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Unlike most investors with Bernard L. Madoff Investment Securities, Malcolm Sage kept a close eye his money manager. Not content to simply let Bernie be Bernie and make the trades that were making a literally unbelievable amount of money for his other clients, Sage insisted on directing the master, treating Madoff like a glorified E*Trade account. And he’s got the account statements, full of real-looking numbers and everything, to prove it.

Of course, while those numbers were real, like every other account statement emanating from BLMIS the Sage’s were fake, because of course Madoff & co. hadn’t actually made any of the trades shown on them. And so the Sages, like many a Madoff “net winner” before them over the last 13 years, have to cough up $16.9 million worth of those “winnings,” which of course weren’t proceeds of trades that never happened but other suckers’ money.

An “unavoidable and unfortunate consequence” of the trustee’s method is that the entirety of the Sages’ investment history will be wiped out, Judge Keenan said. The Sages had argued that thousands of trades in the family account were the product of Malcolm Sage’s directions or authorizations and should have been treated separately from the rest of Mr. Madoff’s scheme…. Based largely on [former Madoff aide Annette Bongiorno’s] testimony, the judge found that more than 5,200 transactions reported in the Sages’ accounts “were fabricated at or near month’s end using historical pricing information.”

Madoff Customers Must Return $16.9 Million for Falsified Trades [WSJ]

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