On the bright side: Even if Bernie pissed all your money away and there aren't any assets left to cover you, you can still sue any third party providers that didn't bother to do due diligence of any sort before dumping 50% of their assets with the guy. They still have the other 50% for you to raid, don't forget.
On the not-so-bright side: You had to invest through one of these third parties to get at that cash, probably.
On the bright side: The SIPC protects investors up to $500,000 per account.
On the not-so-bright side: Coverage is "murky" when the securities you were supposed to have in our account never existed.
On the not-so-bright side: Bernie's investment advisory business wasn't covered, only the broker-dealer.
On the not-so-bright side: The SIPC reserve is "only" about $1 billion.
On the not-so-bright side: It will take about two years to get money out of the SIPC.
Feeling better yet?
Madoff's Indirect Investors May Recover Some Money, Lawyer Says [Bloomberg]
Posted by guest , Dec 16, 2008 3:21PM
what would Les Grossman say?
Posted by guest , Dec 16, 2008 3:23PM
I don't understand the structure here. Maybe no one but Bernie does yet...
The broker-dealer must have been a member of the SIPC so, sure, accounts held there would be insured up to $500k, yada yada.
But was this 'investment advisor' a member of the SIPC? Where were the underlying accounts held? The press accounts make it seem like they were NOT held at the Madoff B/D.
What entity was issuing those statements? Was that entity a registered B/D? SIPC member?
Posted by guest , Dec 16, 2008 3:23PM
Who is this SPIC to which you refer? That's pretty edgy language, EP.
Posted by guest , Dec 16, 2008 3:30PM
Who were the last ones to make withdrawals before the scheme was shut down?
Posted by guest , Dec 16, 2008 3:34PM
2 Good point. Were the assets held at an SIPC member firm? How hard is that to figure out?
Posted by ep , Dec 16, 2008 3:37PM
"Posted by guest, Dec 16, 2008 3:23PM
Who is this SPIC to which you refer? That's pretty edgy language, EP."
Apparently, my spell checker thought that was cute.
Thanks for the catch.
Posted by guest , Dec 16, 2008 3:41PM
A pub crawl that adds a new person to buy a round at each location. Each new person is promised that they will get free drinks at all the future bars if they buy this round. Obviously, whoever joins the ponzi crawl last gets screwed!
Posted by guest , Dec 16, 2008 3:41PM
A pub crawl that adds a new person to buy a round at each location. Each new person is promised that they will get free drinks at all the future bars if they buy this round. Obviously, whoever joins the ponzi crawl last gets screwed!
Posted by guest , Dec 16, 2008 3:42PM
Our firm Drier & Madoff has been appointed to be the third party receiver if you have any questions please refer to our cayman island account, opps i mean our office in the cayman islands.
Kind regards,
Bernie Madoff
Mark Drier
Posted by guest , Dec 16, 2008 3:43PM
@2, it was all done through various branches of the bank of underpants gnomes
Posted by guest , Dec 16, 2008 3:44PM
I think this is the apartment he put up to secure his bond. http://propertyshark.com/mason/nyc/Reports2/showsection.html?propkey=23017
It also seems that he is the Head Officer of the coop building.
Posted by guest , Dec 16, 2008 3:45PM
anyone who invested with this guy is a clown. they had an external auditor that had 3 employees, a 70 year old partner, secretary and one staff accountant. with in house custody. i don't feel bad for any of them, do your due diligence.
Posted by guest , Dec 16, 2008 3:47PM
Mass Mutual owns Tremont
Deep pockets
Posted by guest , Dec 16, 2008 3:47PM
Too long; didn't read.
Posted by guest , Dec 16, 2008 3:48PM
Anyone read about the fight that broke out at Donald Trump's Mar-a-Lago this Saturday night between several of Madoff clients and Bob Jaffe, who had directed big-deal investors to Madoff Investment Securities.
http://businesssheet.alleyinsider.com/2008/12/superrich-madoff-investors-fight-at-trump-palm-beach-party
Posted by guest , Dec 16, 2008 3:49PM
ugh! enough with the madoff posts already...
Posted by guest , Dec 16, 2008 3:50PM
anyone who invested with this guy is a clown. they had an external auditor that had 3 employees, a 70 year old partner, secretary and one staff accountant. with in house custody. i don't feel bad for any of them, do your due diligence.
Posted by guest , Dec 16, 2008 3:50PM
Mass Media again protects certain interests by deceiving and distracting the public: SIPC protects no investor from trading losses, and NASD protects no QEP.
Madoff acted as a broker trading with discretion; thus, Madoff had no authority to add or take funds from accounts unlike a GP; thus, Madoff took no money by theft but rather lost money by poor trading.
SIPC's observation of defective trading records matters not; e.g: had Madoff traded with discretion and lost all funds thereby and then later burned all records, SIPC would have no obligation to refund investor' trading losses.
