Madoff, 70, the founder of Bernard L. Madoff Investment Securities LLC, maintained a separate and secretive investment-advising business that served between 11 and 25 clients and had a total of about $17.1 billion in assets under management, prosecutors said.
A criminal complaint signed by FBI Agent Theodore Cacioppi said Madoff told at least three senior employees at his Manhattan apartment Wednesday that the investment adviser business was a fraud and had been insolvent for years, losing at least $50 billion.
Madoff told the employees he was "finished," that he had "absolutely nothing," that "it's all just one big lie" and it was "basically, a giant Ponzi scheme," according to the complaint filed in court.
The employees understood Madoff's admission to mean that "he had for years been paying returns to certain investors out of the principal received from other, different, investors," said the complaint, which did not identify the investors impacted by the scheme.
Cacioppi said two senior Madoff employees told him that Madoff said during the Wednesday meeting that he planned to surrender to authorities in a week but first wanted to distribute $200 million to $300 million he had left to certain selected employees, family and friends.
Cacioppi said he and another FBI agent arrived Thursday at Madoff's apartment, where Madoff invited them in and acknowledged knowing why they were there.
"After I stated, `We're here to find out if there's an innocent explanation,' Madoff stated, `There is no innocent explanation,"' the agent wrote.
"Madoff stated, in substance, that he had personally traded and lost money for institutional clients, and that it was all his fault," Cacioppi said.
The agent wrote that Madoff said he had "paid investors with money that wasn't there" and that he was broke and insolvent and had decided that "it could not go on" and that he expected to go to jail.
Defense lawyer Dan Horwitz called Madoff "a person of integrity" and said he intends to fight the charge.
If convicted, Madoff could face up to 20 years in prison and a maximum fine of $5 million.
Bernard L. Madoff Investment Securities LLC ranks among the top 1 percent of U.S. securities firms, according to the company's Web site.
Shortly after leaving law school, Madoff founded his firm in 1960. It was one of five broker-dealers most closely involved in developing the Nasdaq Stock Market, where he served as chairman of the board of directors and a member of the board of governors.
Prosecutors noted in a release that the company Web site boasts: "Clients know that Bernard Madoff has a personal interest in maintaining an unblemished record of value, fair-dealing and high ethical standards that has always been the firm's hallmark."