Comment on victims of the Madoff scam

[Rich]

I was watching a “finance” show, On the Money, on CNBC. A couple was on, victims of the Madoff Ponzi scheme. They’d been retired four years (the guy had been a NYC Corrections Officer) and have been taking their retirement money from the Madoff “fund” during that period. They had (on paper) $1.6 million dollars in the fund and, if I understood them correctly, they’d been in the bogus fund for twenty-eight years. At any rate, they were understandably upset and wanted to get some of their money back from somebody.

I’ve been thinking, if they had $1.6 million dollars in the Madoff account now, and they first put their money in twenty-eight years ago, at the phony percentage growth stated by Madoff they might have put in to the Madoff scam somewhere between $200,000 to $250,000 dollars (at around ten percent return, in the time frame they spoke of, that amount would grow to just about the $1.6 million dollars they thought they had in that account.).

So, if they took out their interest for three or four years, they may, in fact, be technically whole ($160,000 a year for three or four years of withdrawals would be a larger amount then the original monies they put in – again, if I’m understanding them correctly).

Don’t misunderstand me, these folks have still been royally screwed over. But, to make their situation even worse, I’m not sure they’re going to have any recourse in regard the return of money to them.

Rich

 

[chinaco]

I have been wondering the same thing.

I am sure Madoff was really happy with investors taking the reinvest div/cap gain option in the fund.

 

[Bikerdude]

Buyer beware.

 

[deepc]

A "clawback" of their gains may find them less than whole though, especially if they've been spending that interest as if it was real.

"Past Ponzi scheme cases such as Bayou Hedge Fund and the case involving the International Management Associates, which bilked some $150 million from thousands of clients, among them Denver Broncos players, show that investors who’d taken out money may be subject to redemption claims or so-called clawbacks. Some of these types of claims could come should Madoff’s firm file bankruptcy. A trustee would argue that money taken out in years’ past never really existed because it was a Ponzi scheme and any money paid out was really someone else’s money, not an asset of the fund. The trustee would ask for the return of the money so it could be pooled and distributed among the victims."

see: Law Blog - WSJ.com : Did You Invest in Madoff? Here's What You Need to Know . . .

They likely won't have the money and will get away with it anyway, their punishment is the loss of the original investment...that is until the govt bails them out.

 

[2B]

If you are not careful, you can become identified as a "qualified investor." That leaves you open to all sorts of sales pitches from hedge funds and other poorly regulated investment vehicles. There is a nice little caveat in becoming a "qualified investor" that suddenly makes you more responsible for doing your own due diligence. Theoretically, hedge funds should not be marketed to non-qualified investors but they are. When investing, you'll be asked to check the box saying your assets are over the qualified investor threshold.

Some people are thrilled to become part of the "exclusive" investor class and they are usually quickly fleeced. Somehow the allure of being able to invest in "sophisticated" investment products blinds people to the risks, lack of regulation and fees.

He got away with the scheme for decades because hedge funds are so poorly regulated. If set up properly, they can have no regulation governing them. LOL then.

 

[Leonidas]

Don’t misunderstand me, these folks have still been royally screwed over. But, to make their situation even worse, I’m not sure they’re going to have any recourse in regard the return of money to them.

I'm curious to see how successful people will be in going after all of the intermediary "feeders" into Madoff's scam.

What balls some of these guys had, taking profits off the top and management fees, when the investment strategy consisted of turning the money over to Madoff. Most of their investors had never heard of Bernie Madoff. They damn sure have heard of him now, though.

One group charged 4.5% management fees, and took 20% of the profits. Sounds like a Mafia skimming operation - no value added, just money stolen.

 

[RonBoyd]

One group charged 4.5% management fees, and took 20% of the profits. Sounds like a Mafia skimming operation - no value added, just money stolen.

My favorite.

A runnerup.

 

[mickeyd]

I would love to have someone caught up in this scam (client) post here and answer all of our many Qs. I doubt that anyone who posts here regularly would fall for this nonsense, but I could see someone sticking some of their "playmoney" with Madoff just as they would invest in a penny stock for fun and possibly profit. It's easy for me to say, after the fact, that I would never in a million years be duped by this "Madoff scheme".