SIPC and Zukerman's deceptive descriptions of trading losses are fraudulent justifications for committing another theft: theft of SIPC funds by Madoff losers aided by SIPC.
Posted by guest , Dec 16, 2008 3:53PM
Yes, anyway, so if these accounts were all held at the Madoff broker dealer and the broker dealer was issuing statements (including to the Madoff kid who had 'lots' invested with dear dad), I'd think everyone at the broker dealer potentially faces a lot of trouble.
If the statements were sent in the name of the broker dealer but no accounts were ever opened...well then I'm not really sure why the SIPC should be involved.
You don't get SIPC coverage just because you have a piece of paper that says "Charles Schwab" at the top - you have to actually open an account...
What's really fantastic is that we're talking about $17-50 BILLION here. No one in the back office of these places ever thought it was strange the numbers never went beyond 9 digits?
Posted by guest , Dec 16, 2008 3:59PM
Despite what MassMutual says in its press release, a careful analysis suggests that the Madoff disaster could easily bring them down. The facts are that its exposure to due diligence lawsuits is $3.3 billion from Tremont; and, as of December 31, 2007, MassMutual had $4.6 billion in subprime and Alt-A bonds.
At the end of 2007, MassMutual only had $7.4 billion in equity capital; therefore, 106.7 % of its equity capital is at risk.
Policyholders with cash value policies would be well advised to immediately borrow the maximum amount they can on their policies. MassMutual is poorly positioned to handle a generalized run by policyholders.
Posted by Anal_yst , Dec 16, 2008 4:01PM
NEWS STORY FOR N. 6654 (Source: DJ)
15:59 12/16 *WSJ: Yale Says Endowment Now Roughly $17B, Same Level At Jan 2008
nice work, Harvard
Posted by guest , Dec 16, 2008 4:02PM
Mass Media again protects certain interests by deceiving and distracting the public: SIPC protects no investor from trading losses, and NASD protects no QEP.
Madoff acted as a broker trading with discretion; thus, Madoff had no authority to add or take funds from accounts unlike a GP; thus, Madoff took no money by theft but rather lost money by poor trading.
SIPC's observation of defective trading records matters not; e.g: had Madoff traded with discretion and lost all funds thereby and then later burned all records, SIPC would have no obligation to refund investor' trading losses.
SIPC and Zukerman's deceptive descriptions of trading losses are fraudulent justifications for committing another theft: theft of SIPC funds by Madoff losers aided by SIPC.
Posted by guest , Dec 16, 2008 4:06PM
You never give me your money
You only give me your funny paper
and in the middle of negotiations
you break down
I never give you my number
I only give you my situation
and in the middle of investigation
I break down
Posted by guest , Dec 16, 2008 4:08PM
I have one question - how come there are no referenced to Madoff using a "Weekend at Bernie's" theme. It seems like there's a fit somewhere.
Posted by guest , Dec 16, 2008 5:00PM
What is the likely net effect of Madoff and his BS on Joe and Jane average?
i.e. Do I care?
Posted by guest , Dec 16, 2008 5:20PM
@24 - It's coming, after he dies/kills himself/gets murdered.
Posted by guest , Dec 16, 2008 5:24PM
@1 - He would say "On the bright side, you're a fucking moron. On the not so bright side, you're a fucking worthless piece of shit that continually self fucks for a self esteem boost. FUCK YOU!"
Posted by guest , Dec 16, 2008 6:00PM
I don't understand how his scam worked. Was it like this>
Someone takes half a billion in money from clients to invest - he promises them 10% in returns.
He doesn't actually invest their money, he keeps it but when he gets new clients he uses the money they give him to invest to pay the other clients the 10% in returns he guaranteed they would get, then repeats it again.
Is that what he did?
Posted by guest , Dec 16, 2008 6:32PM
28 - sort of. you don't have to pay people back if your returns are on paper until they redeem. most people getting 10%+ returns annually don't redeem. he probably started off legit and somewhere (possible even year one) started fudging the numbers to keep face.
Posted by guest , Dec 16, 2008 6:55PM
Maybe the only reason he was caught is because people wanted to pull their money out because they had to use it to cover losses on other investments but they should have known something was wrong when he guaranteed them the same return every year.
But I'm not surprised it happened either - look at what that rogue trader in France did. I think when people are making money, they choose to look the other way.
Posted by guest , Dec 16, 2008 8:49PM
@28 & 29 - That's exactly what he did. Although the question has to arise - WTF did he do in 1987? Seems like a big crash in the market would be enough to bring this about, how did he dodge that bullet?
Posted by guest , Dec 17, 2008 12:21AM
There has been a significant amount of "revisionism" regarding due diligence parameters of firms that were invested w/Madoff; i.e., sections deleted from websites that described their processes. Portfolio.com has a posting on Bramdean Asst Management (whereby the PM who once bragged to the FT about an allocation to a "market timer called Madoff") is now blaming the SEC for lack of oversight. She has deleted a whole section from her website about Bramdean's due diligence process, but someone caught and exposed her, hence the portfolio.com posting.
