Thread: Madoff

This is by far the greatest scandal in financial history, by volume and by sophistication, and yet the story is not as big as it should be. This will have more impact on WallStreet than anything else, even the bailout and the Sub-Prime mess but you won't hear it on the news. The consequences of the scandal is questioning the whole infrastructure of investment feeds, the input of capital into mutual funds, private funds, hedge funds etc...

Even the most skeptical got burned, and the scandal is revealing all the fraudulent and negligence work of many investment advisers. It seems that all kind of easy money went to feed Madoff funds, so maybe at the end justice was served.

'Dr. Doom' Didn't Predict Madoff Blowup

Originally Posted by WSJ

Henry Kaufman, the former Salomon Brothers chief economist whose bearish views decades ago earned him the nickname "Dr. Doom," lost several million dollars with Bernard Madoff, making him one of the most prominent Wall Street figures to emerge as a victim of the alleged Ponzi scheme.

Mr. Kaufman, 81 years old, had the money in a brokerage account with Bernard L. Madoff Investment Securities for more than five years, he said in an interview Tuesday.

Meanwhile, a federal bankruptcy judge in Manhattan overseeing the liquidation of the Madoff firm on Tuesday approved a transfer of $28.1 million from one of Mr. Madoff's bank accounts to the court-appointed trustee of the firm, who said the funds will be used for satisfying customer claims. On Wednesday, Mr. Madoff is expected to turn over details of his personal assets, liabilities and accounts to government investigators.

Kevin Bacon, the actor who has appeared in movies from "Footloose" to "Frost/Nixon," was also an investor in Madoff along with his wife, actress Kyra Sedgwick, Mr. Bacon's spokesman Allen Eichhorn said Tuesday. The investment was earlier reported by New York magazine's Web site.

Mr. Kaufman earned the Dr. Doom nickname as a result of his consistent predictions while at Salomon Brothers in the 1970s and early 1980s that interest rates would rise and bond prices would fall.

More recently, Mr. Kaufman was a director of Lehman Brothers Holdings Inc. and was chairman of the Lehman board's finance and risk committee before the Wall Street firm's September descent into bankruptcy.

Like many other Madoff investors, he is also a prominent supporter of Jewish institutions, including Yeshiva University. In an interview Tuesday, Mr. Kaufman said his Madoff loss was "no more than a couple percent of my entire net worth" and "immaterial to my financial well-being."

"Fortunately my net worth is higher than it was at the end of last year -- after working very hard to achieve that," Mr. Kaufman said. His net worth is several hundred million dollars, according to a person familiar with the matter.

Despite the Madoff losses, Mr. Kaufman made money in 2008, he said, in part by shorting the Standard & Poor's 500.

Mr. Kaufman said he didn't recall who introduced him to Mr. Madoff but said he trusted him with his money and was "shocked" by the alleged fraud. "You ask yourself, how could that happen? He was a reputable individual."

Mr. Madoff's "background, his associations" were reasons for comfort, Mr. Kaufman said. He called the alleged fraud "a terrible situation" and "another reflection of loose credit, of very rapid credit expansion ... which tends to breed all kinds of excesses."

In the filing Mr. Madoff is to make Wednesday to the Securities and Exchange Commission, he also is expected to provide names and locations of entities that held accounts or assets for his firm. The filing won't be public. Before his arrest, Mr. Madoff allegedly told his sons that there was $200 million to $300 million left in his firm, according to court documents and people familiar with the case.

Meanwhile, the court-appointed trustee for the Madoff firm, lawyer Irving Picard, will mail claim forms to the firm's customers by Jan. 9, 2009. Customers may be eligible for relief from the Securities Investor Protection Corp., a securities-industry-funded nonprofit group that can provide as much as $500,000 to customers of failed brokerages.

Originally Posted by Muadib

dis-banned

cough

jail the greedy fuk.

^ Bernie will get his day in court and likely get a minimum security prison term... While those who trusted him with their hard-earned $$$ go back to square one...

The implication is that the SEC was / is complicit from an oversight standpoint and should be dis-banned... Get it???

banned - made illegal.

dis-banned (sic) - made legal again after being illegal.

bush and his cronies are kunts. this is a financial iraq.

Originally Posted by Muadib

The SEC should be dis-banned and shut down over this mess... The worst part is that the SEC had been tipped-off for the last 10 years of Bernie's antics and turned a deaf ear... The damage could have been held to 10B if shut down in 1999... Now the impact is 5 times that and counting...

