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This law actually led to Bernie Madoff being caught. I worked at a hedge fund at the time and we applied this to his returns and immediately knew it was a scam.
by tbrock 7y ago
This law actually led to Bernie Madoff being caught. I worked at a hedge fund at the time and we applied this to his returns and immediately knew it was a scam.
- skunkworker 7y agoI’ve heard of this before, but part of me thinks also: How many people are getting away with fraud because they are utilizing Benfords law in order to make their data appear more normal? Or is there another attribute that can’t be accounted for when aiming for that?
- Archit3ch 7y agoI've read that they have multiple "tells" for catching fraudsters. There's almost 100 of them and not all of them are as known as Benford's Law. At that point, it's just easier to run a legit business.
- dredmorbius 7y agoAny pointers to details or research?
- m3kw9 7y agoA lot of them probably deals with timing and some correlation type analysis
- alohomora2 7y agoSources?
- duxup 7y agoNot to refute you but my understanding was that many people simply assumed something was wrong if only because of the consistency of returns he claimed were pretty much impossible. IIRC at one point his numbers showed on a month to month basis losses only 4% of the time.
- joe_the_user 7y agoMany people got wise to Madoff before his scheme collapse - Notably Harry Markopolos. But Madoff was essentially never caught. Rather, his scheme ended the way most Ponzi schemes end - he no longer had enough money to pay withdrawal requests from the money that was coming in. https://en.wikipedia.org/wiki/Bernie_Madoff#Investment_scandal https://en.wikipedia.org/wiki/Bernie_Madoff#Investment_scand...
- m3kw9 7y agoCan’t people use this law to defraud? I bet the more sophisticated ones already are