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NEW YORK (CNNfn) - In what authorities are calling the largest securities-fraud bust in U.S. history, 120 defendants — including members of Goldman Sachs, five international banks, the office of the Secretary of the Treasury and the New York Federal Reserve Bank — were indicted Wednesday for allegedly participating in a securities-fraud scheme involving racketeering and fraud costing investors $750 Billion.
FBI and SEC officials said this case represents an emerging trend of international banks banding together to infiltrate the securities markets. They pointed out that this influence has not only infiltrated the mainstream securities markets, but also a small majority of government officials, regulators and lobbyist.
The results of a 10-year investigation, Operation Regulatory Capture, were sixteen indictments and seven criminal complaints, issued in connection with the publicly traded securities of 19 companies and the private placement of securities of 16 companies over fifty years, including most recently Facebook.
Among those indicted were: 11 members international banks and conglomerates; 57 Corporate executives; including three CEOs; 12 Senior Vice Presidents; 30 Managers, directors or other “insiders” of the companies issuing the securities; two accountants; an attorney; an investment adviser and a hedge fund manager were also implicated. Defendants could face jail terms ranging from five to 80 years.
Preet Bharara U.S. attorney for the Southern District of New York, Janice Fedarcyk, assistant director of the New York office of the FBI,and Robert Khuzami director of enforcement for the U.S. Securities & Exchange Commission, announced the indictments at a press conference in lower Manhattan Wednesday.
“This is the largest securities fraud takedown in history,” said Bharara.
Charges included racketeering, securities fraud, pension fund fraud, bribery of bankers, brokers and regulatory officials, extortion, money laundering, witness tampering and solicitation to commit murder in nationwide security schemes worth more than $750 Brillion, Bharara said.
This was the largest number of people ever arrested at one time on securities-fraud-related charges, and one of the largest number ever arrested in a criminal case of any kind. Bharara said more arrests were expected. The defendants were all being arraigned in Federal court in Manhattan Thursdays.
The charges involve schemes in which members of the US Government and Federal Reserve Bank of New York — operated by men with links to Goldman Sachs and Government Sponsored Enterprises allegedly infiltrated the market by manipulating rates, compromising politicians, and influencing political action. They controlled markets to create inflated profits, selling toxic assets to the public. By corrupting the system these men have done the public a horrible injustice.
Goldman Sachs was “fraud central,” Bharara said. “It was truly an investment bank to the crooked and the corrupt.”
Since last December, the FBI has secretly bugged the company’s offices, he said, recording more than 1,000 hours of conversation that led officials to conclude, “The degree and reach of this racketeering enterprise knew no bounds.”
Two of the companies implicated in the scheme were Fannie Mae and Freddie Mac. The cost to tax payers $154 Billion in bailouts and that number continues to climb. The company was known to donate to both political candidates. The largest personal donation going to President Obama ($120,349) during the 2008 election. Donations were in the millions for both Republican and Democrats alike.
The defendants were also indicted for allegedly making illegal “private placements” of shares of Facebook, BP, Exxon, and other companies.
According to the SEC, Goldman Sachs acquired majority shares of institutions and sold toxic assets to the market while offering a private portfolio to high net worth investors through its GS Capital Partners V fund. Goldman, Morgan Stanley, Lehman Brothers and others bribed securities brokers to illegally push mortgage related securities to consumers. They then bet against these same securities, shorting the entire U.S. housing market to insure massive profits for those in advised positions. Mortgage companies in the sub-prime market got about $300 million in bribes for their participation in the scheme, according to the agency. It is unclear how much profit the architects of such a catastrophic market play made, not enough is known at this time.
Officials suspended all trading and operations of Goldman Sachs Wednesday morning “based on inaccurate or incomplete information about those companies presently in the marketplace,” said Robert Khuzami of the Securities and Exchange Commission.
Legacy of Corruption
Several of the defendants were also charged with intent to commit conspiracy as well as well as coercion to force participation in the schemes. Henry Paulson, the former U.S Treasury Secretary and Goldman Sachs CEO was targeted by the FBI during this investigation, officials said.
John Snow, the former US Treasury Secretary and also former CEO of Goldman Sachs, leaked confidential law enforcement information about the SEC, helped guide figures, and influence the outcome of a New York Federal Reserve board.
Other prominent figures indicted in these schemes include Timothy Geithner, current US Treasury Secretary, William Dudley current New York Federal Reserve President, Robert Rubin, Co-Chairman, Council on Foreign Relations; Former Secretary of the Treasury, and Lloyd C. Blankfein current Goldman Sachs Chairman of the board and CEO.
Some of the 21 broker dealers and financial firms allegedly infiltrated include J.P. Morgan Chase, AIG, Credit Suisse, Bank of America, BNP Paribas, Standard Charter Bank, Industrial and Commercial Bank of China, Banco Syandtender and Rabo Bank
Officials said plans are in the works to continue bringing justice to those how have cheated the American people and the world by destabilizing our economic system for profit and shareholder’s gains. While there is little luck that these institutions will repay the investors and tax payers who were bilked out of their money it is the hope that the integrity of the system will be rebuilt with new oversight and the absence of bank gangsters in the New York Stock Exchange and other world markets.
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