the matter at this time.

    “We are shocked at this revelation,” the school said in a statement sent Sunday via e-mail. “Bernard Madoff has tendered his resignation from all positions affiliated with the university and involvement with the university. Our lawyers and accountants are investigating all aspects of his relationship to Yeshiva University. We reserve our comments until we complete our investigation.”

    Even before last week’s developments, Y.U.’s endowment had dropped from $1.8 billion to $1.4 billion, according to the school newspaper, the Yeshiva Commentator.


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    35 Comments
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    Shmiel
    Shmiel
    15 years ago

    And will the rabanim speak about choshen mishpat and maybe teach yirei shmayim,bitchon,emunha?

    Rabbi Eli Teitelbaum has always screamed if a deal is to good to be true——–but some people will never learn. This will happen again and again. This has been going on for generations. A new sucker is born everyday.

    So people said about this ganev that he has been giving 30% returns for 25 years already and there was no problem how can we not trust him? A thief always gets caught. Sometimes it takes two years, 5 years, 10 years to get caught but this guy managed for 40 years!

    With the bad economy everyone was pulling out their money at the same time and since the scam was a ponzi scheme the deck of cards went flying off the shelf!

    When will people learn to trust in go-d and not people?

    Oy Gevald
    Oy Gevald
    15 years ago

    I doubt that 90% of the Stock Market can sustain a run. A “run” is when everyone tries to cash-in at the same time. Were we to start confirming which corporations can or can’t pay up all their share holders, the stock market would crash immediately and bring down the few companies that still can pay all their shares. Even the banks today couldn’t sustain a run on. Since this so, why isn’t the stock market one big “ponzi scheme”?

    Dave
    Dave
    15 years ago

    He was giving 10% returns. Still hard to swallow, but not as outrageous as 30% yield.

    Dave
    Dave
    15 years ago

    A Ponzi Scheme is fairly simple to understand. There are no underlying assets. Instead, the investment from new investors is used to pay off old investors.

    If those characteristics aren’t being met, it isn’t a Ponzi Scheme. So, that would be why the stock market is considered to be one. You don’t “redeem” stock, you sell it to someone who wants to buy it. If no one wants to buy it, it may be functionally valueless, but you still own some small percent of the company. The only way that goes to zero is if the company goes under.

    Tzedaka Org. or GREEDY Org.
    Tzedaka Org. or GREEDY Org.
    15 years ago

    Since when are Non_Profits supposed to be filthy rich?

    If their purpose os Tzedaka Vachesed, why don’t they help people who need the money instead of the executives driving a Cadillac, Lincoln Continental or Mercedes Benz. Shame on all the “Gabai_Tzedaka” who fill their own pockets in a filthy rich way and then “pocket the rest” in to Bernard Madoff fund, in hopes of “Making Money” and “Making Millions” on top of Tzedaka Money, instead of giving that Money to the needy.

    Why should YU be ashemed of themselves? Because YU was so gullible to miss all the red flags and entrust their 10s of Millions to a Con Man?

    No.

    The Reason YU (and all other Tzedaka Funds who had invested with Madoff) should be ashemed of themselves, because what kind of a Chutzpah is it to ask people for “Tzedaka” and not us it for Tzedaka of the needy but rather use that money so that YU executives should have fancy cars and houses and the Millions in dollars that are left (after the Executives are done gorging the,selves with excesses) even that leftover MILLIONS is not spent fr the needy (Tzedaka) but just used as a Money Making Machine, they call “Investment”.

    Any Tzedaka Organization that is so filthy rich that they don’t know what to do with their excessive money (except to invest), how can they have a Chutzpah to “COLLECT TZEDAKA”?

    The Biggest CON-Game of all is not the 50 Billion which Madoff ripped off others.

    Rather the Biggest CON-Game is the SOURCE of the 50 Billion. How and Why did Madoff get this 50 Billion, much of it form so called “Non Profits” Tzedaka Funds.

