Edward Thorp: My Encounters With Madoff’s SchemeVW Staff
“On the afternoon of Thursday, December 11, 2008, I got the news I had been expecting for more than seventeen years. Calling from New York, my son Jeff said Bernie Madoff has confessed to defrauding investors of $50 billion in the greatest Ponzi scheme in history. “It’s what you predicted in … 1991!” he said.
“It began on a balmy Monday morning in New York in the spring of 1991, when I arrived at the office of a well-known international company. The investment committee, reviewing their hedge fund investments, decided at this time to add due diligence by hiring me as a consultant. I spent a few days listening to summaries of track records, analyses of the business structures of the hedge funds, the backgrounds of their managers, and making on-site visits. One of the fund managers was so paranoid when I interviewed him at his office that he wouldn’t tell me what kind of personal computers they used. When I went to the restroom he escorted me for fear that I might acquire some valuable crumb of information.
“With one exception, I approved the investments. The story from Bernard Madoff Investments did not add up. My client had been getting steady monthly profits ranging from 1% to more than 2% for more than two years. Moreover, they knew other Madoff investors who had been winning every month for more than ten years.”
(Editor: How did the SEC’s examiners miss the swindle? All they had to do was check the OPPOSITE party on the Madoff’s trading tickets. So if Madoff had a purchase of 1000 options on Coke, the examiner would check the counter-party’s back office to verify the transaction–a sale of 1,000 coke options to Madoff’s firm. A few more random checks would take 20 minutes. DID the SEC EVEN DO THIS? If not, then why wouldn’t the government be liable for the fraud?)