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Officials said that Stanislav Markelov, who also represented the slain journalist Anna Politkovskaya, was shot dead in the street by an unknown gunman moments after speaking out about the case of Yuri Budanov.

A young female journalist accompanying Mr Markelov later died in hospital after being seriously injured when she tried to intervene.

Anastasia Barburova was reported to be working freelance for Novaya Gazeta, the opposition newspaper which also employed Politkovskaya.

Budadov was sentenced to 10 years in jail in 2003 for the murder of 18-year-old Kheda Kungayeva, a Chechen woman snatched from her home in March 2000 and taken to the colonel’s office. There she was allegedly raped before Budanov, who accused her of being a rebel sniper, strangled her.

The case caused widespread revulsion and Budanov became the first senior Russian officer convicted of human rights abuses during the Chechen campaign. He was released from jail four days ago.

Before his death today, Mr Markelov, who represented Kungayeva’s family, told reporters that he planned to challenge the release, which has prompted street protests in Chechnya attended by both human rights activists and representatives of the region’s pro-Moscow authorities.

Britain has foreign reserves of under $61bn dollars (£43.7bn), less than Malaysia or Thailand. The foreign liabilities of the UK banks are $4.4 trillion – or twice annual GDP – according to the Bank of England. The mismatch is perilous.

It is why sterling has crashed 10 cents from $1.49 to $1.39 against the dollar in two days. The markets have given their verdict on Gordon Brown’s latest effort to “save the world”.

Credit default swaps (CDS) measuring risk on British debt have reached an all-time high of 125, just below Portugal. The yield spread on 10-year Gilts over German Bunds has doubled to 53 since last week.

Standard & Poor’s has quashed rumours that it will soon strip Britain of its AAA credit rating – an indignity averted even after the International Monetary Fund bail-out in 1976. But there was a sting yesterday as it responded to the Treasury plan for the banks. “Market confidence in the sector has eroded to such a degree that it is not clear whether these measures by themselves will bring about a material improvement,” the IMF said. “As a result, full nationalisation of some banks remains a possibility in our view.”

Spain was relegated from AAA to AA+ on Monday, and Spain’s public debt is a much lower share of GDP.

“If Spain can get downgraded, then the risks for the UK are self-evident,” said Graham Turner, of GFC Economics. “The increase in the UK gross public debt burden – 11.8 percentage points in just one year – is troubling. The market rightly fears the long-term fiscal costs of a collapsing banking system. Rising Gilt yields are the main impact of the botched move from the UK Treasury.”

Mr Turner said the British Government had taken far too long to resort to quantitative easing – printing money – and had wasted months with fiscal frippery as debt deflation throttled the banks.

The parallels with Iceland are disturbing. The country was ruined by the antics of its three big banks. They built up foreign liabilities equal to 900pc of GDP. Operating as hedge funds, they borrowed in dollars, euros and pounds to speculate. However, the state lacked the foreign reserves to match this leverage.

But Iceland at least had the luxury of letting banks default – shifting losses on to the rest of the world. It refused to honour foreign debts.

“They drew a line,” said Jerry Rawclifffe, who tracks Iceland for Fitch Ratings. “They created new banks, parking the old losses in resolution committees. It is not easy for other governments to walk away. They have a duty of care.”

Indeed, if Britain walked away from UK banks’ $4.4 trillion of foreign liabilities – worth eight times Lehman Brothers – it would destroy the credibility of the City and take the whole world into deeper depression.

“The UK cannot go down that route because it would set off an asset price death spiral,” said Marc Ostwald, a bond expert at Monument Securities. “The Western banking system is already on life support. That would turn it off altogether.”

So whatever the temptations, and whatever the feelings of righteousness over the follies of the RBS leadership in its debt-driven campaign of Napoleonic expansion, the Treasury is wedded to the banks and all their sins. Chancellor Alistair Darling cannot copy Iceland.

S&P’s lead UK analyst, Trevor Cullinan, said the Government faces a “severe test” and will be judged by its actions, but he doubts whether matters will reach such a dangerous pass.

