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By the end, the world itself was too small to support the vast Ponzi scheme constructed by Bernard L. Madoff.
Initially, he tapped local money pulled in from country clubs and charity dinners....
Then, he and his promoters set sights on Europe, again framing the investments as memberships in a select club....
Mr. Madoff’s agents next cut a cash-gathering swath through the Persian Gulf, then Southeast Asia. Finally, they were hurtling with undignified speed toward China, with invitations to invest that were more desperate, less exclusive. One Beijing businessman who was approached said it seemed the Madoff funds were being pitched “to anyone who would listen.”
Interestingly, it seems that even his sons, who worked for their dad for quite some time, were unaware of the fraud, From the NY Times article:
Then, early on Dec. 10, he shocked his sons by suggesting that the firm pay out several million dollars in bonuses two months ahead of schedule. When pressed by his sons for a reason, he grew agitated and insisted that they all leave the office and continue the conversation at his apartment on East 64th Street.
It was there, at midmorning, that he told his sons that his business was “a big lie” and, “basically, a giant Ponzi scheme.” There was nothing left, he told them — and he fully expected to go to jail.
He is a student at Auburn, and I disagree with his conclusion:
It seems that this event will place people into one of two camps. Either people will be disillusioned with the SEC and realize that the only function that it seems to be able to do well is to stand in the way of the free market's self-policing mechanism, or they will come to the erroneous conclusion that there is too little regulation and that the SEC needs more power to protect investors.
I fear that the latter will be the majority, but even so, many will come to see that less government is the real way to protect people. Tragically, it is in the nature of government, when its failures are exposed, to claim that if only it had more power it could have performed its duties in the manner it had promised.
I don't see increased reliance in self policing of hedge funds as the logical outcome, rather I see a requirement for an annual certified auditor statement from a registered source (i.e. - legitimate CPA audit firm) as a logical outcome.
Here's where it goes horribly wrong mcmaster-- these articles would have their potency when the true crimes are illustrated without the presumption of guilt by association or conspiracy theory because the guy who shined my shoes or lives next door to me is involved in crime.
The SEC has been notoriously underfunded. How much of that is because we've 'downsized' big government? Prevention of loss isn't given it's true worth in light of recent events. Curbing big government shouldn't mean law enforcement gets axed wholesale and big ole duh, foxes guarding hen houses never works. So why have new age republicans encouraged this plan? It doesn't work for progressives, moderates, or paleo conservatives. It doesn't work for anyone but fiscal liberals (which are not the majority of the country).
I think regardless of political affiliation everyone can agree that madoff BS and those associated with scandals on wall street need serious consequences (RICO statutes should apply because this is organized crime IMO) along with meaningful reforms to the financial sectors to protect investor confidence. We're a nation of laws and when our own laws fail to function properly or are circumvented by lobbyist efforts that needs to be addressed by Obama, congress and senate directly. Even better it should be demanded by we the people regardless of party affiliation because this hurts everyone equally.
Obama did not personally create the mess culminating for decades or more, but if members of his staff have been in agreement with treachery, I hope that gets the full attention it deserves. To allude that jews and masons are responsible for this systemic nightmare is too far a stretch to consider. No evidence was posted in that article for those claims, which doesn't surprise me in the least. Being a nasty little birdie whispering in someone's ear is enough for you? It's not enough for our justice system.
I believe economic warfare has been and is currently in play, but the guilty parties are as yet nameless. I believe there have been many nameless/ faceless opportunists profiting from the strife and creating the strife that divides the nation. In turn this preserves the livelihood of unscrupulous opportunists, who also get thrown under the bus by bigger fish. Left, right, and all points in between have got to get together and purge them out or this nation will perish.
Will right agree, put aside their beef with Elliot Spitzer's infidelities, that he should be hired to investigate this nightmare? Who on the right possesses such abilities and can work with Spitzer to restore health to financial markets?
Harborlady, I agree with you in many ways.
I'm glad you were able to see through the tinfoil hat illuminati nonsense as well.
I should have added a big caveat with the article.
I didn't include my thoughts on it for a reason.
It was meant more to point out that more hedge hund houdinis and wall street con artists are going to appear out of the woodwork as more diligence and attention is focused on the mechanisms of finance.
For the record, I agree with you about Obama, and find it suspicious the timing of the Eliot Spitzer scandal. Personally he seemed a man of integrity who believed in his work exposing fraud and crime and it is curious how he was investigating Wall street at the time of the scandal. Tragically, like Bill Clinton, both were affected by scandals that in my libertarian views were irrelevent to their performances.
Per what I saw on CNBC the other day, there were occasional investors who looked at Madoff's operation with the idea of taking a stake in it, but thought it was fishy. Some of these folks TOLD the SEC but the SEC did NOTHING.
Saw a clip of Madoff on TV today, in a prior talk to a group Madoff said words to the effect that the SEC rules were so loose that they were not enforceable and you could go whatever you wanted. Looks like HE did whatever he wanted.
Warren Buffett has never invested in hedge funds, he says he doesn't understand them, and refers to hedge funds as weapons of mass destruction. No kidding.
Wait until we hear from the European investors. I wonder if we get to bailout this creep too, or is this hit going on AIG's plate...
warren buffet is not telling the truth then since mr. buffett invested $620 million of Berkshire Hathaway's money in a hedge fund run by the son of a close family friend.
The $1.3 billion fund, Value Capital L.P., is run by Mark Byrne, son of Jack Byrne, the former president of Geico insurance.
The SEC has been notoriously underfunded. How much of that is because we've 'downsized' big government? Prevention of loss isn't given it's true worth in light of recent events. Curbing big government shouldn't mean law enforcement gets axed wholesale and big ole duh, foxes guarding hen houses never works.
The SEC funding has nothing to do with this problem, from the SEC iteself (not a copyright protected document):
Hedging Your Bets:
A Heads Up on Hedge Funds and Funds of Hedge Funds
What are hedge funds?
Like mutual funds, hedge funds pool investors' money and invest those funds in financial instruments in an effort to make a positive return. Many hedge funds seek to profit in all kinds of markets by pursuing leveraging and other speculative investment practices that may increase the risk of investment loss.
Unlike mutual funds, however, hedge funds are not required to register with the SEC. Hedge funds typically issue securities in “private offerings” that are not registered with the SEC under the Securities Act of 1933. In addition, hedge funds are not required to make periodic reports under the Securities Exchange Act of 1934. But hedge funds are subject to the same prohibitions against fraud as are other market participants, and their managers have the same fiduciary duties as other investment advisers.
What are "funds of hedge funds?"
A fund of hedge funds is an investment company that invests in hedge funds -- rather than investing in individual securities. Some funds of hedge funds register their securities with the SEC. These funds of hedge funds must provide investors with a prospectus and must file certain reports quarterly with the SEC.
Note: Not all funds of hedge funds register with the SEC.
Many registered funds of hedge funds have much lower investment minimums (e.g., $25,000) than individual hedge funds. Thus, some investors that would be unable to invest in a hedge fund directly may be able to purchase shares of registered funds of hedge funds.
What protections do I have if I purchase a hedge fund?
Hedge fund investors do not receive all of the federal and state law protections that commonly apply to most registered investments. For example, you won't get the same level of disclosures from a hedge fund that you'll get from registered investments. Without the disclosures that the securities laws require for most registered investments, it can be quite difficult to verify representations you may receive from a hedge fund. You should also be aware that, while the SEC may conduct examinations of any hedge fund manager that is registered as an investment adviser under the Investment Advisers Act, the SEC and other securities regulators generally have limited ability to check routinely on hedge fund activities.
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