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RPGWatch Forums » General Forums » Politics & Religion » Madoff made-off with billions…

Default Madoff made-off with billions…

December 21st, 2008, 12:50
It unfortunated event for those involved in his investment schemes, and another bad news for the already unstable stock market.

The big questions now are:

1) How Madoff pull off such scam without detection for so long?

2) What kind of person he really is? Is it due to weaknesses that inherent in everyone else?

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December 21st, 2008, 13:25
Originally Posted by Remus View Post
It unfortunated event for those involved in his investment schemes, and another bad news for the already unstable stock market.

The big questions now are:

1) How Madoff pull off such scam without detection for so long?
That one's easy — because the people in charge of supervising him were ideologically committed to the self-regulation of the markets. Chris Cox didn't want to regulate securities and the exchange; he wanted to dismantle the SEC. It's not like there weren't whistle-blowers or something.

2) What kind of person he really is? Is it due to weaknesses that inherent in everyone else?
I doubt you can answer that fully about anyone. I would suppose that Madoff is what he now appears to be — a highly skilled con-man. I.e., likable, believable, with a knack of making himself look trustworthy, but utterly lacking in the scruples that keep most people from doing that sort of thing. He's a seed that fell into the fertile ground of Reagan-Bush market fundamentalism.
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December 21st, 2008, 13:34
It isn't that simple. Madoff was a respected businessman who helped found NASDAQ. He was even on the board. It's not like people didn't know him. He was a smart guy and he probably saw that people trusted him with his money.
My guess is that he saw he could make millions by doing what he did and he took the opportunity. He had friends in high places everywhere so he could easily convince other people to join on his scheme.

If things are easy to do and as long as the economy didn't crash he wouldn't even have been found out and he probably would have kept on going.
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December 21st, 2008, 14:57
If the SEC had done its job, he would've been found out years ago. Don't believe me; follow the links I provided.
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December 21st, 2008, 18:13
Cox has no balls at all. The SEC is a freaking joke. You'd think after Enron they would have gotten some more teeth.

I would like to see Madoff hung from the front of the NYSE.

It's cheesy to say this, but the best explanation of how a guy that was once rightfully respected ended up in this state is with the expression Yoda says about the dark side, essentially once you give in, forever will it dominate your destiny. I'm sure that the first time he did claim unearned gains, he probably just thought he'd do it once to make up for bad year and keep his rep, and he'd make it up the next year.

But then it was too easy and maybe the next year wasn't so good, and he kept doing it, and doing it, and at some point, he probably felt that he just couldn't get out.

Don't mistake this for excusing him, I'm not, just following the process that leads to this type of downfall.

A couple thoughts on the impact though on the investors:

1) Anyone that had $500k or less, should be fully repaid (at least their principle, if not their 'growth') by the SIPC. Unfortunately, that will likely take more money than the SIPC currently has, so the govt is going to have to kick some in (It sucks, but I think they need to make the SIPC solvent)

2) For the big money people and the charities, I don't have that much sympathy. When I was a trust PM, we invested a lot with outside managers. There were two main things that we did each year during due diligence of those managers that would have caught Madoff:
a) Check out their auditors. Usually it was one of the big firms, or at least a well known regional name. Madoff was using a mom and pop in Florida where he was the only client. That is a HUGE red-flag
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.

Forgetting the fact that the returns he was showing seemed unrealistic to many people, those two red flags would have kept anyone with half a brain from investing. So why did so many high networth people and charities get taken? Simple: The 'good old boy network' so to speak. In many communities, people take the word of someone in that community over the word of anyone else, no questions asked. Sure, not 100% of the time, but that trust is what Madoff was counting on. They took Madoff's word that everything was legit and never bothered to do the due diligence. It's really amazing that after the dotcom massive frauds that anyone would do that, but alas it continues.

So while it sucks for the beneficiaries of those charities, and my heart genuinely goes out the them, the people that were running them were completely negligent.

