Bernie Madoff

Bernie Madoff, the Wizard of Lies: Inside the Infamous $65 Billion Swindle
by Diana B. Henriques
Published 1 Aug 2011

Hope, Lost and Found Epilogue Notes Acknowledgements Index CAST OF CHARACTERS THE MADOFF FAMILY Bernie Madoff, founder of Bernard L. Madoff Investment Securities Ruth Madoff (née Alpern), his wife Mark Madoff, their elder son, born 1964 Andrew Madoff, their younger son, born 1966 Peter Madoff, Bernie Madoff’s younger brother Shana Madoff, his daughter Roger Madoff, his son Ralph Madoff, Bernie Madoff’s father Sylvia Madoff (née Muntner), Bernie Madoff’s mother AT BERNARD L. MADOFF INVESTMENT SECURITIES Eleanor Squillari, Bernie Madoff’s secretary Irwin Lipkin, Madoff’s first employee Daniel Bonventre, the director of operations Frank DiPascali, the manager on the seventeenth floor Jerome O’Hara, a computer programmer George Perez, his coworker and officemate David Kugel, an arbitrage trader THE ACCOUNTANTS Saul Alpern, Ruth Madoff’s father Frank Avellino, Alpern’s colleague and successor Michael Bienes, Avellino’s longtime partner Jerome Horowitz, an early Alpern partner and Madoff’s accountant David Friehling, Horowitz’s son-in-law and successor Paul Konigsberg, a Manhattan accountant Richard Glantz, a lawyer and the son of an early Alpern associate INDIVIDUAL INVESTORS AND “INTRODUCERS” Martin J.

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The case is number 1:05-cr-01036-CM-1. 148 One of his last calls from his deathbed: Confidential interview with a longtime friend of the Levy family. 148 “Bernie Madoff, trust Bernie Madoff”: Fox Business News interview with Francis Levy, “Bulls and Bears,” January 2009, from a transcript of Money for Breakfast, Jan. 9, 2009, posted on CEOWire and retrieved from BNET. 148 He had named Madoff as the executor: SIPC v. Bernard L. Madoff Investment Securities, Debtor; In re: Bernard L. Madoff, Debtor (hereafter Main Madoff Liquidation), case number 08-01789-BRL in U.S. Bankruptcy Court, Southern District of New York, “Motion for Entry of Order Pursuant to Section 105(a) of the Bankruptcy Code and Rules 2002 and 9019 of the Federal Rules of Bankruptcy Procedure Approving an Agreement by and Among the Trustee and Jeanne Levy-Church and Francis N.

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On November 25, 1959, with him still shy of his university diploma and her enrolled in nearby Queens College, Bernie Madoff and Ruth Alpern were married at the Laurelton Jewish Center. She was eighteen years old. A few days later, according to family lore, he filed the papers to open his own brokerage business, although the official birth date for Bernard L. Madoff Investment Securities in regulatory ledgers is January 19, 1960. He was in his final year of university, just shy of twenty-two. He would later enrol in law school but would drop out after a single year, having spent almost every afternoon trying to drum up business for his newborn brokerage house. By Bernie Madoff’s own account, it was not until late in his university years that he seriously considered a life on Wall Street.

Madoff Talks: Uncovering the Untold Story Behind the Most Notorious Ponzi Scheme in History
by Jim Campbell
Published 26 Apr 2021

Interviews and communications with Bernard L. Madoff. 34. Bernard L. Madoff email to the author, March 25, 2016. 35. Interviews and communications with Bernard L. Madoff. 36. Interviews and communications with Bernard L. Madoff. 37. Interview with Diane Francis, May 8, 2020. 38. Diana Henriques, The Wizard of Lies: Bernie Madoff and the Death of Trust, Times Books, 2011. 39. Erin Arvedlund, “A Decade After Bernie Madoff’s Arrest, FBI Agents Reveal More About His Ponzi Scheme,” Philadelphia Inquirer, December 6, 2018. 40. Interview with FBI Special Agent Paul Roberts, April 29, 2019. 41. Interview with Ira “Ike” Sorkin, April 10, 2019. 42.

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Interviews and communications with Bernard L. Madoff. 4. Bernard Madoff email and letter to the author, April 15, 2016. 5. Interviews and communications with Bernard L. Madoff. 6. Interviews and communications with Bernard L. Madoff. 7. Interviews and communications with Bernard L. Madoff. 8. Interviews and communications with Bernard L. Madoff. 9. Interviews and communications with Bernard L. Madoff. 10. Interviews and communications with Bernard L. Madoff. 11. Interviews and communications with Bernard L. Madoff. 12. Interviews and communications with Bernard L. Madoff. 13. Interviews and communications with Bernard L.

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Author’s exclusive interviews and communications with Bernard L. Madoff. 2. Interview with Josh Stampfli, head of BLMIS market-making automation, April 4, 2019. 3. Interviews and communications with Bernard L. Madoff. 4. Interviews and communications with Bernard L. Madoff. 5. Interviews and communications with Bernard L. Madoff. 6. Bernard Madoff handwritten letter to the author, November 9, 2014. 7. Bernard Madoff handwritten letter to the author, November 9, 2014. 8. Bernard Madoff handwritten letter to the author, November 9, 2014. 9. Interviews and communications with Bernard L. Madoff. 10. Interviews and communications with Bernard L.

No One Would Listen: A True Financial Thriller
by Harry Markopolos
Published 1 Mar 2010

Adelman, Jim Adelphia case Advisors Act Affinity scheme Alarm systems Arthur Treacher’s Fish and Chips Restaurant Arvedlund, Erin Asian investors Association of Certified Fraud Examiners Audit opinions Avellino & Bienes Bachenheimer, Doria Bank foreclosures Barron, Charles Barron’s Bates, Harry Becker, David Benchmark Plus fund Bergers, David Bernard L. Madoff Investment Securities LLC, Bid/ask spreads Black box strategy Bloomberg terminals Boilermaker’s Union Bounty program Broker-dealer profits Brown, Jerry Broyhill, Paul H. Broyhill All-Weather Fund Bull spreads Burns, Pat Bush administration Call options Capito, Shelly Casey, Frank background of careers at Rampart Chicago Art Museum continued activities of and Dave Fraley discovers Bernie Madoff cash needs discovers fraudulent trades discussion on Bernie Madoff and Harry Markopolos helps Neil Chelo relocate impact of Bernie Madoff case on leaves Benchmark leaves Rampart London based funds of funds avoids Bernie Madoff on Madoff operations meets Mike Ocrant meets Paul H.

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Who: The politically powerful Madoff family owns and operates a New York City based broker-dealer, ECN, and what is effectively the world’s largest hedge fund. Bernard “Bernie” Madoff, the family patriarch started the firm. According to the www.madoff.com website, “Bernard L. Madoff was one of the five broker-dealers most closely involved in developing the NASDAQ Stock Market. He has been chairman of the board of directors of the NASDAQ Stock Market as well as a member of the board of governors of the NASD and a member of numerous NASD committees. Bernard Madoff was also a founding member of the International Securities Clearing Corporation in London. His brother, Peter B.

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Could this split-strike option conversion strategy be capable of earning average annual gross returns of 16 percent with only seven monthly losses during the past 14 years? But if this person had heard of Bernie Madoff, among the questions I suggested were: Do you know who Bernie Madoff trades his over-the-counter OEX index options through? Have you ever seen the footprints of Bernie Madoff’s trades in the markets that you trade? How realistic do you consider Bernie Madoff’s performance numbers to be? Have you heard any stories about Bernie Madoff going to cash ahead of major market sell-offs? If so, how do you think he manages to sell ahead of the market? In the world of numbers, it should take only a few pointed questions to figure out what’s real.

Investment: A History
by Norton Reamer and Jesse Downing
Published 19 Feb 2016

Fraud, Market Manipulation, and Insider Trading 3. Andrew Clark, “Bernard Madoff’s Sons Say: We’re Victims Too,” The Guardian, March 17, 2010, http://www.theguardian.com /business/2010/mar/17/bernard-madoff-usa; Christopher Matthews, “Five Former Employees of Bernie Madoff Found Guilty of Fraud,” Wall Street Journal, March 25, 2014, http://online.wsj.com/news/articles /SB10001424052702304679404579459551977535482. 4. Alison Gendar, “Bernie Madoff Baffled by SEC Blunders: Compares Agency’s Bumbling Actions to Lt. Colombo,” Daily News (New York), October 30, 2009, http://www.nydailynews.com/news/crime/bernie -madoff-baffled-sec-blunders-compares-agency-bumbling-actions-lt -colombo-article-1.382446. 5.