Just proves the SEC has been complicit in Wall Street

it's a bit more complex than that unfortunately. The SEC have little resources to investigate, and when they do they usually target the small guys or the very public cases to advertise their work. Attacking a giant like Madoff is a can of political worm that no SEC officials would like to take. Wouldn't be surprised if a few phone calls with certain politicians have been made when the investigation was opened.

But, yes in substance the SEC has failed, and that despite being nasty kunts looking for a bone. The problem is inefficiencies and resources, not the institution itself.

and philosophy of the commander and chief!

This will be a big problem for the industry - who is going to pay the hefty fees now when so many investment management firms just parked funds with madoff?

....and you folks consider Thailand corrupt? America exist to be corrupt and crime ridden.

I posted something the other day on my long thread about how the bankruptcy court intended to go after any invester with Madeoff over the past 6-years who had been paid out in part or in full.

Now that would be a really big shitfest.

this will be in the civil courts for decades.

big boon for the lawyers.

the whole system is symbiotic.

The whole Made-Off debacle really showcases the Merkin charade for what it really is - smoke, mirrors & lies.

In the aftermath of the sub-prime crisis, I plan to never again invest in anything US, or having ties to it - all my investments will continue into Europe - for better, or worse. At least there (offshore, UK-biased), the regulations & coverage seem to be more solid.

Nice to be awake, huh?

Originally Posted by bkkandrew

I posted something the other day on my long thread about how the bankruptcy court intended to go after any invester with Madeoff over the past 6-years who had been paid out in part or in full.

Now that would be a really big shitfest.

Ah yes - here it is:

https://teakdoor.com/us-domestic-issu...tml#post890032

^ True... But, for the moment, a rock-solid investment is where I'm happy.

try the taste of careful reasoning and selective whacks to the crooks.

middle path. middle path. middle path.

CNBC have been airing a "special" on the Madoff fraud. Very very disappointing. Should have been aired on Lifetime.
No depth, no meat, not even speculation as to how Madoff did it in a practical way.

It was not a one man job.

Madoff Chasers Dug for Years, to No Avail
Regulators Probed at Least 8 Times Over 16 Years; Congress Starts Review of SEC Today

Originally Posted by WSJ

Bernard L. Madoff Investment Securities LLC was examined at least eight times in 16 years by the Securities and Exchange Commission and other regulators, who often came armed with suspicions.

SEC officials followed up on emails from a New York hedge fund that described Bernard Madoff's business practices as "highly unusual." The Financial Industry Regulatory Authority, the industry-run watchdog for brokerage firms, reported in 2007 that parts of the firm appeared to have no customers.

Mr. Madoff was interviewed at least twice by the SEC. But regulators never came close to uncovering the alleged $50 billion Ponzi scheme that investigators now believe began in the 1970s.

The serial regulatory failures will be on display Monday when Congress holds a hearing to probe why the alleged fraud went undetected. Among the key witnesses is SEC Inspector General David Kotz, who was asked last month by the agency's chairman, Christopher Cox, to investigate the mess.

The situation is even more awkward because SEC examiners seemed to be looking in the right places, yet still were unable to unmask the alleged scheme. For example, investigators were led astray by concerns that Mr. Madoff, now under house arrest, was placing orders for favored clients ahead of others to get a better price, a practice known as "front running." Front running isn't thought to have played a role in the firm's collapse.

Concern that the SEC lacks the expertise to keep up with fraudsters is the latest criticism of the agency, which saw the Wall Street investment banks it oversees get pummeled or vanish altogether in 2008. With Congress likely to take a hard look at how to structure oversight of financial markets, the SEC is struggling to maintain its clout.

The failure to stop Mr. Madoff also is an embarrassment for Mary Schapiro, the Finra chief who has been nominated by President-elect Barack Obama as the next SEC chairman. Finra was involved in several investigations of Mr. Madoff's firm, concluding in 2007 that it violated technical rules and failed to report certain transactions in a timely way.

Ms. Schapiro declined to comment. Mr. Cox has previously acknowledged mistakes by the SEC. The agency declined to comment.

Regulatory gaps abound in the paper trail generated by the SEC's scrutiny of Bernard L. Madoff Investment Securities, according to a review of the documents. Many of the details haven't been reported previously.

For years, Mr. Madoff told regulators he wasn't running an investment-advisory business. By saying he instead managed accounts for hedge funds, Mr. Madoff was able to avoid regular reviews of his advisory business.

In 1992, Mr. Madoff had a brush with the SEC's enforcement division, which had sued two Florida accountants for selling unregistered securities that paid returns of 13.5% to 20%. The SEC believed at the time it had uncovered a $440 million fraud.

"We went into this thinking it could be a major catastrophe," Richard Walker, then-chief of the SEC's New York office, told The Wall Street Journal at the time.