 

[Moemg]

I was watching a “finance” show, On the Money, on CNBC. A couple was on, victims of the Madoff Ponzi scheme. They’d been retired four years (the guy had been a NYC Corrections Officer) and have been taking their retirement money from the Madoff “fund” during that period. They had (on paper) $1.6 million dollars in the fund and, if I understood them correctly, they’d been in the bogus fund for twenty-eight years.
Rich

I also watched the show and I was wondering what they would have had if they had invested with Vanguard . Would they still have ended with $1.6 million or much less since Madoff's scheme got great returns even in down years .

 

[mickeyd]

I wonder what their 1099-DIV looked like? I wonder if Madoff even had time to even issue one to each of the accounts that he raped.

 

[DAYDREAMER]

After this Madoff scam, how do we know any of our investments are being placed were we think they are. If you think about it, all we get is a cheap piece of paper telling us what our balances are. I would sure hate to wake up someday (like the couple on the "On the MONEY") and find out we have been duped! I really have no other proof of my investments other than what is stated on-line or sent to me in the mail.

Am I nervous, not really. But could this scam be happening to all of us right now? It sure as hell could be!

 

[Nords]

After this Madoff scam, how do we know any of our investments are being placed were we think they are. If you think about it, all we get is a cheap piece of paper telling us what our balances are. I would sure hate to wake up someday (like the couple on the "On the MONEY") and find out we have been duped! I really have no other proof of my investments other than what is stated on-line or sent to me in the mail.
Am I nervous, not really. But could this scam be happening to all of us right now? It sure as hell could be!

We're already getting one every year in the mail titled "Your Social Security Statement"...

 

[DAYDREAMER]

Good point Nords! I guess there are no real guarentees in life. Just hope for the best and plan for the worst!

 

[FIREd]

After this Madoff scam, how do we know any of our investments are being placed were we think they are. If you think about it, all we get is a cheap piece of paper telling us what our balances are. I would sure hate to wake up someday (like the couple on the "On the MONEY") and find out we have been duped! I really have no other proof of my investments other than what is stated on-line or sent to me in the mail.

Am I nervous, not really. But could this scam be happening to all of us right now? It sure as hell could be!

How can I know that my investments are not scams? They actually rise and fall with their respective markets exactly as they are supposed to. Looking at the YTD return on my brokerage statement, I am thinking that Vanguard is either for real or it's the worst scam ever.

 

[NW-Bound]

Aren't many pensions no better Ponzi schemes than Social Security? How long until the Pension Benefit Guaranty Corp go belly up and need a bail out?

A couple of years ago, thumbing through the books in a library, I ran across a book authored by Al Gore. I do not remember the title, except that it was something about the "government that works". Anyway, I chuckled when I read his discussions of the benefits of PBGC.

Yes, Virginia, there is really a free lunch.

 

[brewer12345]

I'm curious to see how successful people will be in going after all of the intermediary "feeders" into Madoff's scam.

What balls some of these guys had, taking profits off the top and management fees, when the investment strategy consisted of turning the money over to Madoff. Most of their investors had never heard of Bernie Madoff. They damn sure have heard of him now, though.

One group charged 4.5% management fees, and took 20% of the profits. Sounds like a Mafia skimming operation - no value added, just money stolen.

For many years, "funds of funds" were all the rage among institutional investors. Never madea whole lot of sense to me. By the time you pay all the fees, you'd be better off investing in investment grade bonds and have much less risk. I suspect the funds of funds business model is dead.

 

[DAYDREAMER]

How can I know that my investments are not scams? They actually rise and fall with their respective markets exactly as they are supposed to. Looking at the YTD return on my brokerage statement, I am thinking that Vanguard is either for real or it's the worst scam ever.

If you think about it, the Vanguard Ponzi scheme is the cleverest of all. Not only do they follow the market to fool everybody, but they are able to skim all the so-called losses into they're own pocket. Mr Vanguard is probably some filthy rich dude basking in the Camon Island sun right now.

I too have money in the Vanguard ponzi game, and hoping my hard earned coin is being invested properly. I here all the arrogant comments that the Madoff investors should have known better, butttttttttt, think about it people. How do you know for sure you are not getting scammed on your investments. You don't!

 

[FIREd]

If you think about it, the Vanguard Ponzi scheme is the cleverest of all. Not only do they follow the market to fool everybody, but they are able to skim all the so-called losses into they're own pocket. Mr Vanguard is probably some filthy rich dude basking in the Camon Island sun right now.