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We must keep in mind that these agents of malice are certainly not good for the ethical managers who have their profession tarnished as a result of the immoral behavior. We examine the nefarious as such, fully cognizant that they are not representative of the industry at large but must nonetheless be understood, given how much devastation and disruption they produce. FRAUD Bernie Madoff We begin with fraud, or deliberate and premeditated deception undertaken for gain. Our first story starts in December 2008. It was the time of reckoning that Bernie Madoff, the man who has since become the modern embodiment of financial duplicity, hoped would never come. And yet, by July 2009 he would trade a life replete with Davidoff cigars, Patek Philippe watches, and fashionable digs in the Upper East Side for a prison cell in Butner, North Carolina.1 It was in this Upper East Side penthouse apartment that the conversation catalyzing his end took place the day before his arrest.

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Curiously, many people did notice, and one man in particular was persistent in trying to get the Madoff operation shut down: Harry Markopolos. In fact, it was precisely in trying to emulate what Madoff was doing that Markopolos made his discovery. Markopolos came upon Bernie Madoff as part of an assignment from his employer, Rampart Investment Management, to deconstruct Madoff’s returns.14 The very essence of Bernie Madoff’s fraud was that he contended he used a “split-strike conversion” strategy when in fact he was simply running a Ponzi scheme. Split-strike conversion is a trade where one buys an index (or some subset of it), sells call options, and buys put options.

Madoff: The Final Word
by Richard Behar
Published 9 Jul 2024

But the first sentence in the document states: “The undersigned hereby authorizes Bernard L. Madoff (whose signature appears below) as his agent and attorney in fact to buy, sell, and trade in stocks.” According to Dubinsky, who also once worked as an investment advisor, it was strange to have customers authorize only Bernie and not the firm itself. “If somebody had sent me that, I would have said, ‘Why is he the only guy? What happens if he had a heart attack—no one can trade my money?’ It makes no sense. No one would ever do that.” Not long after Bernie’s arrest, Madoff prosecutors, FBI agents, and forensic accountants found themselves in a conference room trying to make sense of the BLMIS account statements.

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When I cleaned out my mother’s apartment, I threw out this stuff.” Her husband, Mark, concurred: “Why would you want to own something from somebody so notorious? Who would actually wear a shoe that was worn by a man named Bernie Madoff? The one saving grace of this whole charade is money to victims.” It turned out that artist Andres Serrano—creator of the infamous Piss Christ, a work that flustered many delicate types back in the eighties—did want to own a shoe worn by a man named Bernie Madoff. In fact, he apparently wanted to own many, many of them, because three days later at the auction, he plunked down $700 for twenty-two pairs. * * * November 13, 2010.

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The only constructive criticism I would give is to always keep in mind the prime directive and downplay Madoff’s role—never to have his name within 30 words of the word manage, as you do in the second paragraph. He is extremely sensitive to this and wants to be referred to merely as our broker and custodian. I got much more comfortable knowing that it is not just Bernie Madoff with a laptop running the [trading] model. I am inclined to continue investing Madoff, but not bet the business on it. Unfortunately there are certain aspects of [Madoff’s] operations that remain unclear and although we are attempting to obtain responses from Bernie Madoff, this process could take some time. In one email, an FGG executive alerts colleagues that he has just found out that Madoff’s auditor, David Friehling, did not have two hundred clients, as they were told by Bernie.

Warnings
by Richard A. Clarke
Published 10 Apr 2017

Harry Markopolos e-mail to Meaghan Cheung, June 2007, quoted in ibid. 16. U.S. v. Bernard L. Madoff, FBI Special Agent Ted Cacioppi, in his Complaint in U.S. Federal Court, Southern District of New York, Dec. 11, 2008. 17. Ibid. 18. Arvedlund, Too Good to Be True, 231. 19. Portfolio Staff, “Wiesel Lost ‘Everything’ to Madoff,” Upstart Business Journal, Feb. 26, 2009, http://upstart.bizjournals.com/executives/2009/02/26/Elie-Wiesel-and-Bernard-Madoff.html?page=all. 20. M. J. Lee, “Madoff: Politics, Remorse, Wall Street,” Politico.com, Mar. 20, 2014, www.politico.com/story/2014/03/bernie-madoff-interview-104838 (accessed Nov. 10, 2016). 21.

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Enormous amounts have been written about the Madoff case, but we benefited particularly from Harry Markopolos’s own book, No One Would Listen: A True Financial Thriller (Hoboken, NJ: Wiley, 2010); Erin Arvedlund, Too Good To Be True: The Rise and Fall of Bernie Madoff (New York: Portfolio, 2009); U.S. Security and Exchange Commission Office of Inspector General, Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme (Public Version) (2009); and a series of articles by Mark Seal that appeared in Vanity Fair magazine as “The Madoff Chronicles,” in April, June, and September 2009. 2. Gregory Zuckerman and Kara Scannell, “Madoff Misled SEC in 2006, Got Off,” Wall Street Journal, Dec. 18, 2009. 3.

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She never even looked at the list. Each time he called Cheung to offer help or check on the status of his complaint, Harry felt that she was dismissive and disdainful. Eventually he stopped calling. He concluded that the SEC staff was simply not willing to believe that Bernie Madoff could be a scammer. “If he was a fraud, it brought into question everything these people believed in. Bernie Madoff was the ultimate insider; I was the bothersome outsider. I was some quant [mathematics geek] from Boston nobody had ever heard of.”12 Cheung’s team went to the Lipstick Building and talked to Madoff. They found his behavior suspicious.

Talking to Strangers: What We Should Know About the People We Don't Know
by Malcolm Gladwell
Published 9 Sep 2019

In November 2003, Nat Simons, a portfolio manager for the Long Island–based hedge fund Renaissance Technologies, wrote a worried email to several of his colleagues. Through a complicated set of financial arrangements, Renaissance found itself with a stake in a fund run by an investor in New York named Bernard Madoff, and Madoff made Simons uneasy. If you worked in the financial world in New York in the 1990s and early 2000s, chances are you’d heard of Bernard Madoff. He worked out of an elegant office tower in Midtown Manhattan called the Lipstick Building. He served on the boards of a number of important financial-industry associations. He moved between the monied circles of the Hamptons and Palm Beach.

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At Pennsylvania State University, the former assistant coach of the school’s football team, Jerry Sandusky, is found guilty of pedophilia, and the president of the school and two of his top aides are found to be complicit in his crimes. You will read about a spy who spent years undetected at the highest levels of the Pentagon, about the man who brought down hedge-fund manager Bernie Madoff, about the false conviction of the American exchange student Amanda Knox, and about the suicide of the poet Sylvia Plath. In all of these cases, the parties involved relied on a set of strategies to translate one another’s words and intentions. And in each case, something went very wrong. In Talking to Strangers, I want to understand those strategies—analyze them, critique them, figure out where they came from, find out how to fix them.

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He had a rear admiral making his case. 2. The next three chapters of Talking to Strangers are devoted to the ideas of a psychologist named Tim Levine, who has thought as much about the problem of why we are deceived by strangers as anyone in social science. The second chapter looks at Levine’s theories through the story of Bernie Madoff, the investor who ran the largest Ponzi scheme in history. The third examines the strange case of Jerry Sandusky, the Pennsylvania State University football coach convicted of sexual abuse. And this, the first, is about the fallout from that moment of crisis between the United States and Cuba in 1996.

How to Predict the Unpredictable
by William Poundstone

He vowed to keep buying, if necessary, to prevent the stock from plunging further. He would move the market all by himself. Word got around to Mark’s dad. There was a hush as Bernie shut down his son’s computer. It’s alleged that Mark’s trading had lost Bernard L. Madoff Investment Securities over $4 million. Bernie, white-haired and focused, began asking questions. It was Bernie Madoff’s good name that was at stake, not Mark’s. “Maybe we could use this on the seventeenth floor,” he thought out loud. The seventeenth floor was where Bernie ran the secret project that he didn’t talk about. “Yes, this is actually okay,” Bernie announced.

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See notes on this chapter Twelve How to Outguess Ponzi Schemes From the 1970s through 2008, three longtime employees of Bernard L. Madoff Investment Securities—David Kugel, Annette Bongiorno, and Joann Crupi — did the paperwork. “I worked together with them to create the false trades and make them appear on investment advisor client statements and confirmations,” Kugel told a federal judge. The trades were invented to correspond to a return on investment that Madoff himself decreed for each of his clients. It was the Bizarro World version of money management. Instead of calculating the return from the trades, Kugel and company made up trades to match the return. This isn’t the way Bernie Madoff started, assuming he can be believed.