The SEC probe turned up money that had been managed by Mr. Madoff. He said he didn't know the money had been raised illegally.

With no investors found to be harmed, the SEC concluded there was no fraud. But the scheme indicated Mr. Madoff was managing money on behalf of other people.

In 1999 and 2000, the SEC sent examiners into Mr. Madoff's firm to review its trading practices. SEC officials worried the firm wasn't properly displaying orders to others in the market, violating a trading rule. In response, Mr. Madoff outlined new procedures to address the findings.

Some outsiders were becoming suspicious. Harry Markopolos, an executive then working at a rival company, met with an official at the SEC's Boston office in 2001 to lay out his concerns about Mr. Madoff's steady returns. The same month, Barron's, a Dow Jones & Co. publication, and hedge-fund trade publication MarHedge suggested Mr. Madoff was front running for favored clients.

In 2004, the SEC's examination staff in Washington opened a limited inspection into whether the firm was front running. After finding no evidence of that, officials transferred the exam to the SEC's New York office.

In 2005, the New York staff began a broader examination, interviewing Mr. Madoff, his brother, two sons and a niece, all of whom worked at the firm. The SEC found that his investment-advisory business had 16 clients and managed $8 billion. Any firm that offers advice to more than 14 clients is required to register with the agency and undergo reviews.

Mr. Madoff "would not acknowledge" that these accounts were an investment-advisory business, the 2005 report by the New York staff said, because he received commissions from trades, not a percentage of the profits, the typical arrangement for hedge funds.

Mr. Madoff said the firm's trades were executed in foreign markets outside of U.S. trading hours. For Jan. 20, 2005, "All orders and executions took place between 2:49 a.m. and 8:57 a.m. This report supports BMadoff's assertion," the SEC concluded.

After examining customer statements made over four days in January 2005, the SEC concluded that they matched the investment strategy Mr. Madoff described. The findings "somewhat alleviated" their concerns of front running, an agency report said.

The report doesn't say whether the SEC looked at bank statements or other records that would have determined whether or not the trades took place. The examination uncovered some technical trading violations that resulted in a letter from the SEC. A predecessor to Finra conducted its own review in 2005 and found no violations.

In November 2005, SEC investigators in New York met with Mr. Markopolos, who prepared a 21-page report outlining his concerns. His conclusion was that Mr. Madoff's firm "is the world's largest Ponzi scheme."

The 2005 review and Mr. Markopolos's report prompted the SEC to open an enforcement case, a notch more serious in the SEC's world than the previous examination. "The staff is trying to ascertain whether" the allegation that Mr. Madoff "is operating a Ponzi scheme has any factual basis," according to the SEC case memo.

After sifting through documents and interviewing Mr. Madoff, the SEC concluded that neither he nor Fairfield Greenwich Group, a New York firm that funneled investors' money into the firm, told investors Mr. Madoff was making investment decisions. Fairfield revised its disclosures to investors.

The SEC also found that Mr. Madoff misled the agency in 2005 about the strategy he used for customer accounts, withheld information about the accounts and violated SEC rules by operating as an unregistered investment adviser. "The staff found no evidence of fraud," according to the SEC case memo. Mr. Madoff agreed to register his business that September, and the SEC didn't make its findings public.

Finra's full-scale examination in 2007 indicated that parts of Mr. Madoff's firm had no customers. It didn't provide an explanation of this finding. "At this point in time we are uncertain of the basis for Finra's conclusion in this regard," SEC staff wrote last month, after Mr. Madoff was arrested.

"We don't have access to that document, nor have we received any feedback from the SEC on our examinations of the Madoff broker-dealer," said Nancy Condon, a spokeswoman for Finra.

^ My bad... Urbanized slang; i.e. dis-banned = disbanded...

At 70 years old, 10 years in the slammer will likely do Bernie in... Even if he gets 6 years plus time off for good behavior...

I saw the same Bloomberg report on the Madoff Schemozzle... I guess there is no honor amongst thieves...

There was also another WallStreet high profile in the 90s who only did 1 year and paid 1 billion fine to avoid a longer term

^ We should trust these people?

Originally Posted by watterinja

^ We should trust these people?

Butterfly? Christ no...

Originally Posted by Muadib

^ My bad... Urbanized slang; i.e. dis-banned = disbanded...

At 70 years old, 10 years in the slammer will likely do Bernie in... Even if he gets 6 years plus time off for good behavior...

I saw the same Bloomberg report on the Madoff Schemozzle... I guess there is no honor amongst thieves...

Open prison for white collar criminals, most likely comes with tennis courts and a spa. Madoff may want to be off the streets and in protected custody where some of his shadier customers can't get at him.