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French Judge Eva Joly Compares Iceland Crisis To Bernard Madoff's Ponzi Scheme

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The chief investigator probing Iceland’s financial collapse has compared the dramatic implosion of the banking system with the infamous Ponzi scheme run by convicted fraudster Bernard Madoff.

Eva Joly, the French judge working with the Icelandic government on the investigation, said international regulators ignored a series of red flags about Iceland’s financial health, just as the American authorities did with Madoff.

The Financial Services Authority, which had an obligation to monitor the health of the Icelandic banks operating in Britain, has to take a share of the blame, she added. The Netherlands, where the Icelandic banks were also active, was also culpable.

“It’s very important for a small country like Iceland, that has gone through something that has changed the lives of everyone living there, to have answers,†said Joly. “It’s not only Reykjavik that has to answer these questions. In London and Amsterdam there are questions to answer, too.â€

She added: “The Icelandic central bank made it quite clear in 2007 that it would not be able to stand behind its banks if they had problems. There were other analysts, too, who pointed out all the obvious problems. It was exactly like Madoff — the warnings were there.â€

Joly, who made her name with fraud investigations into France’s Elf Aquitaine and Crédit Lyonnais, is advising Iceland’s specially-appointed prosecutor Olafur Hauksson.

Hauksson has raided more than 30 homes in Iceland as part of his probe, and interrogated more than 50 people — including some of the country’s wealthiest businessmen. The investigation is focused on the collapse of the Kaupthing, Landsbanki and Glitnir banks.

A number of British businessmen have been sucked in, including Kevin Stanford, the retail entrepreneur, and mining and property investors Moises and Mendi Gertner.

The Icelandic government is close to agreeing an international extradition treaty that could be used to help alleged culprits of financial crime face trial there, but not all of the alleged misdeeds were illegal under Icelandic law, particularly with regard to activity in the financial markets.

“I am very confident that with the rules we have, we will be able to do the job,†said Joly. She added: “There is very often a thin line between bad business and criminal business.â€

She doesn't appear to be compromising with these comments.

I wonder how they will get out of jailing anyone for this mess.

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ALL fractional reserve banking systems are ponzi schemes.. the only mistake madoff made was not declaring himself a bank :/

why? FR limits the amount of lending based on reserves on hand....ponzi has no such limits.

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