Also, just went to Fairfield Greenwich's website - fggus.com - and they have deleted the fotos of the principals and staff. Pretty lame. I guess they don't want to be ID'd and harrassed on the street.
Posted by guest , Dec 17, 2008 7:29AM
Assuming for a moment that Madoff was operating the scam in 1987:
Why would Madoff have been exposed by the '87 crash? He's not actually investing most/all of this money. The only reason 2008 exposed him was because he had $7 billion in redemptions, which was way more than what was left of the Ponzi could bear. Why would investors want their money back if their statement said they were perfectly fine after the '87 crash? Some might, but many more would want in because the guy avoided losing 20%.
Madoff is not actually tied to the stock market. That's becoming clear as his books come to light.
Posted by guest , Dec 17, 2008 11:20AM
A fool and his money are soon parted!
Posted by jbr , Dec 19, 2008 12:37AM
This is definitely complicated.
It seems to me that it will be very hard to go after principal of redeemers with a satisfactory good faith defense based just on a "should have known" inquiry notice because so many people, form institutional investors to the SEC itself remained unaware for so long (decades). In fact, the SEC remained unaware even after an investigation. There was a similar precedent in the Bayou case where it was ruled a hedge fund advisory firm was not liable for reckless disregard in due diligence in not discovering the fraud BECAUSE so many people including institutional investors and the SEC were similarly fooled for so long (and in this case the extent of that is an order of magnitude larger).
From what I saw, in the Bayou case, all fraudulent conveyance claims were made only to direct redeemers, either individual investors, funds, or fund of funds. I recall no case where the claim was made directly to investors of the funds or funds of funds who redeemed. In that case, all satisfactory good faith defense resulted in settlements where the investors kept their redeemed principal but returned all fictitious profits.
What makes this case compelling is that most of the direct investors appear to be feeder funds of one type or another. So say an investor in a feeder fund redeems in good faith. Based on the Bayou precedent, it appears to me that Madoff trustee would pursue the feeder fund. The question is whether the feeder fund has a legal claim on the redeeming investor. I say this because 1) The transfer from the feeder fund to the redeeming investor was not fraudulent in that the feeder fund was not itself operating a ponzi scheme (even if it was inadvertently investing in one) and depending on the fund (some are backed by large financial institutions) it itself may or may not be bankrupt by it's investment in Madoff, and 2) The feeder fund may be claimed to have exercised insufficient due diligence so it's possible it may be liable for it's own losses.
I'd appreciate other peoples thoughts on these matters.
Posted by jbr , Dec 19, 2008 12:38AM
One question I'm not seeing addressed which further complicates issues relates to previously paid taxes on fictitious gains. Many of the Madoff investors were long term investors who paid taxes yearly on the gains as they were reported (as short term gains taxed as ordinary income). Lets say a good faith redeemer returns profits and keeps their principal. I would think they would need to refile their prior year taxes with the IRS to get refunds for previously paid taxes since the gains were fictitious and any redeemed gains have been returned. I'm not a tax person but in looking at the IRC, it's not clear to me if they are subject to a 3 year lookback under 6511(a) or would qualify for a 7 year lookbacdk under 6511(d) pertaining to worthless securities or 6511(g) pertaining to partnership items (since the feeder funds were typically implemented as limited partnerships).
Also, since the SEC has effectively perpetuated this fruad by not acting on credible evidence that was apparently provided to it as early as 9 years ago, I wonder if investors who paid taxes on fictitious gains since then (particularly if they made their investments since then without the benefit of an adequate investigation) might have a justifiable claim against the SEC?
Any comments would be appreciated.
Posted by jbr , Dec 19, 2008 12:39AM
One question I'm not seeing addressed which further complicates issues relates to previously paid taxes on fictitious gains. Many of the Madoff investors were long term investors who paid taxes yearly on the gains as they were reported (as short term gains taxed as ordinary income). Lets say a good faith redeemer returns profits and keeps their principal. I would think they would need to refile their prior year taxes with the IRS to get refunds for previously paid taxes since the gains were fictitious and any redeemed gains have been returned. I'm not a tax person but in looking at the IRC, it's not clear to me if they are subject to a 3 year lookback under 6511(a) or would qualify for a 7 year lookbacdk under 6511(d) pertaining to worthless securities or 6511(g) pertaining to partnership items (since the feeder funds were typically implemented as limited partnerships).
Also, since the SEC has effectively perpetuated this fruad by not acting on credible evidence that was apparently provided to it as early as 9 years ago, I wonder if investors who paid taxes on fictitious gains since then (particularly if they made their investments since then without the benefit of an adequate investigation) might have a justifiable claim against the SEC?
Any comments would be appreciated.