Bank Medici

Bank Medici was a Vienna-based Austrian bank founded in 1994 by banker Sonja Kohn. It was incorporated as a bank in 2003 and operated as a privately controlled financial institution, with Kohn serving as president and majority shareholder. Bank Austria Creditanstalt, then Austria's largest banking group, was the principal institutional shareholder and held the balance of the ownership after Kohn's approximately 75% stake. The bank's public profile was defined less by a broad retail banking franchise than by its role in investment management and the distribution of alternative-investment products to wealthy and institutional clients. One of its most consequential relationships involved Thema International Fund, an investment vehicle that placed money with funds operated by Bernard Madoff. Bank Medici acted as investment manager for Thema and was reported to have received approximately €4.6 million in fees in 2007 for finding investors for the fund. The arrangement placed the Austrian bank within the international network of intermediaries and feeder funds connected to Madoff's investment operation. The collapse of Madoff's scheme in December 2008 brought Bank Medici into severe regulatory and reputational crisis. Reports published in early January 2009 indicated that the bank's exposure to Madoff-linked investments could have been about $3 billion, while subsequent reporting placed the exposure at approximately $2.1 billion. The figures were reported in the context of assets invested through funds associated with Madoff and should not be treated as a confirmed measure of the bank's own balance-sheet loss. Some of the affected money was reported to have originated from wealthy international investors, including Russian oligarchs. On 2 January 2009, after the exposure became public, the Austrian government appointed a supervisory commissioner to oversee the bank. Gerhard Altenberger was subsequently described as effectively managing the institution during the crisis, while Sonja Kohn and her husband, Erwin, largely withdrew from public view. The episode also prompted scrutiny in the United States because of alleged referral relationships involving Madoff promoters and Cohmad Securities. Massachusetts officials cited an alleged payment of $526,000 in referral fees connected with Madoff investments and Bank Medici's majority owner; Kohn denied the allegation. Bank Medici ultimately lost its Austrian banking license on 28 May 2009. The bank and Kohn remained subject to investigation in connection with the Madoff-related affair. The loss of its license ended Bank Medici's operation as an authorized Austrian bank and made the institution an important Austrian case study in the regulatory, intermediary, and investor-protection consequences of the Madoff scandal.

Bank Medici was established in Vienna in 1994 by banker Sonja Kohn. Unlike a large universal bank with a substantial branch network, it developed as a privately controlled institution focused on investment-related activities and affluent or institutional clients. Kohn became the bank's president and retained approximately three quarters of its equity. Bank Austria Creditanstalt, one of Austria's leading banking groups at the time, was the principal institutional shareholder and owned the remaining interest. The institution was formally incorporated as a bank in 2003. A significant part of Bank Medici's business involved investment management and the placement of investment products. The bank served as investment manager for Thema International Fund, which invested with Bernard Madoff's investment operation. Bank Medici was reported to have received approximately €4.6 million in 2007 for sourcing investors for Thema. This fee relationship illustrated the bank's role as an intermediary and investment manager in the international distribution chain around Madoff-linked funds. Madoff's fraudulent investment scheme collapsed after authorities and markets learned in late 2008 that the apparent investment returns were not supported by actual securities trading. Bank Medici became one of the most prominent European institutions connected to the fallout. On 2 January 2009, reports emerged that investments associated with the bank could have exposed it to roughly $3 billion in Madoff-run funds. A subsequent report cited an exposure of approximately $2.1 billion. The reported amounts concerned investments made through associated funds and included money belonging to outside investors; the public reports did not establish that the entire amount represented Bank Medici's own proprietary loss. The exposure triggered an Austrian regulatory intervention. The government appointed a commissioner to supervise the bank, and Gerhard Altenberger was described as effectively directing its affairs during the emergency. Sonja Kohn and her husband, Erwin, largely disappeared from public view as the crisis developed. The affair also generated scrutiny in the United States. Massachusetts Secretary of the Commonwealth William Galvin brought proceedings involving Robert Jaffe, who had promoted Madoff-related funds to wealthy investors, and later sought action against Cohmad Securities. The Massachusetts complaint requested information on investors referred to Madoff, the fees earned from those referrals, and other relief. It referred to an alleged $526,000 payment connected to Cohmad, Madoff Investments, and Kohn, which Kohn denied. Bank Medici's regulatory position deteriorated during the investigation. On 28 May 2009, the bank lost its Austrian banking license. The loss of authorization effectively ended its banking operations and left the institution associated primarily with the Madoff scandal rather than with an enduring consumer or corporate banking franchise. Investigations involving the bank and Kohn continued after the license withdrawal. Bank Medici's history therefore consists of a short period of private investment banking followed by a rapid collapse caused by its exposure to the Madoff feeder-fund network and the resulting regulatory response.