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Were the methods disclosed to investors, the secrets would leak faster. The black-box nature of the business is well illustrated by a mortifying incident. Stony Brook University asked Simons, formerly of its maths faculty, to recommend a good manager for its endowment fund. Simons introduced them to … Bernie Madoff. The university invested with Madoff and lost $5.4 million. Some might have looked at Madoff’s returns and figured they were too good to be true. Simons knew they weren’t. The rule should perhaps be reworded: Never invest more than you can afford to lose in something no outsider understands. Many of Madoff’s victims violated that rule, putting practically all their assets with him.

A Man for All Markets
by Edward O. Thorp
Published 15 Nov 2016

to destroy documents Rothfeld, Michael and Strasburg, Jenny, “SEC Accused of Destroying Files,” Wall Street Journal, August 18, 2011, page C2. the headline article Arvedlund, Erin E., “Don’t Ask, Don’t Tell,” Barron’s, May 7, 2001. in the early 1990s “Bernard Madoff Gets 150 Years in Jail for Epic Fraud (Update 7), Bloomberg.com, June 29, 2009. $65 billion News Release, “Bernard L. Madoff Charged in Eleven-Count Criminal Information,” U.S. Attorney for the Southern District of New York, March 10, 2009. One individual reportedly One Jeffry M. Picower, according to The New York Times, Sunday, July 5, 2009, page B2. According to a later report in The New York Times by Diana B.

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Success on Wall Street was getting the most money. Success for us was having the best life. It was by chance during this time that I discovered the greatest of all financial frauds. 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, told me Bernie Madoff confessed to having defrauded investors of $50 billion in the greatest Ponzi scheme in history. “It’s what you predicted in…1991!” he said. On a balmy Monday morning in the spring of ’91, I arrived at the New York office of a well-known international consulting company. The investment committee hired me as an independent adviser to review their hedge fund investments.

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Ten years after I discovered the Madoff fraud, at a hedge fund investing conference sponsored by Barron’s, a weekly publication by The Wall Street Journal presenting financial data and in-depth stories, the headline article was about the investment manager who wasn’t there, the manager with the best record of all—Bernie Madoff. Better yet for investors, he didn’t charge the typical hedge fund fees of 1 percent of assets per year plus 20 percent of any new net gains. Supposedly he made his money from charging small fees on the huge trading volume that was flowing through his brokerage firm from the orders he placed on behalf of his investment clients.

When Free Markets Fail: Saving the Market When It Can't Save Itself (Wiley Corporate F&A)
by Scott McCleskey
Published 10 Mar 2011

Complaints made in writing to customers are therefore logged, investigated, and tracked so that managers and regulators can identify in each case how the complaint was handled, what the outcome of the investigation was, and how it was finally resolved. In this sense it must be said that the regulated firms were by necessity performing the tasks that the SEC’s Inspector General found were not performed during the period in which Bernard Madoff was operating his Ponzi scheme.3 3 ‘‘Review and Analysis of Examinations of Bernard L. Madoff Investment Securities, LLC,’’ U.S. Securities and Exchange Commission Office of the Inspector General, pp. 3–4. C12 06/16/2010 11:24:24 Page 117 Compliance Departments & 117 Examinations and Reporting Some firms, particularly those that engage in many different sectors of the financial industry, are subject to regulation and examination by so many different regulatory agencies that being examined is a full-time job.

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Similarly, Jerome Fons, another former Moody’s colleague (and also well respected), gave xi E1FACK 06/16/2010 xii 11:30:0 n Page 12 Acknowledgments me valuable insight into the challenges of regulating the rating agencies in the course of several discussions and professional interactions. Genevievette Walker-Lightfoot, a former SEC attorney and one of the very few who raised concerns about Bernie Madoff, walked me through the SEC examination and investigation process to provide the kind of insight that comes only from experience. Additionally, each of these three, in their own capacities, raised alarms about practices and abuses that lie at the center of the financial crisis and its aftermath.

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E1FPREF 06/16/2010 11:31:43 Page 21 Preface n xxi While the pursuit of self-interest may be the driving force that makes markets work, it did nothing to prevent homebuyers from applying for mortgages they patently could not afford, investment bankers from churning out billions of dollars’ worth of instruments based on shaky sub-prime mortgages, rating agencies from diluting the meaning of AAA, or Bernie Madoff from stealing money on the order of a small country’s gross domestic product. Self-interest can drive markets, but selfish interest can drive irresponsibility, inordinate risk-taking, short-termism, and outright fraud. If you believe in free markets, you believe that they should be efficient and fair.

Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market
by Scott Patterson
Published 11 Jun 2012

But it was difficult to get around the fact that the NYSE was the dominant meeting place for NYSE-listed stocks—among the largest public companies in the world. What’s more, the NYSE’s powerful interests erected all kinds of roadblocks, including lawsuits, to keep brokers from trading its stocks with one another. Still, these firms—including Bernie Madoff’s broker dealer, Bernard L. Madoff Investment Securities—kept trying. As such, Instinet had been founded in 1967 as Institutional Network (it was open only to “institutional” firms such as Fidelity and Merrill Lynch) in order to trade NYSE stocks. It had largely failed at its original goal, but it eventually became the largest electronic trading network for over-the-counter stocks (that is, non-NYSE stocks).

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An eighteen-wheeler truck equipped with air-conditioning units was called in to funnel a hose into the basement as Island’s tech team scrambled to get the backup system online. Despite what might have been a perfect storm, Island continued to trade smoothly—and users were deeply impressed. They’d watched as nearly every other ECN choked and wheezed through the turmoil, even as Island kept humming like a jet engine. Andy Madoff, Bernie Madoff’s oldest son and an executive at Bernard L. Madoff Investment Securities—a big user of Island—lavished Levine’s system with praise in an April 7, 2000, e-mail. “Every day that goes by without your system going down builds my respect,” he wrote. “REDI, ARCA, B-Trade have all been plagued with almost continuous problems at crunch times during the last 2 weeks.”

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In April 1998, future Nasdaq CEO Robert Greifeld, then chief of financial software giant SunGard Data Systems, started an ECN called BRUT that capitalized on volumes traded through SunGard’s computer system for trading Nasdaq stocks, BRASS (BRUT was short for BRASS Utility). An operation called Strike Technologies leveraged the high-speed trading volumes of Chicago quant-trading behemoth Hull Trading (which had recently employed data-mining expert Haim Bodek). Future Ponzi schemer extraordinaire Bernard Madoff, head of Bernard L. Madoff Investment Securities, helped develop Primex Trading, backed by firms such as Merrill Lynch and Goldman, whose electronic trading tentacles were suddenly everywhere. Bloomberg, the financial-data firm owned by the future New York City mayor Michael Bloomberg, had jumped in with Bloomberg Tradebook, called B-Trade for short.

Planet Ponzi
by Mitch Feierstein
Published 2 Feb 2012

Footnotes Chapter 1: The scheme 1 Mary Darby, ‘In Ponzi we trust,’ Smithsonian Magazine, Dec. 1998. 2 ‘The Madoff scam: meet the liquidator,’ CBS News, 60 Minutes, June 20, 2010. Note that there is still some uncertainty about the exact scale of the losses. 3 The Federal Bureau of Prisons is kind enough to make Madoff’s exact projected release date available online. Just go along to their website – www.bop.gov – and pop the name ‘Bernard L. Madoff’ into their Inmate Locator. 4 ‘Bernie Madoff baffled by SEC blunders,’ New York Daily News, Oct. 31, 2009. 5 I haven’t sought to update The Economist’s data. The relatively low number for Manhattan real estate is eye-catching, but you can verify this from the NYC FY12 Tentative Assessment Roll, published Jan. 14, 2011. 6 Graph available direct from the Federal Reserve, www.federalreserve.gov. 7 Data from Reuters, extracted Aug. 19, 2011. 8 All book value ratios extracted from Reuters, Aug. 16–19, 2011.

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Charles Ponzi bought a bank and thought about buying a battleship. (He wanted to turn it into a floating shopping mall.) Bernie Madoff wasn’t daft enough to buy a battleship; he was simply content to live the gilded life of New York’s super-rich, without a care for those whose stolen money he relied upon. If we’re claiming that the US government and (as we’ll come to see) Wall Street are running huge Ponzi schemes, we should expect to find some beneficiaries: the Charles Ponzis, the Bernie Madoffs. Following the collapse of the mortgage market in 2008, it’s been common enough to point an accusing finger at the bankers who caused it.