    Bernard Madoff should be commended for teaching the Non_Profits, that now, after Bernard Madoff is busted, now for the first time these non-profits can HONESTLY say “we are a non-profit” 🙂

    Until now the biggest Lier was not Bernard Madoff, himself but the so called “Non_profits” which fed him.

    uri ltzedek ???
    uri ltzedek ???
    15 years ago

    I wonder if there is still someone that can say that it is not ”hashgacha protis” that a night after thair panel of bashing the rubashkins this man was arrested

    norman lamm
    norman lamm
    15 years ago

    it’s a good thing this happened AFTER i retired 🙂

    No Joy in Yenem's Tzar
    No Joy in Yenem's Tzar
    15 years ago

    let’s not all judge YU – many people donate funds where you can only use the interest and not the principal – trying to provide long term funding for their charities – these are trying times and we should take out our tehillims and our sifrei mussar to help us handle and bring rachmei shamayim on everybody

    The Broader meaning of Ponzi
    The Broader meaning of Ponzi
    15 years ago

    Many have argued here that not everything is a Ponzi and those who are in the stock market certainly take great offense of it being compared to being LIKE a true Ponzi.

    Again the Stock market is not A Ponzi.

    Rather the Stock Market functions (for all practical purposes) just a like a real Ponzi and this Giant Ponzi is currently disintegrating in front of our eyes – History in the Making.

    Most “MLMs” are Legally not a Ponzi, but for all practical purposes function just like a real Ponzi.

    Simply put, a true and simple Ponzi is Illegal and the Stock Market is not illegal, so you can legitimately argue that the stock market is not a Ponzi.

    So let’s rephrase that. The Stock Market is Like a LEGAL type of a Ponzi.

    The stock Market by it’s initial design, was never intended to be a Ponzi, but it has evolved that way today and is collapsing today for this reason.

    The deeper meaning of a Ponzi is a business model of investment where it’s entire life force is derived from speculative investemnt dollars, rather than from any real tangible valued actual product worthy of the dollars paid.

    What this means is that if you own a vending machine that can generate a profit of $ 100 per week it is reasonable to pay for it X amount of dollars because of the profit it can produce. If the price of this vending machine is trading at reasonable price that is related to it’s income producing ability (within reason) then you are purchasing a PRODUCT and you are not purchasing a “dream”, of pure hot air speculation.

    When you buy in to a Ponzi you are not buying a product but rather buying a dream of pure hot air, where it’s only way to make money is because you hope that others will speculate more than you have speculated and that THE additional speculation will be your profit, but not because anything tangible is really worth that much – That’s what Ponzi is about.

    When the stock market started out it was Legit and it’s price was related to the profits it can generate but in the past few decades the prices are so OUT OF TOUCH with reality (reality of what the purchased companies income producing ability is) that it’s all pure speculation now.

    When you pay $10,000 for a stock today, there is no real (worth and actual $10,000 of income producing revenue) rather you are purchasing a PIPE DREAM in hopes that another sucker will come along (and a new sucker is born every second….so don’t worry…) and this new sucker will hopefully outbid you above the price you had paid and the reason he will do so (if he does) is for the same reason (not because it’s worth it but) because he is speculating on thin air that another even bigger sucker than both of you will be the 3d sucker to pay even more and the only reason that 3d sucker will pay more is because he is speculating on a 4th sucker.

    This is an absolute classic Pyramid and or Ponzi – call it what you want but it’s all the same essentially. The only diffrence being that the Stock Market is LEGAL of course.

    In the end, the laws of nature dictate that a pyramid can’t continue forever because it’s “profits” comes only from new and additional speculation and funding and that “supply is not endless”. The supply of new suckers to keep on feeding the market and keep outbidding each other in a mindless CRAZE, can only continue for a while, so long as everyone is comfortable and and everyone keeps dreaming and keeps on pouring NEW and FRSH-NEW money into the scheam (called Stock Market).

    The moment reality sets in and anyone tries to LEGITIMATELY pull out his one small little deck of cards, the entire giant PONZI_deck must fall, because to begin with it was just a SHELL, just like Murdofs, only it was LEGAL and Murdofs was not sanctioned by the law.