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December 21st, 2008, 18:43
Maybe When he started his business in 1960s, everything was legitimate or never intended to cheat. Somewhere along the way, he started to conceal old investors loss with new investors’ money. If he started the scam 20 years ago (1980s), that's still highly unusual for a Ponzi scheme to last that long.
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December 21st, 2008, 20:27
The SEC is an administrative organization. Its authority comes from Congress, its leadership and its orders come from the President. The SEC does what its told, and it was told for years (decades?) to favor a hands-off approach and to avoid "stifling" those wonderful engines of growth that are our financial firms. Heard of credit default swaps? In all the finger-pointing over how the meltdown happened, no one seems to bring up the tiny fact that Congress by statute specifically exempted those delicious instruments of finance from the SEC's regulatory perview. By law, the SEC could not regulate them. No registration, no disclosure, and here we are with no one able to figure out what the damn things are worth.

The SEC is not like the FDIC. They didn't have open access to Madoff's books, they didn't have on-site agents, and they were told to be hands-off. Madoff's firm is/was not a public corporation. The SEC is run by a commission of political appointees who share the President's views on finance, and are obligated to carry out the laws passed by Congress in the manner prescribed by the President. If you want to blame somebody, try the people with authority.
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December 21st, 2008, 21:54
Originally Posted by blatantninja View Post
It's cheesy to say this, but the best explanation of how a guy that was once rightfully respected ended up in this state is with the expression Yoda says about the dark side, essentially once you give in, forever will it dominate your destiny. I'm sure that the first time he did claim unearned gains, he probably just thought he'd do it once to make up for bad year and keep his rep, and he'd make it up the next year.

But then it was too easy and maybe the next year wasn't so good, and he kept doing it, and doing it, and at some point, he probably felt that he just couldn't get out.
Yup, sounds plausible to me BJ. I am also sure that, when he cooked the books for the first time, if you told Madoff that he will end up with 50 bill Ponzi scheme, he would have spit you in the eye and called you a liar.
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December 22nd, 2008, 13:32
He should be put to death.
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December 30th, 2008, 21:07
I'm currently reading "Making Money" by Terry Pratchett.

That and "Going Postal" are great novels about economy.

I think, Madoff would be called von Lipwick on the Discworld.

“ Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius – and a lot of courage – to move in the opposite direction.“ (E.F.Schumacher, Economist, Source)
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December 30th, 2008, 21:45
Someone stole a statue of his worth 10K
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January 6th, 2009, 19:57
What I wonder is… what actually happened with all that money? 50 billions doesnt evaporate like that. Some of it must remain somewhere, no?

This scandal seems much like the bigger version of a scandal we had here in Quebec in 2005 : http://en.wikipedia.org/wiki/Vincent_Lacroix
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January 16th, 2009, 22:42
Holy Crap. I take back what I said before. Madoff may not have made a SINGLE trade in the 48 years his firm was around.

http://news.yahoo.com/s/nm/20090116/…_madoff_trades

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January 16th, 2009, 23:09
Oooh, can I?

Told ya so!
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January 16th, 2009, 23:12
Just insane that anyone could be that corrupt AND pull it off for that long.

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January 16th, 2009, 23:21
I thought that particular firm was only around for 20 or so years…
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January 16th, 2009, 23:28
Madoff's broker-dealer operation, Bernard L. Madoff Investment Securities, underwent routine examinations by FINRA and its predecessor, the National Association of Securities Dealers, every two years since it opened in 1960, Perone said.
From the article

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January 19th, 2009, 22:36
Daily Mail, right leaning tabloid newspaper, managed to secure interview with Julia Fenwick (office manager of Madoff's London HQ). While not revealing anything startingly new, it does provide some interesting background informations about her ex-boss:
http://www.dailymail.co.uk/femail/ar…ie-Madoff.html

The question remains: was Madoff one of the greatest con artists ever or just a master at disassociation?
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January 19th, 2009, 22:54
No, it doesn't.

If he ran a con for 48 years, and filched $50bn doing it, and there's still someone even pretending that there's any question about what he was… then there's absolutely no question about it whatsoever.
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January 19th, 2009, 23:07
Well, then the answer is : The greatest con artist ever
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