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Now, you’d be right to think that Ponzi’s investors were dumb. If you think you’d be smarter than them‌—‌relax, you would be. But just as investors have become shrewder over time, so Ponzi schemes have become a little smarter too. The most outrageous recent example of a Ponzi scheme was the one operated by Bernie Madoff, under the guise of a hedge fund. When his scheme hit the wall in 2008, investors had accumulated losses of $18 billion.2 Whereas Ponzi had been sent to federal prison for just five years, Madoff was sentenced to jail for a term of 150 years, the maximum allowed. If he gets time off for good behavior, he can look forward to being released on November 14, 2139.

Choose Yourself!
by James Altucher
Published 14 Sep 2013

But when I was trying to raise money, very smart people would say to me, “Why should I invest in you when I could invest in a great fund like Madoff?” And I never had any answer to that. In fact, I visited Bernie Madoff one time. He had a lot of employees up there. You know what he said to me? “One day, computers will be doing what all of these employees are doing.” Oh, he said another thing to me. He said, “I can’t put money with you because I don’t know where you are putting your money. The last thing we need to see is ‘Bernard Madoff Securities’ on the front page of the Wall Street Journal.” And he was right. That is the last thing he needed to see. Ultimately, I had to shut my fund down.

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“Get some info while you are there,” a friend of mine in the business said when he heard I was visiting my neighbor’s boss. The boss said to me, “I’m sorry, James. We like you and if you want to work here, then that would be great. But we have no idea what you would be doing with the money. And here at Bernard Madoff Securities, reputation is everything”.So I didn’t raise money from Bernie Madoff although he wanted me to work there. Later, the same friend who wanted me to get “info” and “figure out how he does it” said to me: “we knew all along he was a crook.” Which is another thing common in Wall Street. Everybody knows everything in retrospect and nobody ever admits they were wrong.

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The US government has laws that allow “sophisticated” or what they call “accredited” investors to invest differently than “unsophisticated.” Some vehicles that sophisticated investors invest in include hedge funds, funds of hedge funds, derivatives, venture capital funds, private equity funds. Bernie Madoff’s fund, for instance, was made up entirely of sophisticated investors. Right now, get down on your hands and knees and pray to God or Allah or Buddha or whoever if you are an unsophisticated investor. A fraud doesn’t become a huge fraud unless it has the blessings of many sophisticated investors.

Nobody's Fool: Why We Get Taken in and What We Can Do About It
by Daniel Simons and Christopher Chabris
Published 10 Jul 2023

She had not had cancer, let alone cured it by eating the right foods, but enough people accepted her tale that she racked up over $1 million in smartphone app and book sales. Even the most sympathetic characters can be liars.14 We should be especially wary when a story is conveyed with utter certainty, because the confidence of con artists can accelerate our tendency to accept without checking. Bernie Madoff cheated investors out of tens of billions of dollars in an infamous Ponzi scheme. During the more than fifteen years that the scam was in full swing, he was questioned several times by authorities and journalists who had been tipped off to his dubious activities. According to one postmortem analysis, Madoff explained his investing success to US Securities and Exchange Commission (SEC) inspectors by saying “he could actually sit on the trading room floor, and ‘feel the market’ and know exactly when to buy and exactly when to sell.

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Trust is not a symptom of an inability to reason or a lack of intelligence; as the choice blindness studies and much other research show, we can identify flawed arguments when we believe they come from someone other than ourselves. Strong interpersonal commitments help explain the longevity of some of the biggest frauds. Frank Casey, whose business partner tried to tip off the SEC about Bernie Madoff’s Ponzi scheme, told a client’s family members that they were taking too great a risk by investing all of their money with Madoff. When Madoff’s scheme collapsed a couple of months later, the client told Casey that his father-in-law had reacted to Casey’s warning by saying, “They’re probably well intentioned, but they do not understand.

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For example, by making standardized test scores optional for admission, colleges such as Union College, where Chris was a professor for ten years, were able to report higher average standardized test scores—because the applicants who had good scores tended to submit them, and those with lower scores chose not to.26 The authorities wouldn’t allow fraud to happen. When an activity is regulated by government agencies, it’s easy to assume that it must be legitimate. Many of Bernie Madoff’s victims admitted that they believed the SEC had checked him out and was keeping such a close watch over the financial markets that fraud could not occur. Madoff himself stated publicly that chronic rule-breakers would not last long on Wall Street. But as Jim Campbell notes in his book Madoff Talks, “The SEC is not a cop on the beat.”

Dead Companies Walking
by Scott Fearon
Published 10 Nov 2014

Madoff’s phony returns were phenomenal, and phenomenally consistent. Everybody was too busy basking in the money he was supposedly making them to realize that his fund’s performance was almost certainly too good to be true. The second factor had to do with identity. For a large number of his investors, Bernie Madoff was “one of us.” He was a respected, even revered figure in the Jewish community—and many of his victims came from that world because of it. This is an age-old problem in both business and investing. Call it the country club effect. Even the sharpest, most astute professionals tend to perform less due diligence when they’re dealing with someone with whom they have an affinity.

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The only reason I trusted my friend with my money in the first place was that he came off as a decent family man. I assumed that someone who seemed so wholesome would manage my money responsibly. That assumption was wrong. Another way sleazy money managers burnish their reputations is by spreading huge amounts of money around to charities and other worthy causes. That was one of Bernie Madoff’s main MOs, and it worked for him for decades. No one wanted to believe that such a generous philanthropist was a complete fraud. A few years ago, I attended a fund-raiser for a school I helped found for disabled kids. It’s a great event that we throw every year. We always start off with a silent auction and then we bring on some entertainment.

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But agencies like the Securities and Exchange Commission (SEC) aren’t just outmanned and outgunned by Wall Street; they’ve essentially abdicated their responsibilities for overseeing my industry. Sure, they make occasional headlines for busting a few blatantly bad actors like Larry Goldfarb and Bernie Madoff, but these cases are the proverbial exceptions that prove a rule. The vast majority of Wall Street’s scams not only go unpunished, but many of them are allowed to continue out in the open without the faintest threat of prosecution. About ten years ago, I got a voice mail from a woman working for a well-known and well-connected boutique brokerage in Arkansas.

Pound Foolish: Exposing the Dark Side of the Personal Finance Industry
by Helaine Olen
Published 27 Dec 2012

As our collective finances got tighter over the first decade of the millennium, Orman’s New Age–oriented financial advice became increasingly hectoring. She yelled at people who got themselves into too much debt, whether it happened via a bout of unemployment or by taking on too much in college loans. She blamed the victims of Bernie Madoff for the fact that they had invested their funds in what turned out to be a Ponzi scheme by telling them, “You walked right into that financial concentration camp.” She lectured people on her popular “Can I Afford It?” and “1 on One” segments on her CNBC show, weighing in on people’s desires to do such things as purchase a Porsche (denied) or even the desire to have a second child (also denied).

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Third, there was actually no proof any of this was going to play out as we thought it would. THE CONVENTIONAL WISDOM MIGHT WELL BE WRONG Investing is risky and there are no guarantees. This is not something very many people will tell you. You can invest your heart out, do all the right things (You didn’t put all your money in Enron! You avoided Bernie Madoff!), diversify properly, not get laid off at a bad time like Carol Friery, and still, at the end of the day, end up way, way short of your goals. The mutual fund industry and many personal finance columnists are fond of quoting statistics, usually ones that reflect well on putting your money in stocks.

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John Coates, please meet Mary Meeker, the Morgan Stanley banker who was dubbed “the Queen of the Net” for her role in the dot-com bubble and was recently described by John Cassidy, who profiled her in the New Yorker, as “a true believer.” Moreover, much is made of the fact that the chief whistleblower in the Iceland fiscal fiasco was a woman, leaving one to wonder if whistleblowers such as Bernard Madoff–nemesis Harry Markopolos and Lehman Brothers’ practically forgotten Matthew Lee (who lost his job for his troubles) should be considered chopped liver. After all, many men are quite conservative with money (I know, I’m married to one of them) while many women are quite capable of engaging in risky investment strategies, being greedy, and committing out-and-out theft.

Adaptive Markets: Financial Evolution at the Speed of Thought
by Andrew W. Lo
Published 3 Apr 2017

The more volatile asset B is the U.S. stock market. Asset D is Pfizer, the pharmaceutical company. Finally, asset C is one you may not have heard of, the Fairfield Sentry fund. What’s the Fairfield Sentry fund? It was one of the feeder funds for the Bernie Madoff Ponzi scheme, the decades long, multibillion-dollar fraud. If you ever wondered how Bernie Madoff could fool so many people for so long, think about your own choice just a few minutes ago. In case you’re wondering, figure 10.3 contains the subsequent performance of these four assets. Figure 10.2. Cumulative returns of a one-dollar investment in each of four financial assets over an unspecified time period.