    Murdof could have continued another 20 years with his pipe dream and veryone would be happy. The only reason it crashed because of slump in a willingness of new investors to keep pumping in NEW(ponzi type) money. Murdof failed for the indetical reason that the entire Stock Market is failing now and it’s only the tip of iceberg now.

    By the way:
    Mr Ponzi, who invented the infamous Ponzi Scheme, he did so “legally” in 1919. At the time he started the Ponzi Scheme there existed no law to say it was illegal (until a few years later in 1923 that the supream court ruled that it was illegal).

    Likewise today there is no law that says that today Stock Market is illegal (yet).

    But laws are made throughout history, by people who live and learn and as you learn from your past falures you make new laws to outlaw that which had lead you to the previous disaster.

    The Broader meaning of Ponzi
    The Broader meaning of Ponzi
    15 years ago

    Part 1:

    MR. CHARLES PONZI OF NEW YORK
    In December 1919 a certain Mr. Charles Ponzi of New York initiated an “investment” scheme in which he put up $150 dollars and got ten friends to do the same. He promised his friends a 50% return on their “investment” in 90 days. He then got a second set of friends, many times larger than the first, to put up similar amounts and promised them the same “return on investment” that he had promised the original group of “investors.” With the money he collected from the second set of “investors,” he paid the first set back their $150 dollars plus the promised 50% “return” ($75 dollars). Naturally, the original investors were thrilled and enthusiastically began promoting the scheme. The process was quickly repeated with the second set of “investors” – and rapidly mushroomed from there.
    The intrigue was simplicity itself: give Ponzi money and in 90 days (and usually much sooner than that) he would give you your money back plus 50%, plus 10% to the recruiter. There was only one problem with the scheme: while the originators and early participants were handsomely paid off from the cash flow of those they recruited, the last ones who were brought into the scheme found that there was no one left to be recruited, and the cash flow stopped – leaving them “holding the bag.” Before the scheme broke down, however (in May of 1920 – six months after it began), Ponzi had made more than a million dollars. Whether Ponzi knew it or not, what he had done was formulate or give expression – so to speak – to much of the thinking which lies behind today’s New World Economic Order.

    Breader Meaning of Ponzi
    Breader Meaning of Ponzi
    15 years ago

    Part 2:

    GREED
    The driving motivation behind the scheme, from top to bottom, was greed. Everyone – from Ponzi on down to the last “investor” recruited – knew that in the end someone would be left “holding the bag;” that people would get hurt; and that some would be hurt very badly. They didn’t care! – just so long as it wasn’t them. Most who involved themselves in the scheme felt that they could get “in and out” of the pyramid before it collapsed – and “to hell” with those who were “dumb” enough to get caught.
    Needless to say, it took very coldhearted people to push the scheme, and very greedy and selfish-minded ones to participate. The scheme Ponzi devised is today called a “Ponzi Pyramid.” It’s called this because if one were to chart out the scheme on a piece of paper it would resemble a pyramid with the originator(s) perched atop the pyramid and the losers sitting at the bottom. Money flows from the bottom of the pyramid to the top.

    Originally, most pyramid schemes involved the use of “chain letters.” The originator would send out a letter to ten friends asking for a certain amount of money, say $10 dollars (for a total of $100 dollars). They were then told to make ten copies of the letter and send one each to ten of their friends. A second circle of “investors” was thus produced, creating a second step in the pyramid that consisted of 100 people. These 100 were told to “buy into” the scheme by producing $10 dollars each and “sending it up the pyramid” (total amount $1,000 dollars) and then to recruit ten more “investors,” making a third circle of “investors” consisting of 1000 people. The process was then repeated, with the new circle of “investors” contributing $10 dollars each ($10,000 total) to be “sent up” the pyramid making the new total “invested” in the pyramid $11,100 dollars ($10,000 dollars contributed by the third circle of investors plus the $1,000 dollars contributed by the second set of “investors” plus the $100 dollars contributed by the first set of “investors”). As the money is passed up the pyramid, each step (circle of “investors”) takes out a portion of the “investment” according to a prearranged schedule as a “return” on his or her “investment.” By the time the fifth step of the pyramid is reached (100,000 people, each contributing their $10 dollars ($1 million dollars) the total amount of money has become astronomical considering the small amount of money with which the scheme was initiated.