I too have money in the Vanguard ponzi game, and hoping my hard earned coin is being invested properly. I here all the arrogant comments that the Madoff investors should have known better, butttttttttt, think about it people. How do you know for sure you are not getting scammed on your investments. You don't!

Vanguard is set up as an inverted pyramid so that it would be very difficult for Vanguard as a whole to be a mammoth ponzi scheme. Each Vanguard fund operates as an independent business entity. Vanguard doesn't own its funds, the funds own Vanguard. There is no Mr. Vanguard. No mythical figure at the helm who can fudge the numbers, undetected. So, even though each fund has the potential to be a ponzi scheme, Vanguard as a whole is very unlikely to be one. And remember, mutual funds are far more regulated than hedge funds and the kinds of outfits operated by the likes of Bernie Madoff. They are constantly monitored by Vanguard and government regulators and it would be much harder for them to fool investors for long periods of time. VG Wellington has been around for 80 years, can you really believe it's a giant ponzi scheme which has yet to be detected?

 

[NW-Bound]

Frankly, I think many of us, myself included, carried our sense of humor a bit too far as it comes to Vanguard, Berkshire, Fidelity being Ponzi schemes.

However, there have been discussions elsewhere about our entire society, our way of saving and investing, being the "mother of Ponzi schemes". Now that gets me a bit concerned (but not scared).

 

[DAYDREAMER]

Wasn't AIG heavily regulate Firedreamer?

I know what you are saying, and I have significant $$$ in Vanguard funds, and can sleep at night that my mula is safe. I'm just being devils advocate, but Madoff has really opened my way of thinking as to "Question Everything!"

 

[Independent]

I was watching a “finance” show, On the Money, on CNBC. A couple was on, victims of the Madoff Ponzi scheme. They’d been retired four years (the guy had been a NYC Corrections Officer) and have been taking their retirement money from the Madoff “fund” during that period. They had (on paper) $1.6 million dollars in the fund and, if I understood them correctly, they’d been in the bogus fund for twenty-eight years. At any rate, they were understandably upset and wanted to get some of their money back from somebody.

I’ve been thinking, if they had $1.6 million dollars in the Madoff account now, and they first put their money in twenty-eight years ago, at the phony percentage growth stated by Madoff they might have put in to the Madoff scam somewhere between $200,000 to $250,000 dollars (at around ten percent return, in the time frame they spoke of, that amount would grow to just about the $1.6 million dollars they thought they had in that account.).

So, if they took out their interest for three or four years, they may, in fact, be technically whole ($160,000 a year for three or four years of withdrawals would be a larger amount then the original monies they put in – again, if I’m understanding them correctly).

Don’t misunderstand me, these folks have still been royally screwed over. But, to make their situation even worse, I’m not sure they’re going to have any recourse in regard the return of money to them.

Rich

Right. In the thread "where is the $50 billion now?", I thought the correct answer is that some if it never existed other than on the statements Madoff sent to his clients.

The real loss is (cash in) - (cash out), possibly adjusted for the returns on other investments these individuals would have made. If you assume the S&P 500 for the "other investment", it hasn't done real well in recent years, either.

 

[NW-Bound]

Then, same as Social Security, the early joiners got "windfall benefits", while the late comers are left sucking air.

 

[FIREd]

Wasn't AIG heavily regulate Firedreamer?

I know what you are saying, and I have significant $$$ in Vanguard funds, and can sleep at night that my mula is safe. I'm just being devils advocate, but Madoff has really opened my way of thinking as to "Question Everything!"

The insurance business at AIG was heavily regulated for sure. But that's not what got AIG in trouble. AIG's insurance business is still sound. It's the other, less regulated (and supposedly more profitable), business that sunk AIG's ship.

There is a thin line between a critical mind and a paranoid one. Yes you should question everything (I am a big advocate of critical thinking). But you have to do your research and remain rational. And if you do both, there is no way you can compare Madoff Investments and Vanguard.

 

[DAYDREAMER]

I'm not Paranoid. Oh wait, maybe I am. Why is everybody always reading my post! Stop it. It makes me nervous.

 

[FIREd]

Well I know you're not paranoid. And I know that, deep inside, you don't really think Vanguard is a Ponzi scheme. Otherwise you would have moved your money to safer grounds (mattress, coin jar, gold bullions buried in the backyard, etc...).