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“The Time-Variance Relationship: Evidence on Autocorrelation in Common Stock Returns.” Journal of Finance 32: 41–55. Seal, David. 2009. “Madoff’s World.” Vanity Fair. March 4. http://www.vanityfair.com/news/2009/04/bernard-madoff-friends-family-profile Securities and Exchange Commission (SEC). 1969. 35th Annual Report for the Fiscal Year Ended June 30th, 1969. Washington, DC: Government Printing Office. ___. Office of Investigations. 2009. Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme. Public version. Report OIG-509. August 31. Washington, DC: Government Printing Office. ___. 2014. Agency Financial Report: Fiscal Year 2014.

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His reputation was more than sound and, until the very bitter end, his clients were delighted with his service. Figure 10.3. Cumulative returns of one-dollar investment in each of four assets from December 1990 to December 2015: U.S. Treasury bills, the CRSP value-weighted stock market index, Pfizer, and Fairfield Sentry fund, which was the feeder fund for the Bernie Madoff Ponzi scheme. In fact, Madoff was engaging in what is known as “affinity fraud,” deliberately courting investors who felt they had a personal connection with him. Charities were a popular target. Madoff claimed to invest in proprietary strategies, but in reality, he hadn’t traded since the early 1990s.

Dangerous Personalities: An FBI Profiler Shows You How to Identify and Protect Yourself From Harmful People
by Joe Navarro and Toni Sciarra Poynter
Published 6 Oct 2014

They can be intelligent, friendly, attractive, quiet, reclusive, delinquent, or any of a number of other characteristics. Being successful, having friends, or holding a status position doesn’t preclude someone from being a predator—a lesson that Penn State faculty, athletes, alumni, and students learned from Jerry Sandusky’s multiple convictions for sexually abusing children, and that Bernie Madoff’s friends and colleagues learned following his colossal swindle scheme. These individuals are persistently calculating, manipulative, and aggressively predatory. When you read about someone who meticulously planned and executed a crime, who stalked and staked out his victim, who’s been committing criminal acts for a long time, who traveled distances to achieve an illicit endeavor, or who’s constructed elaborate Ponzi schemes, you’re reading about predators.

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When they do make the headlines, it’s on those rare occasions when they get caught. They are responsible for many of the nearly 15,000 homicides, 4.8 million domestic assaults, 2.2 million burglaries, 354,000 robberies, and 230,000-plus sexual assaults that occur annually in the United States, many of which go unreported and unpunished.2 Or, like Bernard Madoff, they may embezzle money from the elderly or even friends for years (on such a grand scale, in his case, that the economic wellbeing of thousands was compromised). They can go undisturbed for decades, destroying lives as convicted child rapist Jerry Sandusky did at Pennsylvania State University.

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The narcissist worked for and got what he wanted, so what’s the problem when he comes home drunk, smelling of other women? What his wife wants doesn’t matter; the only thing that matters is what he feels he’s entitled to. He has used attentiveness to ensnare, but he doesn’t really care. In real life, financier Bernard Madoff used connections and friendships to ensnare trusting people in his Ponzi scheme. The crushing difference between what they expected and what they got is the terrible truth of relationships with a narcissistic personality. You expect to be treated as an equal, as a friend, but a narcissist has no equal.

Endless Money: The Moral Hazards of Socialism
by William Baker and Addison Wiggin
Published 2 Nov 2009

Might not the managers of Bear Stearns, who banked large bonuses each year, been inspired to do this because they could reshape financial contracts to produce high yields through option-like structures, with the consequences of their excess seemingly never to be felt due to the salutary effects of inflation, or deferred to some indistinct future moment? What is intriguing is that to attract prodigious amounts of investment capital, hedge funds no longer needed to post eye-popping returns, just 22 ENDLESS MONEY a constant stream of respectable profits and maybe a few mildly down months, a model that shysters like Bernie Madoff mastered to the pleasure of their sheep. How were derivatives used to enhance return in a way suggestive of fake alpha? An oft-quoted example is the case where a small hedge fund set up a subsidiary backed by a paltry $4.6 million guaranteed $1.3 billion of subprime mortgages for the Swiss banking giant UBS.

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We are told it is hard to guard against it and that there are no software packages that can avert it. Of course, the disinfectant of transparency goes a long way, but common sense is the most effective tool at our disposal to avoid being sucked into such schemes. The centerpiece of operational risk for our time has to be the Bernie Madoff scandal, which broke in December 2008. However, the continual financial market meltdown has revealed other giant Ponzi schemes, such as the failure of the $50 billion Stanford Group in February 2009. Oddly, most mainstream professional money managers had never heard of Madoff, yet he had raised over $50 billion.

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In so doing, they release themselves of guilt should anything go wrong (which happens to some percentage of any risky investment by nature), but investors learn to ignore this rubbish and even associate the better-run firms with the most official looking and weightiest paperwork. In the end, the despot takes his cut, the investors lose out and honorable money managers are burdened. Fraudsters such as Bernie Madoff or Allen Stanford, both major Democratic Party supporters, might escape the long arm of the law indefinitely unless a super-bear market exposes missing funds when redemptions are requested, especially if they make well-placed donations to political campaigns as did Marc Rich (through his wife), earning him a pardon by the ultimate wizard of relativism, President Bill Clinton.

The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness
by Morgan Housel
Published 7 Sep 2020

That was just one example of an alleged trend. The SEC claims Gupta’s insider tips led to $17 million in profits. It was easy money. And, for prosecutors, it was an even easier case. Gupta and Rajaratnam both went to prison for insider trading, their careers and reputations irrevocably ruined. Now consider Bernie Madoff. His crime is well known. Madoff is the most notorious Ponzi schemer since Charles Ponzi himself. Madoff swindled investors for two decades before his crime was revealed—ironically just weeks after Gupta’s endeavor. What’s overlooked is that Madoff, like Gupta, was more than a fraudster. Before the Ponzi scheme that made Madoff famous he was a wildly successful and legitimate businessman.

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Madoff’s firm can execute trades so quickly and cheaply that it actually pays other brokerage firms a penny a share to execute their customers’ orders, profiting from the spread between bid and ask prices that most stocks trade for. This is not a journalist inaccurately describing a fraud yet to be uncovered; Madoff’s market-making business was legitimate. A former staffer said the market-making arm of Madoff’s business made between $25 million and $50 million per year. Bernie Madoff’s legitimate, non-fraudulent business was by any measure a huge success. It made him hugely—and legitimately—wealthy. And yet, the fraud. The question we should ask of both Gupta and Madoff is why someone worth hundreds of millions of dollars would be so desperate for more money that they risked everything in pursuit of even more.

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For some reason the same logic doesn’t translate to business and investing, and many will only stop reaching for more when they break and are forced to. This can be as innocent as burning out at work or a risky investment allocation you can’t maintain. On the other end there’s Rajat Guptas and Bernie Madoffs in the world, who resort to stealing because every dollar is worth reaching for regardless of consequence. Whatever it is, the inability to deny a potential dollar will eventually catch up to you. 4. There are many things never worth risking, no matter the potential gain. After he was released from prison Rajat Gupta told The New York Times he had learned a lesson: Don’t get too attached to anything—your reputation, your accomplishments or any of it.

Vulture Capitalism: Corporate Crimes, Backdoor Bailouts, and the Death of Freedom
by Grace Blakeley
Published 11 Mar 2024

Paul Toscano, “Portfolio’s Worst American CEOs of All Time,” CNBC, April 30, 2009, https://www.cnbc.com/2009/04/30/Portfolios-Worst-American-CEOs-of-All-Time.html. 60. Diana B. Henriques, “Bernie Madoff, Architect of Largest Ponzi Scheme in History, Is Dead at 82,” New York Times, April 15, 2021, https://www.nytimes.com/2021/04/14/business/bernie-madoff-dead.html. 61. “The Madoff Files: Bernie’s Billions,” Independent, January 29, 2009, https://www.independent.co.uk/news/business/analysis-and-features/the-madoff-files-bernie-s-billions-1518939.html. 62. Ethan Sacks, “Bernie Madoff, Mastermind of Largest Ponzi Scheme in History, Dies at 82,” NBC News, April 14, 2021, https://www.nbcnews.com/news/us-news/bernie-madoff-mastermind-behind-largest-ponzi-scheme-history-dies-82-n1139831. 63.