    In 1923 the Supreme Court determined that this was fraud (Cunningham v Brown 44 SCt 424) – and since then such pyramid schemes have been known colloquially as “Ponzi schemes.” According to the Supreme Court, what made the scheme illegal was that there was no “product” involved in the scheme. Nothing was “bought and sold.”

    Breader Meaning of Ponzi
    Breader Meaning of Ponzi
    15 years ago

    Part 4:

    THE REAL ESTATE MARKET
    Now to be sure, the real estate boom (and inevitable bust) of the 1970s and ’80s was not an organized Ponzi scheme. No one fiendishly devised it and pushed it on an “unsuspecting” public. There was no single “mastermind” behind the scheme; no lone Svengali planned and promoted it; no Bill Gouldd. But it was a Ponzi Pyramid nonetheless, at least in the sense that people bought and sold homes not to live in them, but to speculate on them.
    Like all those who “invest” in Ponzi schemes, greed was what motivated them. “Easy money” was what enlivened and excited them. People came to expect that housing values would rise endlessly. No one really knew how or why – they just seemed to sense that they would, and that there was money to be made in all this. People could buy a house one year, hold it for a few years without putting any real cash into it to fix it up, and then sell it for a twenty or thirty percent profit. The house wasn’t what was important in the scheme. It was the speculation that was important! Like Equinox’s herbal supplements, water filters and “other sucking and sifting gadgets,” houses were merely the “product” around which the speculation was organized. Speculation was the name of the game; building or rehabilitating homes had nothing really to do with what was going on.

    As the speculation boom took off, houses which sold for $35,000 dollars at the beginning of the 1970s were selling for $150,000 dollars at the end of the 1980s – a run up of over 400 percent in less than fifteen years. The run-up in these values had nothing to do with the “real” value of the home – i.e., what it cost to originally build it (minus the costs of inflation and improvements). It resulted in speculation. Houses were incidental to the speculation. It was the “paper” (i.e., the mortgage) that was being “bought and sold.” People were buying paper, they weren’t buying houses. People bought real estate sight unseen. So long as people could be found to buy the same house (i.e., the “paper” on the house) every two or three years at a twenty to thirty percent markup, the pyramid held and the speculation continued. Eventually, however, there were no more buyers. The price of the paper had reached a point where it no longer had any real connection to the value of the house. Buyers quit coming into the market.

    Those that had bought at the height of the speculation craze, found they couldn’t unload their purchases. The mortgage (i.e., the “paper” on the house) was technically worth more than the house itself. People found that when they sold their homes, they couldn’t get enough money to pay off the banks (i.e., liquidate the “paper”). The pyramid broke down, foreclosures ensued, and bankruptcies followed shortly thereafter. Thousands of people lost everything they had. And who was at fault? – everybody! Both the big investors and the small investors. Greed – not a desire to find a place to live – had brought them into the market; and their own corruption and depravity had “sold them down the river.”

    And were there any innocent victims? You bet there were! – but they weren’t the investors who got left “holding the bag” when the pyramid collapsed; they deserved what they got! They speculated on the market and lost! The real victims were instead the families who legitimately needed a home to live in; “blue collar” families who needed a roof over their heads, not a device to speculate with. These people were left out in the cold through no fault of their own – and for the most part, they’re still there, left having to rent houses in run down neighborhoods from landlords that could “give a damn.”

    The Broader Meaning of Ponzi
    The Broader Meaning of Ponzi
    15 years ago

    Part 6:

    THE STOCK MARKET VORTEX
    As money has poured into the stock market, the sheer volume of it has pushed stock prices up. As stock prices have soared, others have joined in the stampede to “get in” on the “easy money,” creating an upwardly spiraling vortex which, as it grows in size and strength, sucks in ever greater amounts of money which in turn pushes stocks that much higher reaching eventually into the absurd.
    What kind of absurdity? – take, for example, the stock of one company with annual revenues of only $14-million which was recently bid up to the point where $52-billion had been dumped into it – and not just by wild-eyed crazies, but by “reputable” mutual fund managers of some of the most well-known mutual funds in the country. And this was an American company doing business in the American market where reporting procedures are considered to be quite strict in comparison to stocks offered on foreign exchanges – for instance, in Latin America and the so-called Pacific Rim – where more and more American investment money is being dumped. God only knows the absurdities that have been reached in those overheated exchanges.

