Prosecutors and regulators have accused the 70-year-old Madoff, who was chairman of the Nasdaq Stock Market in the early 1990s, of masterminding a fraud of epic proportions through his investment advisory business, which managed at least one hedge fund. But what was not known was that Madoff was dealing with unregulated Derivatives and pulled off a good old fashion Ponzi scheme ~ totally enabled by a lack of government regulation. See my article of October 13th UNSPOKEN CAUSE OF MARKET COLLAPSE IS DERIVATIVE TRADING http://blogs.salon.com/0002255/2008/10/13.html
Here's the brief Madoff scenario ~
Madoff's investment advisory business served between 11 and 25 clients and had a total of about $17.1 billion in assets under management.
On Dec. 10, 2008, Madoff informed the Senior Employees, in substance, that his investment advisory business was a fraud. Madoff stated that he was "finished," that he had "absolutely nothing," that "it's all just one big lie," and that it was "basically, a giant Ponzi scheme." Madoff stated that the business was insolvent, and that it had been for years. Madoff also stated that he estimated the losses from this fraud to be at least approximately $50 billion.
So I called my old friend, George Axxel Knutson, www.tradingweapon.com , a former Investment banking partner and frequent BBC stockmarket prognosticator, to give me his inside view on the Madoff scandal: Here's his email response ~
" In a statement late Friday, the SEC said its enforcement team probed the Madoff firm in 2007 and recommended no action. Many have said in recent days they saw clear warning signs at the firm ~ its extraordinarily even returns, the secretiveness with which Madoff managed the money, the fact that others could not replicate the firm's stated investment strategy ~ but no one stopped it until it was too late. No one stopped it because the regulators are inept. PERIOD
Well, here is the story isn’t it? The SEC probed the firm? Does this mean that they sent them a Chanukah card or did they actually show up at the place and at least let themselves be taken out to lunch? Chanukah, the Jewish festival of rededication, may be appropriate for Bernie since he “rededicated” his clients’ assets to his own bank account at Bank of New York Mellon. My concern is not for or about the swine Bernie, but for and about the regulatory agencies that are so involved with form that they can never seem to uncover a fraud until the thing blows apart or the perp, in this case, just confesses.
We saw it with Enron in 2001, WorldCom, hedge fund Amaranth Advisors LLC with a loss of 6.6 billion U.S. dollars, in 2005 Refco concealed a loss of $430 million. And there was Long Term Capital Management in 1998. And there are more that we could mention and more that are simply cooking and have not come to light.
Regulation has been long on form and short on substance.
The real crime is Madoff filling out forms and getting a pass just like Enron and Long-Term Capital and the substance is that he stole billions because if the columns added up, and some auditor attested to the accuracy. Well, hell, they must right!
What we really need is a few from Moody’s, S & P, and the SEC and other regulators to see the inside of a prison cell or just shoot old Bernie in the Rose Garden and our good friend Osama bin Laden, when we find him, to gain some real attention.
Don’t hold your breath...when it comes to government...pessimism works. And the reason why government never works is because the populace will never stand for a moment of sacrifice to attain a favorable long-term outcome."