“The challenges to UK banks are significant amid a correction in property prices and a contraction of GDP. Nevertheless, the situation is very different from Iceland. The UK benefits from sterling, which is a major global funding currency. UK access to external funding is far more secure. In a worst-case scenario we estimate the cost of recapitalising the UK banking system to be in the region of £83bn (5.7pc of GDP),” he said.

The Government can take out derivatives contracts on currency markets to hedge the foreign debt risk. Perhaps it already has. The banks have $4.4 trillion foreign assets to offset their liabilities, of course. But what is their real value in this climate?

However, the Sarasota County Sheriff’s Office said it believes Arthur G. Nadel planned his disappearance and that it was ending its search for him.

The Federal Bureau of Investigation will continue to investigate complaints from investors who were expecting Nadel to deliver the $50 million redemption on Jan. 15, the day after he disappeared.

The Florida financier’s car was found at a Sarasota airport, and Sheriff’s Lt. Chuck Lesaltato said they believe Nadel left on his own volition.

“He doesn’t want to be found,” Lesaltato said.

Also on Tuesday, pepper spray manufacturer Mace Security International claimed Nadel owed them $2.2 million. The company said in a release they’d been informed the deposits could not be located, and that documents Nadel had provided were not authentic.

“We have already filed a report with authorities, and we intend to take all possible legal action against the Victory Fund,” Mace CEO Dennis Raefield said, referring to one of Nadel’s hedge funds.

The 76-year-old financier disappeared last Wednesday. Nadel told his wife he was going to his office, but was not there when she arrived about two hours later. Later, Nadel called and said he’d left something for her in a desk drawer at their ranch-style home in Sarasota. That’s where she found a suicide note, the sheriff’s report states.

In it, Nadel told his wife how much he loved her. He also said he felt guilty over losing other people’s money.

“The subject wrote that as a result of his management of other people’s money that there are those that would like to kill him,” the sheriff’s report states, “but that he will do it himself.”

Investigators attempted to find Nadel by tracing his cell phone activity. A final call placed him in Tampa Wednesday afternoon, after which his phone appears to have been turned off, according to the incident report.

On Thursday, police found his green Subaru outside the Sarasota-Bradenton International Airport. Lesaltato said they don’t know where Nadel went, and couldn’t say how close they were to finding him.

“I don’t know if we were ever really close,” he said. “He was constantly moving as far as we know.”

Nadel operated Scoop Management Inc., and was a trader for six different funds. According to Scoop’s internal accountant, there are between 500 and 600 investors across the country. Last week, many were told that the funds are empty.

Mace said it invested $2 million in Nadel’s Victory Fund Ltd., a short term hedge fund. The company requested a redemption in June, which was valued at $3.2 million and expected to be delivered in the fall.

In October, Mace said it was told the redemption would be withheld “due to extraordinary market conditions.”

The fund agreed to a $1 million payment in November, which was received, and the remainder was due in January.

The situation was reported to the U.S. Securities and Exchange Commission and state authorities.

Sarasota police have been fielding inquiries from around the country and as far away as France, though the size of the funds and the value of their assets still remains unclear.

Duncan McCandless, a watercolorist from California, said he invested around $500,000 since 2002, and that he believed it had nearly doubled in value. He was expecting $14,000 on Jan. 15 that never arrived.

Ordinary islanders were determined to vent their fury at the way that the political class had allowed the country to slip towards bankruptcy. The building was splattered with paint and yoghurt, the crowd yelled and banged pans, fired rockets at the windows and lit a bonfire in front of the main door. Riot police moved in.

Now in the grand sweep of the current crisis, a riot on a piece of volcanic rock in the north Atlantic may not seem to add up to much. But it is a sign of things to come: a new age of rebellion.

The financial meltdown has become part of the real economy and is now beginning to shape real politics. More and more citizens on the edge of the global crisis are taking to the streets. Bulgaria has been gripped this month by its worst riots since 1997 when street power helped to topple a Socialist government. Now Socialists are at the helm again and are having to fend off popular protests about government incompetence and corruption.