    The stock market is today nothing more than a mammoth Ponzi pyramid, and like all such pyramids, greater and greater amounts of money have to be found to feed into it in order to prevent its collapse. And the money that is being fed into it are the diverted wages of American workers, the pension and retirement funds of our senior citizens, trust funds, and the “savings” of ordinary Americans who have been persuaded to divert their savings from their bank accounts to mutual funds and 401k accounts.

    One would think, of course, that the “game” can’t go on forever; that eventually the funds that are required to feed into the pyramid will dry up. And that is beginning to happen insofar as the nation’s pension and trust funds are concerned. [The only thing that hasn’t been thrown into the maw is the nation’s social security funds – and now there’s talk of doing that.]

    But so long as the wages and salaries of America’s workers can continue to be squeezed there will be money available to feed into the vortex; so long as work can be shifted from high-paying U.S. jobs to low-paying jobs in Mexico, Indonesia, the Philippines, China, etc., the amount of money thus saved can be fed into the exchanges, thus preventing the collapse of the pyramid. If all else fails, of course, U.S. taxpayer funds can be fed into the pyramid to prevent its collapse – as is being done even now in Korea, Indonesia and Thailand (almost $100-billion in the last four months alone).

    But there is a price to be paid – the pauperizing of ordinary people not only in the United States, but throughout the world – and this brings us to our next article, “The New World Economic Order: A Closer Look at Today’s Ponzi Pyramid” and to a mysterious and enigmatic lyric …

    “A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine.”

    Obama
    Obama
    15 years ago

    Maybe YU will now have to start sending out meshuluchim like all the “black hat” institutions they so ridicule

    Yisrael Chaim Ben Dov Ber Halevi
    Yisrael Chaim Ben Dov Ber Halevi
    15 years ago

    Some people really have the most horrible things to say.DO YOU REALLY THINK THAT NO FRUM PEOPLE LOST MONEY IN THS????. Does it really matter if the yidden that lost money are frum or not? All you have to say is maybe in YU they will teach Choshen Mishpat? Well they do , and have a damn good smicha program. What is wrong with you people ? Cant you see that all Jews are the same? Honestly , Im sure that some of the people that Lost alot of Money are give big donations to frum organizations.So guess what ? Dont laugh at YU , be sad for the yeshivas ,and orginizations , that wont be able to put food on Aniyim’s tables , or donate new Ambu;lances to Hatzalah. So you should all be ashamed of yourselves, and you are Adding to the Chillul Hashem……

    Anonymous
    Anonymous
    15 years ago

    what a chilul hashem

    Anonymous
    Anonymous
    15 years ago

    YU has tried to be run as responsibly as it can to do good for klal yisroel. It had endowments that could support a huge amount of talmidei chachamim with dignity for many years in many of its schools. We should daven that these talmidei chachamim will continue to be paid

    Chana L. Schochet
    Chana L. Schochet
    15 years ago

    While I feel sorry for this gentleman who obviously got so caught up in his web, I am not surprised he was specifically arrested right after the YU forum promoting Hechsher Tzedek,and bashing Rubashkins. Hashem hates arrogance and they should hang their self righteous heads in shame.

    murray
    murray
    15 years ago

    Everyone go say Kaddish for Charles Ponzi, on his Yahrtzeit (Jan 18th)

    Anonymous
    Anonymous
    15 years ago

    I think the poster who complained about YU’s endowment doesn’t know how univeristies are run. Every single university has an endowment which they use to generate interest, so they can fund their tenured staff, among other expenses. This is not a misuse of the donated funds, it is a way to ensure that they will have enough money to pay a lifetime of salaries to people whom they have guaranteed to do so. They can also use the funds for maintenance and whatevr other needs they have. It is responsible to put some money away, rather than spending all of it, and having nothing to fall back on later on.