• 2009

  Austrian supervisory intervention

  [1]Bank Medicien.wikipedia.org

  After the bank's Madoff-related exposure became public, the Austrian government appointed a supervisory commissioner.

• 2009

  Banking license withdrawn

  [1]Bank Medicien.wikipedia.org

  Austria withdrew Bank Medici's banking license on 28 May 2009.

• 2007

  Fees received for sourcing Thema investors

  [1]Bank Medicien.wikipedia.org

  Bank Medici reportedly received approximately €4.6 million for finding investors for Thema International Fund, which invested with Bernard Madoff.

• 2003

  Incorporated as a bank

  [1]Bank Medicien.wikipedia.org

  Bank Medici was formally incorporated as a banking institution.

• 1994

  Bank Medici founded in Vienna

  [1]Bank Medicien.wikipedia.org

  Banker Sonja Kohn established Bank Medici in Austria.

A privately controlled Austrian investment-oriented bank serving wealthy and institutional investors rather than a mass-market retail audience.

• Banking services

  Private banking and wealth management

  Bank Medici operated as a privately controlled Austrian bank oriented toward affluent and institutional clients. Public reference material characterizes its business through investment management and fund-related activity rather than through a broad retail branch network. Its client-facing role included arranging or managing access to investment opportunities and alternative funds.

• Investment management

  Thema International Fund investment management

  Bank Medici acted as investment manager for Thema International Fund. Thema invested with Bernard Madoff's investment operation, making the fund a central link between Bank Medici and the international Madoff feeder-fund network. Bank Medici reportedly received fees in 2007 for sourcing investors for the fund.

• 2009

  Bank Medici's involvement in the Madoff investment scandal

  Bank Medici was the investment manager for Thema International Fund, which invested with Bernard Madoff. After the scheme collapsed, reports placed the bank's exposure to Madoff-linked investments between approximately $2.1 billion and $3 billion. The bank was placed under government supervision and later lost its Austrian banking license.

  Source

• 2009

  Alleged referral-fee relationship examined in Massachusetts

  Massachusetts securities authorities cited an alleged $526,000 referral-fee payment linked to Madoff investments, Cohmad Securities, and Sonja Kohn. Kohn denied the allegation, while the authorities sought records and other relief in proceedings concerning Cohmad.

  Source

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• 2009

  Austrian government places the bank under supervisionStrategy

  Background

  The intervention followed public reports that Bank Medici and funds connected with it had substantial exposure to Bernard Madoff's investment operation.

  Action taken

  Austria appointed a supervisory commissioner, with Gerhard Altenberger effectively managing the bank during the crisis.

  Aftermath

  The intervention preceded the withdrawal of Bank Medici's Austrian banking license later in 2009.

  Source

• 2009

  Banking license withdrawnOther

  Background

  Bank Medici faced regulatory and investigative pressure after its Madoff-related investment exposure became public.

  Action taken

  The Austrian authorities withdrew the bank's banking license on 28 May 2009.

  Aftermath

  The decision ended Bank Medici's status as an authorized Austrian bank and effectively brought its banking operations to an end.

  Source

1. 1Bank Medicien.wikipedia.org
2. 2Madoff investment scandalen.wikipedia.org