In Latvia – where growth has been in double-digit figures for years – anger is bubbling over at official mismanagement. GDP is expected to contract by 5 per cent this year; salaries will be cut; unemployment will rise. Last week, in a country where demonstrators usually just sing and then go home, 10,000 people besieged parliament.

Iceland, Bulgaria, Latvia: these are not natural protest cultures. Something is going amiss.

Yes, Bernard Madoff was an impressive man. That much was clear even before we learned that his $50 billion Ponzi scheme may have been orchestrated in cahoots with the most powerful, sophisticated, and indiscriminately murderous organized crime syndicate the world has ever known.

Charles Gasparino (citing “speculation” from investigators) reported last week on CNBC that the Russian Mafia might have been partners in Madoff’s larcenous fund business. Or perhaps the Mob had an even greater interest in Madoff’s market making operation, as some of our sources have told us in recent weeks.

Either way, there is a certain cachet.

But it wasn’t just pierogies and pistol-packing wiseguys in purple suits. Mr. Madoff was also a dedicated public servant, volunteering countless hours at the Securities and Exchange Commission.

Indeed, Madoff seems to have written many of the SEC’s rules. For example, Madoff was the principal author of an SEC rule that exempted market makers (i.e. Madoff) from various regulations governing short sellers (i.e. Madoff’s friends).

Madoff’s rule ensured that market makers (Madoff) could, among other things, engage in so-called “naked short selling.” To sell “naked” is to sell stock that one does not actually possess. That is “phantom stock,” according to the SEC Chairman and many others.

Sometimes, short sellers (who profit when shares lose value) offload massive amounts of phantom stock to drive down prices, destroy pubic companies, or even crash the market. That is why there used to be restrictions.

At any rate, I don’t think Madoff had an office at the SEC. He certainly was not employed there. But the SEC was glad to have Madoff write a rule exempting Madoff from the rules. The formal name of the rule is, “the option market maker exception to Rule 203(b)1,” but the SEC was so thankful that it named the rule after the great man himself.

It was called, “The Madoff Exception.”

After Madoff wrote that rule, market makers (e.g., Madoff) proceeded to “rent” their exemption to hedge funds (i.e. friends-of-Madoff).

It remained against the law for hedge funds to sell phantom stock to manipulate the markets. It was also against the law for market makers to help hedge funds orchestrate such schemes. But under the Madoff regulatory regime, unscrupulous short sellers (i.e. friends-of-Madoff) could engage in this illegal activity so long as they did so with the illegal connivance of a law-breaking market maker (i.e. Madoff).

A few months ago, this naked short selling was implicated–by numerous academics, the U.S. Chamber of Chamber of Commerce, the Secretary of the Treasury, the CEOs of Wall Street’s biggest banks, respected law firms, John McCain, Hillary Clinton, and numerous congressmen – in the near total collapse of the American financial system.

The SEC has not prosecuted anybody for this. After all, there is an “exception.”

It is unclear whether the SEC will continue to name this “exception” after a man who might have absconded with 50 billion dollars (a sum that exceeds the gross domestic product of Pakistan) in league with the Russian Mob, an organization that is said to be in the market for a nuclear bomb – in addition to narcotics, sex slaves and, yes, phantom stock.

He played tennis with Sir Alan Sugar in Marbella and ran a property empire that spanned the Irish Sea.

With a glamorous wife, three young children and a sister who is the partner of Van Morrison, the musician, he seemed to embody the shiny world into which Ireland transformed itself after decades on the periphery of Europe.

Yet on Monday morning neighbours noted something was not right when he was seen wandering outside his luxury home in his pyjamas. A little while later he shot himself in the head while his wife Annette was out on the school run.

His suicide, prompted by the prospect of financial ruin according to unnamed friends speaking to Irish newspapers, sent shockwaves through the beau monde of Dublin’s wealthy cocktail society, like a bell tolling the end of the heady days of Ireland’s rampant consumerism and ostentatious exuberance.