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In the investigations that followed WorldCom’s bankruptcy, it emerged that Ebbers had had a remarkably close relationship with senior executives at Salomon Smith Barney, an investment bank later absorbed into Citigroup.56 When the former attorney general found that the bank “gave extraordinary financial favors and assistance” to Ebbers to convince him to give them his business, Citigroup settled with WorldCom’s shareholders for $2.65 billion.57 JPMorgan, which had helped to underwrite $15.4 billion of WorldCom’s bonds with Citigroup, paid out $2 billion.58 Ebbers himself was convicted on fraud and conspiracy charges. He is remembered as the fifth-worst CEO in US history.59 Or, if those two examples aren’t enough, let’s take a look behind the scenes of Bernie Madoff’s 2009 conviction for fraud. In 2009, Madoff, the former chair of the NASDAQ stock exchange, admitted that his wealth management company, Bernard L. Madoff Investment Securities LLC, was a giant Ponzi scheme, in which new investment was being used not to grow the business but to pay off previous investors. Madoff had started the firm in 1960, with $5,000 he’d saved from working as a lifeguard and a sprinkler installer,60 alongside a $50,000 loan from his father-in-law—the first, but not the last, person to be duped into supporting Madoff’s schemes.61 In 2009, he was sentenced to one hundred and fifty years in prison for operating the largest Ponzi scheme in US history.

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Laurence Kotlikoff, “A Look at JPMorgan Chase’s 20 Years of Watching Madoff Commit Crimes,” Forbes, September 26, 2014, https://www.forbes.com/sites/kotlikoff/2014/09/26/jpmorgan-chases-20-years-of-watching-madoff-commit-crimes-read-chapter-2-at-jpmadoff-com/?sh=2df5ceaf3b89. 64. MJ Lee, “Madoff: ‘JPMorgan Knew,’ ” Politico, March 21, 2014, https://www.politico.com/story/2014/03/bernie-madoff-jpmorgan-104887. 65. Nathan Vardi, “JPMorgan Chase to Pay $1.7 Billion in Largest Bank Forfeiture in History Settles Criminal Madoff Charges,” Forbes, January 7, 2014, https://www.forbes.com/sites/nathanvardi/2014/01/07/jpmorgan-chase-to-pay-1-7-billion-in-largest-bank-forfeiture-in-history-settles-criminal-madoff-charges/. 66.

Framing Class: Media Representations of Wealth and Poverty in America
by Diana Elizabeth Kendall
Published 27 Jul 2005

Subsequent investigation reveals that the victim “was trapped inside the car’s windshield after the accident and that the driver—a high profile publicist—left the man dying in her garage” before disposing of the body.71 “Darwinian” uses what Law & Order refers to as a “rippedfrom-the-headlines” plot that combines two real criminal cases, one in which a woman (of more modest means than in the TV show) left a man to die on her windshield after hitting him with her car and a second involving a wellknown society publicist convicted on a felony charge of leaving the scene of an accident after she backed her Mercedes SUV into a group of people going to a night club. This episode is characteristic of the bad-apple messages that Law & Order and other crime dramas send to viewers.72 When Bernard (“Bernie”) Madoff was accused of perpetrating a $65 billion fraud in a Ponzi scheme, set up through Bernard L. Madoff Investment Securities, that cost many investors their life savings, a Law & Order episode combined elements of his crimes with the murder of a television reporter: While investigating the murder of television reporter Dawn Prescott, detectives Lupo and Bernard discover that she was involved in a love triangle involving 9781442202238.print.indb 75 2/10/11 10:46 AM 76 Chapter 3 another reporter at the station.

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Ebert, “‘Law & Order’ Plotline Follows Larry Mendte Story and Madoff Scam,” IPBIZ, March 25, 2009, http://www.ipbiz.blogspot.com/2009/03/ law-order-plotline-follows-larry-mendte.html (accessed October 17, 2010). 74. Steve Fishman, “Bernie Madoff, Free At Last,” New York Magazine, June 14–21, 2010, 35. 75. Alex Kuczynski, “For the Elite, Easing the Way to Prison,” New York Times, December 9, 2001, ST1, ST2. 76. Fishman, “Bernie Madoff, Free At Last,” 35. 77. Warren St. John, “Advice from Ex-Cons to a Jet-Set Jailbird: Best Walk on Eggs,” New York Times, July 13, 2003, ST1. 78. Juan A. Lozano, “Judge Vacates Conviction of Kenneth Lay,” Washington Post, October 18, 2006, http://www.washingtonpost.com/wp-dyn/content/article/2006/ 10/18/AR2006101800201_pf.html (accessed October 15, 2010). 79.

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“Finding Third Places: Other Voices, Different Stories.” Pew Center for Civic Journalism. 2004. www.pewcenter.org/doingcj/videos/thirdplaces.html (accessed July 6, 2004). Firestone, David. “4 Dead and 9 Missing in a Pair of Alabama Mine Blasts.” New York Times, September 25, 2001, A14. Fishman, Steve. “Bernie Madoff, Free At Last.” New York Magazine, June 14–21, 2010, 35. Fitzgerald, F. Scott. “The Rich Boy.” In The Short Stories of F. Scott Fitzgerald, edited by Mathew J. Brucoli, 317–49. New York: Scribner, 1995 [1926 in Redbook magazine]. Florida, Richard. The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community and Everyday Life.

Circle of Greed: The Spectacular Rise and Fall of the Lawyer Who Brought Corporate America to Its Knees
by Patrick Dillon and Carl M. Cannon
Published 2 Mar 2010

Now they would pick up the pace. 24 THE PATIENCE OF JOB Little in the way of personal exchanges now entered the preamble of the regular business conversations between Bill Lerach and Mel Weiss. Once there had been rambling, reciprocal check-ins about their families, or (usually from Mel to Bill) the latest stock market tips. A few years back Mel had even bragged about his inclusion in an exclusive investment fund run by a friend by the name of Bernie Madoff. Told it was a sure thing, Lerach flinched. “Sure things” touted by Mel often did not pan out.* On this day Weiss was furious with his protégé and let him know it. “I just got a call from Max Berger,” Weiss said stonily. Lerach knew Max A. Berger as a star partner of the big plaintiffs’ firm Bernstein, Litowitz, Berger & Grossman.

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Isaacs replied that he’d seen the draft and, in his opinion, the whole investigation had reached a critical point of whether to keep investigating, discontinue, or push forward and out into the open. Did he have an opinion? McGahan was anxious to know. Yes, Isaacs told his younger colleague, previewing what he would recommend to Cardona. “Let’s indict.” * Among the many victims of Bernie Madoff’s Ponzi scheme was Mel Weiss. Although the amount of his loss was not disclosed publicly, Bill Lerach estimated it to be between $20 million and $30 million. * “I know what I don’t know,” Ebbers would later testify at his own trial. “I don’t know technology and engineering. I don’t know accounting.”

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Two weeks later the U.S. attorney’s office in Los Angeles announced that the government had settled with the law firm of Milberg Weiss. The firm, soon to be known as only Milberg, agreed to pay $75 million dispersed over five years and accept government oversight in return for the removal of charges against it. In December, four months after Mel Weiss began serving his prison sentence, he learned that his friend Bernie Madoff had fleeced him, along with hundreds of other “exclusive” investors, in the largest private investment fraud in history. Estimates of the amount Madoff bilked ran as high as $50 billion. Mel Weiss alone was believed to have lost upward of $20 million. Weiss was not the only victim in the Milberg Weiss circle.

The Village Effect: How Face-To-Face Contact Can Make Us Healthier, Happier, and Smarter
by Susan Pinker
Published 30 Sep 2013

Thirty-five others were forced to accept handouts to pay for rent, food, Ensure, and adult diapers from the charities they had not long before supported with their own donations.1 No one wants to spend their golden years financially vulnerable and dependent on others. And for a proud generation of savers, most of whom had cut their teeth during the Depression and who had spent their adult lives intent on being self-supporting, becoming penniless was the ultimate disgrace. How did Earl Jones pull it off? As was the case with Bernie Madoff, the trust inherent in a tightly knit, homogeneous social network helped Jones build a legitimate career at first. As a member of the community, it’s easy to establish one’s bona fides. And once he had earned other members’ confidence, he no longer had to prove himself. The pressures and temptations built.

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Getting up close and personal can swing both ways, especially in business. While face-to-face contact can bring increased performance, customer loyalty, satisfaction, and profits, it can also lead to big-time betrayal. Affinity Fraud How could so many people fall for the outsized promises of Earl Jones—or Bernie Madoff, for that matter? As social animals, “the default is to trust until there’s a reason not to,” said the late Robyn Dawes, a psychologist at Carnegie Mellon who was one of the pioneers of behavioral economics.7 When it comes to having confidence in other people, our group or religious affiliations work as a stand-in for family relationships.

