No evidence Madoff bought securities, trustee says

By Grant McCool and Caroline Humer

NEW YORK (Reuters) - Going back as far as 13 years, there is no evidence that the firm of accused swindler Bernard Madoff bought securities for customer accounts, the trustee liquidating the firm to recover assets said on Friday.

In the first meeting of creditors of Bernard L. Madoff Investment Securities, a lawyer for the court-appointed trustee said his staff was "looking at every Madoff family member and every insider associated with the Madoff firm" as part of the effort to find assets.

Madoff, a once-respected Wall Street trader and investment adviser, was arrested and charged with securities fraud on December 11 after authorities said he confessed to running a global Ponzi scheme with losses of $50 billion. A Ponzi scheme is one in which early investors are paid off with the money of new clients.

All Madoff's assets were frozen and his firm is being liquidated by court order.

"The work done to date indicates that for some substantial period, perhaps as much as 13 years ... we have found no evidence that securities were purchased for customer accounts," the trustee, New York lawyer Irving Picard, told the meeting in an auditorium at U.S. Bankruptcy Court.

The meeting for Madoff creditors -- including individual investors, banks, charities and others -- was attended by about 100 people and was at times emotional.

Picard was confirming statements made by the Financial Industry Regulatory Authority in January that there were no trades made by the Madoff firm. Examinations had also shown no evidence of trading by Madoff's investment fund.

That means Madoff either placed trades through other brokerages, a move industry officials have considered unlikely -- or he was not executing trades at all.

Picard said at a news conference after the meeting that although no securities were bought or sold, customers still received statements showing trades.

"We know how that was done but we can't tell you now," said Picard, citing a criminal investigation by U.S. prosecutors.

Picard said his staff was in the process of receiving bids for the market-making part of the firm. The trustee told reporters that the market-making operation and the proprietary trading arm of the firm were legitimate.

He said 2,350 customer claims had been filed through Thursday, most of them from individual investors, not the hedge funds that had invested client money with Madoff by the billions and which also consider themselves victims.

"To my recollection the total amount is more than $1 billion."

The deadline for filing all claims is July 2. The lawyers said creditors would begin to receive letters in one or two weeks about how their claims will be treated. They said creditors were entitled to recover money invested, but none of the phantom profits.

Picard said his team is "getting a feel for how this operation worked."