Madoff Investors

[growing_older]

I say it is bogus since we now know there was no insider trading... no 'illegal' trades going on that we could not get..

The guy was running an "investment" scheme that was questionable at best, and most investors got involved because they believed they were skirting the law. Yes, even the charities. It now turns out that one thing he didn't do was insider trading, because his fraud was bigger than that - he didn't do any trading. It looks more like an affinity group Ponzi scheme on an unbelievably massive scale. But still a con.

So how does that change that the investors were trying to get away with something outside the law?

So how does that change whether the investors should be protected by government insurance?

Maybe it doesn't matter to you that the investors TRIED to cheat, because they were thwarted in doing so by the larger con that Madoff was running. I see this as different from what the SIPC was set up to protect and I hope there is no bailout.

 

[Zathras]

...because they believed they were skirting the law...

This is the part I think is a bit weak. Which investors thought they were skirting the law?
Sure, lots of people are now saying that the returns were 'too good to be true'. But that speaks of gullibility more to me than thoughts of skirting the law.
Is there anything that supports your supposition that the investors thought they were 'skirting the law'?

 

[growing_older]

I cite The Economist, but there are many many other similar reports:

According to reports, some of those who put their faith in Mr Madoff suspected that he was engaged in wrongdoing, but not the sort that would endanger their money. They thought he might be trading illegally for their benefit on information gleaned by a separate business within his group, which made a market in shares. The firm had been investigated for “front-running”, using information about client orders to trade for its own account before filling those orders.

 

[Zathras]

Thank you, I do appreciate that as I had not heard anyone mention that aspect yet.
Did the Economist mention which reports they are referring to (in their 'According to reports' statement)?
I don't think we should throw all investors to the dogs, because some thought wrongdoing was involved. I think there are plenty of other reasons the government shouldn't be bailing out investors. But that isn't one of them

 

[JAB1950]

It's one thing to throw the investors who dealt with Madoff directly under the bus, but what about those folks who entrusted their assets to Fund of Fund managers who decided to invest with Madoff and not tell his/her clients! Them I can feel sorry for.

 

[Gumby]

I have heard that most successful con artists play on the greed of their "marks". Think of those who fall for the Nigerian money transfer scam or the old "money in the sack" trick. In both cases, the victims are less than honest themselves.

JAB1950 does have a good point about the people who did not even know they were invested with Madoff.

 

[Retire Soon]

Madoff has now been caught sending $1 Million worth of watches, jewelry and other heirlooms to his brother, sons and daughter-in-law even after he is was freed on criminal bond. Did the judge who granted him bond think he'd suddenly become honest?



Prosecutors Seek Detention of Madoff - WSJ.com

 

[samclem]

Madoff has now been caught sending $1 Million worth of watches, jewelry and other heirlooms to his brother, sons and daughter-in-law even after he is was freed on criminal bond. Did the judge who granted him bond think he'd suddenly become honest?



Prosecutors Seek Detention of Madoff - WSJ.com

Ouch. I'll bet Bernie's lawyers wish he and his wife hadn't tried this stunt. After all, he's only supposed to be transferring assets to their pockets.

It's time for Bernie to make some new friends in jail. They'll like Bernie there.

 

[barbarus]

Ouch. I'll bet Bernie's lawyers wish he and his wife hadn't tried this stunt. After all, he's only supposed to be transferring assets to their pockets.

It's time for Bernie to make some new friends in jail. They'll like Bernie there.

Perhaps he should share a cell with the judge who granted him bond.

 

[NW-Bound]

Even if you were a more fortunate ex-Madoff investor who bailed out before the mushy hit the fan, you may still have to cough it back up, due to a "pain sharing" process known as "clawback".

The managers of the Fort Worth Employees' Retirement Fund thought they had dodged a bullet when Bernard L. Madoff was arrested on Dec. 11 for alleged fraud. Just a few months earlier the $1.7 billion public pension plan had pulled $10 million out of a hedge fund that invested exclusively with Madoff. But now the managers face the possibility of having to give back the money—a sum that includes all of the pension's purported gains over the years plus its initial investment.

The Fort Worth plan and other Madoff investors who got out before the operation imploded may yet be snared by the bankruptcy proceedings. Under federal law, the trustee in the case can sue former investors to force them to return their profits and principal, a process known as a clawback. The legal theory is that investors who stick around to the bitter end shouldn't bear all the pain.
​

The Madoff Case Could Reel in Former Investors - BusinessWeek

 

[Sue J]

Last night on CNBC's "On The Money" show with Carmen Wong Ulrich, she interviewed a psychologist, Stephen Greenspan, who had lost $400,000 with Madoff. He had just published his new book when the Madoff thing was announced.

His book is called "Annals of Gullibility - Why We Get Duped and How To Avoid It".
Amazon.com: Annals of Gullibility: Why We Get Duped and How to Avoid It: Stephen Greenspan: Books

Stephen Greenspan, PhD: Exploring and facilitating human competence

He comments on his personal situation here -
Fooled by Ponzi (and Madoff)
How Bernard Madoff Made Off with My Money

Skeptic: eSkeptic: Tuesday, December 23rd, 2008

 

[eridanus]

The Professor got duped. Ouch.

"I genuinely liked and trusted this man [the FA and friend of his sisters], and was persuaded by his claim that he had put all of his own (very substantial) assets in the fund, and had even refinanced his house and placed all of the proceeds in the fund."

