Madoff made-off with billions...

The only way he could've topped that would have been to die peacefully in his bed of old age, and leave the mess for the descendants to clean up. IOW, yeah, I think he *is* a good candidate for greatest con artist ever (not counting politicians).

blatantninja said:

b) Check out their secondary insurance. As I said above, SIPC only covers $500k. Most major brokerages and money managers buy secondary insurance to a much larger amount. When I was at Morgan Stanley, it was up to $2Billion per customer. This insurance isn't used that often, so the premiums were pretty low and given the size and supposed profitability of Madoff's firm, there would be no reasonable reason why he would not have it. And he didn't..

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$2bn per customer? Even $2bn in aggregate for an entire company like morgan stanley would be an extremely high, almost unheard of level of coverage . . . we've got the biggest financial institutions insurance book in Lloyds and I don't think we've really got any limits over $1bn. Mind you we don't touch the US with a 20 foot shitty stick (any more) because the legal system in the US can lead to utterly horrific losses for insurers.

And even though the insurance isn't used very often the premiums are never immaterial because the insurers need to hold a fair bit of capital to cover limits like that so they charge for capacity. Plus I can't speak for our peers in the market but hedge funds, particularly US hedge funds with billions of funds under management, we would consider to still be materially exposed at that level.

Anyway, there are most likely going to be a lot of claims on the professional indemnity insurance of other financial institutions for advising their clients to invest in Madoff's fund while clearly not doing due diligence on him. I think the big thing is his auditors, there's apparently some rules on the size of the auditing company relative to the size of the fund that any adequate due diligence would have picked up on.

Article

A detailed proof of fraud submitted nearly 9 years ago and resubmitted several times since . . . the SEC is a fucking joke.

Benedict said:

$2bn per customer? Even $2bn in aggregate for an entire company like morgan stanley would be an extremely high, almost unheard of level of coverage . . . we've got the biggest financial institutions insurance book in Lloyds and I don't think we've really got any limits over $1bn. Mind you we don't touch the US with a 20 foot shitty stick (any more) because the legal system in the US can lead to utterly horrific losses for insurers.

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It's been 8 years since I worked there, but I'm pretty sure that that was the max level (Obviously there were only a handful of clients at that range)/

And even though the insurance isn't used very often the premiums are never immaterial because the insurers need to hold a fair bit of capital to cover limits like that so they charge for capacity. Plus I can't speak for our peers in the market but hedge funds, particularly US hedge funds with billions of funds under management, we would consider to still be materially exposed at that level.

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Not going to say it is immaterial, but it isn't unaffordable, especially if you are doing a decent job with your firm.

Anyway, there are most likely going to be a lot of claims on the professional indemnity insurance of other financial institutions for advising their clients to invest in Madoff's fund while clearly not doing due diligence on him. I think the big thing is his auditors, there's apparently some rules on the size of the auditing company relative to the size of the fund that any adequate due diligence would have picked up on.

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yeah, there have already been a few companies that have just given in and said they will reimburse customers original investment. It should be interesting. I'm obviously not an expert on the insurance, but my understanding was that it generally only covered fraud by the firm, not by outside managers. If that's the case, I think what we'll see are large class action suits that end up benefiting the lawyers more than anyone else.

A detailed proof of fraud submitted nearly 9 years ago and resubmitted several times since . . . the SEC is a fucking joke.

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Yup. I really thought that after the Enron, Worldcom and Tyco snafus that the SEC would get some balls. Obviously I was wrong.

blatantninja said:

Not going to say it is immaterial, but it isn't unaffordable, especially if you are doing a decent job with your firm..

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I've always found the insurance quite unnerving really . . . even if they use the insurance the sums involved are not material for banks overall capital, but the premiums are still material enough that they're not going to casually throw them away, which would kind of suggest that they see it as an arbitrage opportunity.

Mind you we've made money out of it. So far . . .

Now that I think about it, I think the insurance was for a total of $200 billion or something similar for the entire firm as a whole, not based on individual accounts.

blatantninja said:

Now that I think about it, I think the insurance was for a total of $200 billion or something similar for the entire firm as a whole, not based on individual accounts.

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That still sounds at least a couple of orders of magnitude too high . . . even a limit of $2bn would be absolutely enormous and incredibly difficult to place with anyone.