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They trusted an elder with their savings, as did about 2,500 other members of the plain community, as the Mennonites and Amish call themselves. Monroe Beachy, now in his late seventies, was a respected financial advisor who lived a modest lifestyle and acquired his financial bona fides in H&R Block classes. Through his company, A&M Investments, Beachy took in about $33 million from his community over twenty-odd years. Much like Bernie Madoff and Earl Jones, Beachy promised a rate of return that was better than the bank’s—and all through risk-free government bonds. “Word spread about his safe, steady returns. Parents encouraged their children to practice thrift by opening A&M accounts, too,” wrote business reporter Diana Henriques.

The Divide: American Injustice in the Age of the Wealth Gap
by Matt Taibbi
Published 8 Apr 2014

In early 2010 the DOJ decided to end the investigation of AIG Financial Products chief Joe Cassano, the patient zero of the financial crisis, whose half-trillion-dollar portfolio of unsecured credit default swaps imploded in 2008, forcing the government to bail out AIG and sending the world economy into a tailspin. Cases involving Ponzi scheme artists Bernie Madoff and Allen Stanford were restricted to a few defendants apiece, while banks and other institutions that aided their frauds got off clean. It would be years before the Obama administration would begin again to look at the role played in the Madoff scandal by JPMorgan Chase, Madoff’s banker. Meanwhile, after the first trial of baseball great Roger Clemens ended in a mistrial, the government pushed forward, keeping dozens of agents and lawyers on the case and deciding ultimately to retry the arch-villain, accused of lying about taking steroids.

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The situation was tenable so long as housing prices kept rising and these teeming new populations of home borrowers could keep their heads above water, selling or refinancing their way out of trouble if need be. But the instant the arrow began tilting downward, this rapidly expanding death-balloon of phony real estate value inevitably had to—and did—explode. In other words, it was a Ponzi scheme, no different than the Bernie Madoff caper, only executed on an exponentially huger scale. The scheme depended upon the ability of a nexus of large financial companies to factory-produce and sell these magic home loans fast enough, and in big enough numbers, to continually keep more money coming in than going out. Once the bubble burst, lawsuits were filed everywhere and whistle-blowers emerged by the dozen, showing, in graphic documentary detail, how nearly every major financial company in America had chosen to participate in this enormous fraud.

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A fund often begins as a one-man operation, run by a smooth-talking Wall Street front man who trolls the very rich, hustling for seed money. There are no real regulatory audits of hedge funds, and no government body checks hedge funds’ trades or verifies their claims. It even came out, in the famous Bernie Madoff case, that despite numerous complaints to the SEC over the years from reputable sources, nobody in the government even checked to make sure Madoff’s hedge fund even made trades at all. Madoff actually went more than thirteen years without making a single stock purchase and yet somehow survived several SEC investigations—that’s how flimsy government regulation of hedge funds has been and still is.

The Truth About Lies: The Illusion of Honesty and the Evolution of Deceit
by Aja Raden
Published 10 May 2021

In fact, it’s kind of weird we’re still calling it a Ponzi scheme one hundred years later. Especially when he didn’t invent it, didn’t pioneer it, and didn’t even go out the biggest. That dubious honor belongs to Bernie Madoff, who was busted in 2008 for running the biggest Ponzi scheme in history, to the tune of $65 billion. Bernie Madoff was born in Queens, New York, in 1938, the son of a plumber. He briefly attended Brooklyn Law School but decided Wall Street was the place to make real money, so in 1960 he founded his own firm, Bernard L. Madoff Investment Securities LLC, where he continued to work for nearly five decades, until he was busted by the feds. Supposedly, the wealth-management arm of his firm had been trading in blue chip stocks for decades, managing massive investments for extraordinarily wealthy clients.

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The newly minted FDA and its subsequent crackdown was intended to protect us but, instead, led us in a blindfolded circle through the “wellness” industry, new-age medicine, and finally right back into the opium den of prescription drugs. Is the story of Snake Oil really about gullibility, or does the strange science of placebos tell us more about the biology of belief than we realize? Last, in chapter six we’ll look at Pyramid Schemes—from Bernie Madoff to Bitcoin—which have the unique power to be utterly transparent and still totally effective. Is it because the real trick is just tricking you into thinking that you got in on the ground floor of what you know is almost certainly a scam, or because you don’t always see a familiar institution for what it is?

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But they generate so much profit in the five to ten years it takes to prove that and pull them from the market that even if (usually when) the companies get sued, it’ll be worth it once the accounting is settled. 6 IT’S LOVELY AT THE TOP Pyramid Schemes and Why You’re Probably Part of One The more important the subject and the closer it cuts to the bone of our hopes and needs, the more we are likely to err in establishing a framework for analysis. —STEPHEN JAY GOULD I certainly wouldn’t invest in the stock market. I never believed in it. —BERNIE MADOFF PYRAMID SCHEME In a Pyramid Scheme, the person at the top recruits a small number of people below them in some supposedly legitimate but still too-good-to-be-true investment or business venture. Each person who is recruited recruits more people. With each tier of recruits, the Pyramid grows larger, as does the concentration of money trickling upward to the top levels.

Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts
by David Gerard
Published 23 Jul 2017

These are so attractive to crypto fans that when Ethereum took blockchains and added “smart contracts” (programs that run on the blockchain), the first thing people did was write automatic “honest” Ponzis. High-yield investment programmes: a variety of Ponzi scheme. You might think it obvious that no investment scheme could pay 6% interest per week sustainably, particularly when it claims a “secret” investment strategy, but what worked on Bernie Madoff’s victims works on Bitcoiners. Coin doublers: send it a small amount of bitcoins and you’ll get double back! (No reason is given why anyone would just double your money.) Send a larger amount straight after and … you won’t. You’d think people would catch on, but years later these keep popping up and finding suckers.

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His lawyer’s entire defense was that bitcoins were not “money” under US law because they were not legal tender; the judge didn’t buy it, and Shavers was required in September 2014 to pay back $40.7 million.75 He was also prosecuted for criminal securities fraud for the Ponzi in November 2014,76 pled guilty in September 2015 and was sentenced to one and a half years in jail.77 The lawyer later maintained that the SEC only went after Shavers because they were upset they hadn’t caught Bernie Madoff in time, and not at all because Shavers stole millions of dollars from people.78 The astounding thing is how successful such an obvious Ponzi had been. Pirateat40 held about 7% of all bitcoins in circulation at the time. Some Bitcoiners offered insurance against Bitcoin Savings & Trust failing, then put the insurance premiums into the scheme; or just didn’t pay up when it went down.

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Anarcho-capitalist Jeffrey Tucker wrote an amazing apologia, “A Theory Of The Scam,”66 in which he admits Bitcoin is suffused with fraud, but posits that “scam artists are the evil cousins of genuine entrepreneurs” and are actually a sign of health for an area – so, since good things had scams, this scam-riddled thing must therefore be good! (With all this horse poop there’s gotta be a pony in here.) No doubt subprime-mortgage-backed collateral debt obligations, Business Consulting International and Bernard L. Madoff Investment Securities LLC were just severely underpriced investment opportunities. Pirateat40: Bitcoin Savings & Trust Now that Pirateat40 closed down his operatations thanks to all the fud that was going on and growing on the forum, I expect everyone that spreads this fud, accused and insulted Pirate and the people that supported him to apologize.

The Little Book of Hedge Funds
by Anthony Scaramucci
Published 30 Apr 2012

Fund of hedge funds version 2.0 came when the industry added the bells and whistles of analytical research and portfolio resource allocation. Suffice it to say, the industry was crushed during the 2007 to 2009 economic crisis, which was further intensified by the devious acts of fraud of managers like Bernie Madoff. No wonder there is a tremendous cabal in the investment industry aligned against funds of hedge funds. Today, there are over 2,018 funds of hedge funds in the world. Many estimates show that close to 22 percent of all new investments into hedge funds are coming from funds of hedge funds. Since their advent, funds of hedge funds have been the vehicle of choice for new entrants into the hedge fund space.

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Some of the requirements imposed by regulators include releasing their holdings and performance to the general public, providing daily liquidity, valuing shares accurately and daily, and providing investors with a prospectus prior to investing. Conversely, hedge funds are loosely regulated and currently do not have to register with the SEC or the Commodity Futures Trading Commission. And, let’s face it, registration doesn’t mean a hell of a lot these days considering that Bernard L. Madoff Investment Securities LLC was once registered with the SEC. (Allow me a quick soapbox moment: Although the media tag Madoff as a hedge fund guy, the irony was that he wasn’t running a mutual fund or a hedge fund; he was running a separate account business that made tons of money and thousands of clients bucketed him in the world of alternatives.