 

[haha]

Last night on CNBC's "On The Money" show with Carmen Wong Ulrich, she interviewed a psychologist, Stephen Greenspan, who had lost $400,000 with Madoff. He had just published his new book when the Madoff thing was announced.

His book is called "Annals of Gullibility - Why We Get Duped and How To Avoid It".
Amazon.com: Annals of Gullibility: Why We Get Duped and How to Avoid It: Stephen Greenspan: Books

Stephen Greenspan, PhD: Exploring and facilitating human competence

He comments on his personal situation here -
Fooled by Ponzi (and Madoff)
How Bernard Madoff Made Off with My Money

Skeptic: eSkeptic: Tuesday, December 23rd, 2008

This is the best story yet. Similar to the kidnapping expert who got kidnapped in Mexico.

For the most part I am agnostic about the Madoff losers. It would be nice if there were no fraud, but realistically has there ever been no fraud? So 2nd best is to have people be reminded to look out for themselves.

Here is a slide show of prominant losers- an interesting aspect I hadn't known about is how many large banks got taken. Very bad news here. What are banks doing making this kind of investment? Aren't they supposed to be out making bad loans?

The suicides, etc. should get the point home. Any sort of bailout would short-circuit the learning op.

Madoff Was Ready to Send Out $173M - AOL Money & Finance

Madoff should get back in jail now, and he should get a very long sentence. The death penalty might be about right.

Ha

 

[mickeyd]

Looks like the feds got to him just in time. I bet each one of those 100 folks are pissed off that "the checks were not on the mail."

Prosecutors arguing that alleged $50 billion scammer Bernard Madoff should be put in jail immediately say that when Madoff's desk was searched following his arrest, investigators found approximately 100 signed checks totaling more than $173 million "ready to be sent out".

ABC News: Feds: Madoff Had Millions in Checks Ready to Go Out

 

[bamsphd]

I would never trust my portfolio to one single person or firm.

The vast majority of my portfolio is invested in Vanguard index funds, either directly through Vanguard, or indirectly through my Fidelity 401(k). Most of the remainder is in US Treasuries via the Vanguard brokerage. I'm not too worried about it, but I must admit their cost structure is just too good to be true! If they were exposed as the biggest security fraud in US history, I could look back and say in retrospect I was obviously getting an impossibly good deal. After all, nobody else manages to offer that kind of deal without temporarily waiving fees! Unfortunately, I'm just too greedy to pay extra for an index fund.

 

[FinanceDude]

Unfortunately, I'm just too greedy to pay extra for an index fund.

That's the reason they are so cheap, they're basically unmanaged..........

 

[jazz4cash]

The vast majority of my portfolio is invested in Vanguard index funds, either directly through Vanguard, or indirectly through my Fidelity 401(k). Most of the remainder is in US Treasuries via the Vanguard brokerage. I'm not too worried about it, but I must admit their cost structure is just too good to be true! If they were exposed as the biggest security fraud in US history, I could look back and say in retrospect I was obviously getting an impossibly good deal. After all, nobody else manages to offer that kind of deal without temporarily waiving fees! Unfortunately, I'm just too greedy to pay extra for an index fund.

Rest assured. VG's cost structure is excellant, but not too good to be true. Thier ER for Index 500 is around .015, but the TSP "C" fund is essentially the same item for around .005, managed by Barclay's, I believe (with overhead subsidized by taxpayers, I guess). And there's Penfed that gave me a home loan for 6% while paying me 6.25 on my CD.

 

[bamsphd]

That's the reason they are so cheap, they're basically unmanaged..........

I know, index funds are cheap and avoid most manager risk. What I have never really understood is why people buy index funds from other providers who charge more for the same index! Comparing Schwab with Vanguard below, unless you couldn't reach the Vanguard minimum investment, why would you pick the Schwab fund?

Schwab S&P 500 Index Fund - Inv Shrs SWPIX
Gross Expense Ratio (before waivers): 0.35%
Net Expense Ratio (after waivers): 0.35%
Minimum investment $100.

Vanguard 500 Index Fund Investor Shares (VFINX)
Expense ratio as of 12/31/2007 0.15%
Minimum investment $3,000

Schwab Institutional Select S&P 500 Fund ISLCX
Gross Expense Ratio (before waivers): 0.22%
Net Expense Ratio (after waivers through 2/27/09): 0.1%
Minimum Initial Investment $75000

Vanguard 500 Index Fund Admiral Shares (VFIAX)
Expense ratio as of 12/31/2007 0.07%
Minimum investment $100,000

I can imagine someone investing in BOTH the Vanguard and the Schwab fund to diversify away some of their, extremely low, but still present, single management company risk. I'm just too cheap to do that!

 

[Gardnr]

Rest assured. VG's cost structure is excellant, but not too good to be true. Thier ER for Index 500 is around .015, but the TSP "C" fund is essentially the same item for around .005, managed by Barclay's, I believe (with overhead subsidized by taxpayers, I guess). And there's Penfed that gave me a home loan for 6% while paying me 6.25 on my CD.

Actually the VG 500 Index ER is 0.15% for Investor shares, 0.07% for Admiral.

The TSP C fund ER is 0.015%. A truly minuscule expense ratio, no doubt.

Not to pick, just for the record.