SEC Charges Madoff “Solicitors,” Feeder with Fraud

The SEC today charged Cohmad Securities Corporation as well as its chairman Maurice J. Cohn, COO Marcia B. Cohn, and registered representative Robert M. Jaffe with actively marketing investment opportunities with Bernard Madoff while “knowingly or recklessly disregarding facts indicating that Madoff was operating a fraud.”  In a separate complaint, the SEC also charged California-based investment adviser Stanley Chais today, who oversaw three funds that invested all of their assets with Madoff.

“Madoff cultivated an air of exclusivity by pretending that he was too successful to trouble himself with marketing to new investors,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.  “In fact, he needed a constant in-flow of funds to sustain his fraud, and used his secret control of Cohmad to obtain them.” According to the SEC, the Madoff “solicitors” charged today collectively received several hundred million dollars in fees over the past few decades related to Madoff investments.

The SEC alleges that the Cohns and Cohmad filed false Forms BD and FOCUS reports that concealed Cohmad’s primary business of bringing in investors for BMIS – as much as 90 percent of Cohmad’s revenue in some years.

In the Chais complaint, the SEC alleges that for the last 40 years, Chais has held himself out as an investing wizard who managed hundreds of millions of dollars of investor funds in three partnerships.  In reality, the SEC alleges, Chais was “an unsophisticated investor who did nothing more than turn all of the Funds’ assets over to Madoff, while charging the Funds more than $250 million in fees for his purported ‘services.'”  The SEC alleges that although Madoff managed all of the Funds’ assets, many of the Funds’ investors had never heard of Madoff before the collapse of his Ponzi scheme, and had not known that Chais invested with Madoff until Chais informed them after Madoff’s arrest.

Accordng to the SEC, counsel for the defendants are as follows:

For Chais: Eugene R. Licker, Esq. at Loeb & Loeb LLP in New York.
For Cohman, Maurice & Marcia Cohn: Clifford Thau and Steven Paradise at Vinson & Elkins in New York.
For Jaffe: Peter Pope at Arkin Kaplan Rice LLP in New York.

Read the SEC press release