SECer: Agency “In A State Of Complete Panic” Over Madoff Revelations

The revelation that Bernard Madoff — who himself had in the past served as an adviser to the SEC on electronic trading — was running an alleged “$50 billion ponzi scheme” has rocked the SEC to its core, according to a current long-serving member of the commission’s enforcement division.

“This has put the agency into a state of complete panic,” the SECer told TPMmuckraker in an interview.

The source said that one associate director in the enforcement division had in recent days ordered junior staff to review every case that’s been closed over the last few years, to ensure that violations weren’t missed — as they appear to have been in the 2006 investigation of Madoff. “There’s a real paranoia around here,” the source added.

That paranoia — or at least extreme concern — apparently extends to commission officials in Washington. The source said that since the Madoff allegations came to light last week, SEC brass had sent out numerous emails warning staffers not to destroy documents relating to the case — which is being investigated both by SEC enforcement and by the FBI. There have also been several warnings not to speak with the press, the source added.

Separate from the SEC and FBI investigations, SEC chair Chris Cox announced last week that he has has asked the commission’s inspector general to probe how the SEC failed to uncover catch Madoff after receiving several complaints going back to 1999.

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