To put it into context, before we capped our exposure to financial institutions this year, our maximum line was up to $25m dollars and we had the largest line in the London market (Lloyds & a few others like ACE for financial institutions). Allow for say four massive internationals like AIG to have lines averaging around $100m and a host of smaller providers with an average of $20m maximum line (all very optimistic estimates) and you'd still need to get nearly 40 insurers to participate just to get a $1bn programme placed and the financial institutions market just isn't that big.

Looking through a couple of our big name risks, Royal Bank of Scotland and Barclays both seem to only buy up to £150m - £200m all told, and although I could see morgan stanley being bigger I'd be surprised if it got up to those kind of numbers.

Benedict said:

That still sounds at least a couple of orders of magnitude too high . . . even a limit of $2bn would be absolutely enormous and incredibly difficult to place with anyone.

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It wasn't any one issuer. It was several. Like I said, it's been 8 years. Regardless, they had insurance that went well beyond the $500k that the SIPC covered.

blatantninja said:

It wasn't any one issuer. It was several. Like I said, it's been 8 years. Regardless, they had insurance that went well beyond the $500k that the SIPC covered.

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Sorry, badly worded, I'd been talking about placements in the subscription market and meant difficult to place at all rather than difficult to place with one person.

Don't think anyone's brought up the "mini-Madoff" yet in this thread--another mind-boggling exercise in unbridled greed and consmanship:

US Charges Allen Stanford with Massive Fraud

The man is single-handedly causing a bank run in his preferred empire of Antigua(where he picked up the bogus knighthood.)and has a ponzi scheme of his own that apparently seems to be bigger than Madoff's in people affected if not actual dollars.

And the guy has skipped town, eluding those great detective minds at the SEC:

Federal regulators said on Wednesday they do not know the whereabouts of billionaire Texas banker Allen Stanford, charged with a "massive" $8 billion international financial fraud.

"We are unaware of his whereabouts," Securities and Exchange Commission spokeswoman Kimberly Garber said from Texas.

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And he lost money with Madoff. He was essentially running a ponzi scheme on top of a ponzi scheme.

I actually interviewed with them in 2001. Dodged that bullet!

There will be others. As Warren Buffett have said: "It's only when the tide goes out that you learn who's been swimming naked."

http://news.yahoo.com/s/ap/20090220/ap_on_bi_ge/bank_fees_jobless_benefits_12

Bankers: public enemy number one these days
(perhaps not all their fault, but they sure aren't helping their cause)

Now he wants to keep about $70MM of it:

Bernie: Ruth Madoff should keep apartment

Lawyers for disgraced financier Bernard Madoff say his wife, Ruth, should be allowed to keep nearly $70 million worth of assets held in her name, including the New York City apartment where Mr. Madoff is currently under house arrest, because they are "unrelated" to the alleged Ponzi scheme.

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Last month, Massachusetts regulators said Ruth Madoff withdrew $15.5 million from a Madoff-related brokerage firm in the weeks before her husband's arrest for securities fraud, including $10 million on the eve of his arrest.

Ruth Madoff hasn't been accused of any wrongdoing.

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That doesn't add up.

I can only see one scenario where she should keep anything:

If the assets were hers before the marriage (earned or inherited) and if at no point were they ever invested in Madoff's schemes.

But even in that scenario, she materially benefited from his scheme due to the lifestyle it afforded her, so she should have to forfeit most, if not all of it.


Now, being in a Madoff related brokerage doesn't necessarily mean that she was invested in the scheme, but in all likelihood she probably was at one point.

Saw this earlier bn--the sheer NERVE of this man is amazing. I guess somebody who can swindle widows and orphans and trusting old people out of their life savings kinda has to have nerve, but this is just over the top. Seems to me his wife is his shadow pawn in this stuff--they've been married for decades so her wealth and his should be pretty indistinguishable in reality if not in legalese.

Where are the metaphorical tar and feathers when you really need them? Where's my damn pitchfork?

Is she the shadow pawn or shadow master?

Behind every successful man is an evil woman wanting new jewelry...

I'll start running now. 1 minute head start?

Shadow puppet?

1 minute is plenty--carrying the torch and pitchfork really slow me down.

magerette said:

...
Where are the metaphorical tar and feathers when you really need them? Where's my damn pitchfork?

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Metaphorical versions of said thingies may be hard to find. Real objects on the other hand shouldn't be too difficult to come by. There must be someone around doing things with chickens and asphalt. The pitch fork may be more difficult - may I suggest a garden fork as a viable replacement?

I wouldn't soil my trusty garden fork with the likes of Madoff. I have good clean dirt and manure to dig with that, you know.