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One thing that's notable, from this report and others, is that there were a class of investors who knew that Madoff was doing something illegal to get these kin
by rajat 18y ago
One thing that's notable, from this report and others, is that there were a class of investors who knew that Madoff was doing something illegal to get these kind of returns, and were bragging about it. These investors didn't think it was a Ponzi scheme; they thought he was using insider knowledge from his broker-dealer's access to order flow.
And they were happy to go along with this obviously illegal practice.
I don't think it's too much of a jump to speculate that the ones who knew there was something illegal going on were the managers of the so-called Funds of Funds and other hedge funds. These include managers of our public pension funds. These managers are too knowledgeable not to know something's up when these kind of returns are being posted, and when red flags were being raised, and they were happy to go profit from it because they figured they were at a safe enough distance from the illegal trading.
- joe_the_user 18y agoIt is a fascinating report. Yes, it seems like Madoff was able to able to convince his investors based on the implications that he made his money with insider trading, The classic approach of con-man is to attract the mark with the promise of ill-gotten gains. The report shows everything we've seen in the news and more. Remember, the report's scenario is for a Madoff scheme collapse in 2005. One would have to assume that in three years, the money hole has gotten bigger while market conditions have gotten far worse. One point of the report is that most reputable funds managers avoided Madoff but didn't actually help bust him. So we have not seen large US banks or pension plans hit by this, just small but wealthy individuals and European private banks. But as the report says, the hit these folks will take can affect everyone else.
- mattmaroon 18y agoI wouldn't say they knew it. I mean, they seriously suspected it. But there's a big difference between 99 and 100 percent certainty.
- Eliezer 18y agoNo, there's a 1% difference between 99 and 100 percent certainty. Or are we working with the log odds here? Are you going to tell me there's a big difference between 99.999999% certainty and probability 1? I think at some point you become morally liable and that's well before 99% certainty.
- mattmaroon 18y agoI meant legally rather than morally. There's plausible deniability if they highly suspect it, there's jail if they knew for certain.