See How the Mighty Have Fallen
Dec 15, 2008
Posted by Jody Eisenman | Filed under fraud
Investors all over the world are stunned by the ongoing fraud revelations of Bernard Madoff. Madoff, who was a former chairman of NASDAQ, also serves on several prominent boards in both the academic and charitable fields. Apparently, according to his own admissions, Madoff managed to somehow wipe out virtually his entire investor base of $50 billion. Of course, there are still many unanswered questions regarding his operation and how he managed to hide this from everyone (especially the regulators) for all this time. Although there have already been several high profile names mentioned as having invested with him, I have been told by 2 prominent attorneys that the client base Madoff had was incredible in scope. How did he manage to fool everyone? Were other employees involved? What about the auditors?
Although I don’t know more than anyone else here, I can surmise that what possibly happened is that Madoffs’ investments started going south. Madoff pioneered something called a “split-strike” strategy that supposedly profited in any type of market, both good and bad. The fact that no other trading firm could duplicate what Madoff did should clearly have raised some red flags. When Madoff starting losing money, he probably started to get more aggressive and lost more. All this time, he continued to report sterling returns to his investors. When redemptions struck, he simply didn’t have enough cash left to meet them, and so he admitted to his sons that the whole game was a giant Ponzi scheme. Again, I am quite amazed that no one at the firm knew what was going on. I find that hard to believe, but I’m sure the truth will come out eventually.
