Cohmad Securities
| Industry | finance |
|---|---|
| Founded | 1985 |
| Founder | Bernard Madoff Maurice Cohn |
| Owner | (15%)(Founder) Bernard Madoff (48%)(Founder) Maurice Cohn (25%)(President) Marcia Cohn (9%)Peter Madoff (1%)Mr. Cohn's brother (1%)Cohmad employee |
Cohmad Securities was a United States-based company that primarily functioned as a referral agent, directing investors to the investment operations managed by Bernard Madoff. The firm earned commissions based on the volume of client investments. Established in 1985 by Bernard Madoff and Maurice Cohn—who was both a longtime friend and former neighbor of Madoff—the company’s name combines elements of its founders’ surnames. Its office was located at the same New York City address as Madoff’s enterprise, employing between 10 and 20 personnel, with annual revenues estimated between $1 million and $5 million.
Business relations
Ownership was distributed with Maurice "Sonny" Cohn holding 48%, his daughter Marcia Cohn—serving as president and chief compliance officer—controlling 25%, and Bernard Madoff owning 15%. Additionally, Peter Madoff possessed 9%, Mr. Cohn’s brother had a 1% stake, and another employee held the remaining 1%. Between 2000 and 2008, Cohmad collected approximately $67 million in fees tied to investments funneled into Madoff’s firm. The brokerage activities of Cohmad accounted for nearly all its income, with audited financial statements for the fiscal year ending June 30, 2008, indicating $3.7 million in revenue from Madoff Securities out of total sales of $3.75 million.
The company employed Robert Jaffe as vice-president; Jaffe was connected through marriage to philanthropist Carl J. Shapiro, an early and significant investor in Madoff’s operation. Jaffe played a key role in attracting substantial investments, including a notable $250 million injection shortly before Madoff’s arrest. Cohmad maintained fewer than 650 client accounts, reflecting its strategic emphasis on channeling funds into Madoff’s activities rather than pursuing broad investment diversification.
Bernard Madoff agents
Robert Jaffe, a philanthropist by background, was pivotal in bringing members of the Palm Beach Country Club into Madoff’s investor base, securing around 150 accounts that collectively contributed over $1 billion. In return, Madoff compensated Jaffe through accounts that yielded returns exceeding those given to other investors. From 1996 through 2008, Jaffe withdrew at least $150 million from these accounts. The SEC alleges that Jaffe was aware that the trading activity reported by Madoff was fictitious. It is reported that Jaffe earned commissions ranging from 1% to 2% on the initial profits generated by investors and paid referral fees to advisers who directed funds to Madoff’s operation.
Civil lawsuits, investigations and revocation
On January 14, 2009, Massachusetts Secretary of the Commonwealth William Galvin initiated legal action against Robert Jaffe and Cohmad Securities Corp., identifying the brokerage as a promoter of Madoff-related investment funds targeting affluent investors in Massachusetts and Florida. When compelled to testify, Jaffe invoked his Fifth Amendment rights. Galvin sought to revoke Cohmad’s license in Massachusetts, demanded full disclosure of investor referrals to Madoff along with detailed accounting of fees earned—exceeding $67 million—and pursued monetary penalties. The complaint highlighted significant withdrawals made by Ruth Madoff and referral payments allegedly made to Sonja Kohn, majority owner of Bank Medici; Kohn denied receiving such payments. Bank Medici subsequently lost its Austrian banking license in May 2009 and remains under regulatory scrutiny.
By May 2009, Cohmad was declared in default due to failure to cooperate with regulators; its securities registration was revoked and it incurred a fine of $100,000. Concurrently, federal prosecutors sought forfeiture of the Madoffs’ ownership interests in Cohmad Securities.
In June 2009, Irving Picard—the trustee overseeing Madoff’s bankruptcy estate—filed claims against Cohmad and several principal individuals including founder Maurice “Sonny” Cohn, Marcia Cohn, Robert Jaffe, among others. The lawsuit contends that up to 90% of Cohmad’s revenue stemmed from client referrals to Madoff’s firm within a mutually beneficial arrangement generating hundreds of millions of dollars. The suit seeks recovery exceeding $100 million paid to Cohmad before bankruptcy proceedings commenced as well as more than $105 million withdrawn by employees and their relatives.
At the same time, the SEC initiated civil fraud charges against Maurice Cohn, Marcia Cohn, and Robert Jaffe, alleging that Cohmad functioned effectively as an internal marketing division for Madoff’s enterprise. Representatives were compensated for bringing in new capital but not based on actual investment returns; withdrawals were treated as losses consistent with fabricated profits. Notably, starting in 2002 Maurice Cohn received annual payments amounting to $2 million from Madoff.
Jaffe has petitioned for dismissal of both SEC and Picard lawsuits within federal courts located in New York.
See also
External links
- Complaint filed by the Commonwealth of Massachusetts Secretary of State, dated January 14, 2009
- Picard versus Cohmad Securities Corp., case number 09-AP-1305, issued June 22, 2009
- SEC lawsuit against Cohmad Securities Corp., case 09 Civ. 5680, June 22, 2009