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He might be right, but then again he may be wrong. After all, at the time of this writing, Protégé Partners is ahead of the Oracle from Omaha. It may end badly for the fund of funds folks on this bet, but one thing is irrefutable—funds of hedge funds just flat out perform better in down markets. Madoff Factor Bernard L. Madoff Investment Securities LLC wasn’t a hedge fund or a fund of hedge funds. Madoff was a broker-dealer who did more damage to the hedge fund industry than any actual manager in history—even more damage than the now-defunct Trader Monthly magazine! Year in and year out, he would grind out consistent and low double-digit returns so as not to drawn attention to his devious plan and keep his clients happy.

The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street
by Robert Scheer
Published 14 Apr 2010

Not only would the economy be stronger, but American individuals, pension plans, and charities could all ride this dragon skyward, through investments and through donations from the mega-rich looking for tax shelters. It is no accident, then, that in each of the recent economic collapses, from Enron to Bernie Madoff, there arose the ever-present laments from charities that were suddenly defunded. The derivatives and swaps involved buying and packaging financial risk and selling it based on a system of corresponding grades. So a bank might buy up a collection of mortgages or credit card debts from lenders, who could then take this capital to bankroll even more loans.

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As for his salary sacrifice, not to worry: In 2005, when he was still CEO and chair of Allstate Insurance, he received $26.7 million in compensation. What we have here is a rare glimpse into the workings of the billionaires’ club, that elite gang of perfectly legal loan sharks who in only the most egregious cases will be judged as criminals—Bernard Madoff, former chair of NASDAQ, comes to mind. These other amoral sharks, who confiscated billions from shareholders and the 401(k) accounts of innocent victims, were rewarded handsomely, rarely needing to break the laws their lobbyists had purchased. The dealings between AIG and Goldman would later form the stuff of scandal, as it turned out that bailout money had been passed through AIG to pay back Goldman Sachs and other clients at full value for their questionable investments.

Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street Are Destroying Investor Confidence and Your Portfolio
by Sal Arnuk and Joseph Saluzzi
Published 21 May 2012

Insider trading cases, including the recent, high-profile prosecution of Raj Rajaratnam from Galleon Group, certainly protect us from those gaining unfair advantages at the expense of long-term investors. However, the Rajaratnam case—the largest insider trading scandal in our nation’s history—centers around only $53 million in ill-gained profits. Compare that to the SEC’s failure to stop the $68 billion Bernie Madoff Ponzi scheme, despite being tipped multiple times. Although we praise the SEC for going after Rajaratnam, we can’t help but be disappointed in the agency’s seeming lack of action around HFT and the conflicts of interests in our market structure. HFT firms generate between $8 billion and $21 billion a year in profits.

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In a prescient September 1999 speech at Columbia Law School, Levitt telegraphed his next battle: “One way or another, Rule 390 should not be part of our future.”3 With pressure mounting from the large brokerage houses, the NYSE heeded Levitt’s threat and voluntarily removed the rule in May 2000. One brokerage house that was thrilled was Madoff Securities. Bernie Madoff commented, “This will very quickly change the landscape positively by giving [brokerages] more flexibility to execute orders most efficiently for their customers.”4 Another supporter was former SOES Bandit and Island ECN executive Josh Levine. “The elimination of Rule 390 is a good step toward competition in the listed-stock world,” he said.5 Both Madoff and Levine were chomping at the bit to access more NYSE order flow electronically.

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The witness list read like a who’s who of Wall Street and included exchange executives, brokerage executives, specialists, and academics. Without Grasso to organize a coordinated defense, the NYSE auction market was dead. Tower Research, an automated trading firm, complained that Trade Through created “an unfair advantage for slower market centers.”10 Bernie Madoff stated at the hearing that the SEC should “require all ‘quoting’ market centers to employ an automated order execution facility for inter-market orders.”11 Professor Daniel Weaver of Rutgers, an associate of David Whitcomb, who was one of the original high frequency traders, demanded that “price priority should be established in all markets.”12 In December 2004, the SEC relented to the pressure from the HFT community and submitted a new Reg NMS proposal that significantly altered the Trade Through proposal, which was renamed the Order Protection Rule.

All About Asset Allocation, Second Edition
by Richard Ferri
Published 11 Jul 2010

When young people make investing mistakes, they are not too damaging because these people typically have little in the pot and they have years of work and savings ahead. However, when an older person makes the same mistake, it can be devastating. The papers are full of sad stories about retirees’ life savings being wiped out because they put all their eggs in one basket and lost, or perhaps they were taken by the likes of a Bernie Madoff. Enron Corporation was a highly publicized corporate bankruptcy that resulted from accounting fraud that ruined the financial lives of many people nearing retirement age. You could not pick up a newspaper or popular magazine without seeing an article about a former Enron employee who lost nearly all his or her savings as a result of the company’s collapse.

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I do not want to be too critical of the brokers and advisors in the investment industry because there are many outstanding people out there. The problem you have is separating the good from the bad. There is no easy shortcut to doing this. Even those with the best credentials have fallen. And it takes only one bad decision by an investment advisor to wipe out your entire life’s savings. Bernie Madoff’s former clients know that too well. Planning for Investment Success 9 THE ASSETS IN ASSET ALLOCATION At its core, asset allocation is about dividing your wealth into different places to reduce the risk of a large loss. One hundred years ago, that may have meant your burying some cash in Mason jars around the barn in addition to hiding money in your mattress and the cookie jar.

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Unfortunately, there is also a large market for financial fraud. Many unethical and unscrupulous investment experts will say that they have found a risk-free road to wealth. They are lying. High x INTRODUCTION returns do not come without risk. Many experts who said that they had the secret to success in the markets went to jail in 2008 and 2009. Bernard Madoff was the most famous person, followed by many other less famous crooks. There is no free lunch on Wall Street. There is risk. This risk can be controlled to some extent through good investment policy and prudent execution of that policy. Disciplined investors who follow their well-defined investment policy will come out far ahead over those who drift aimlessly from strategy to strategy, hoping for a lucky break.

Economists and the Powerful
by Norbert Haring , Norbert H. Ring and Niall Douglas
Published 30 Sep 2012

Therefore if enforcement choices are sensitive to political pressure, firms with strong political connections should be less deterred by regulatory enforcement and exhibit lower accounting quality. Many of the firms involved in accounting scandals were known for their strong political connections. Enron, Global Crossing, Halliburton, Harken, Arthur Andersen. Fannie Mae and Freddie Mac had a lot in common with Bernie Madoff in this respect. Indeed, the study finds that the less accurate companies’ accounts are, the more these companies spend on contributions and lobbying. Taking into account that the financial industry has been extremely active in terms of lobbying and contributions in the years preceding the subprime crisis, the otherwise enigmatic lack of oversight exercised by the responsible authorities is less puzzling.

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In France, the respective number is 8 percent, in the US 5 percent, in Germany and Japan only 1 percent. If an officer or large shareholder of a corporation is entering politics, its share price and thus the value of the corporation increases significantly (Faccio 2006). In light of the scandal around the US$50 billion investment fraud by Bernard Madoff, which the Securities and Exchange Commission (SEC) had not detected despite the numerous tips it had received, another study by Correia (2009) is particularly interesting. It reveals that more lenient treatment by regulatory agencies is an important channel through which political connections raise company value.

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SEC management had delayed Mack’s testimony for over a year, until days after the statute of limitations expired, and had fired the whistleblower. No serious and credible investigation of his claims was ever conducted, according to the Senate. It is quite clear that the failure of the SEC to detect the huge Ponzi scheme of Bernard Madoff, a major contributor 218 ECONOMISTS AND THE POWERFUL to federal candidates, parties and committees, was not an isolated case but part of a pattern (Correia 2009). Conclusion: Strengthen and Protect the Political System from Itself One school of thought concludes from this that it is best to have as small a government as possible and give it as little power as possible.

Trading and Exchanges: Market Microstructure for Practitioners
by Larry Harris
Published 2 Jan 2003

Several generous sponsors provided financial support for this project. I received “angel financing” from the New York Stock Exchange (Dick Grasso, Billy Johnston, Jim Cochrane, and George Sofianos), the Jefferies Group (Frank Baxter), Mellon Capital Management Corporation (Bill Fouse and Tom Loeb), Bernard L. Madoff Investment Securities (Bernie and Peter Madoff), First Canada Securities International (Jim Medlock), Cantor Fitzgerald (Stuart Fraser and Phil Ginsberg), and First Quadrant (Rob Arnott). Their early support allowed me to take time off from my teaching to start this project. I am also grateful to Oxford University Press, which provided a developmental grant with which I was able to pay research assistants.

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I particularly appreciate the generosity and encouragement that the following individuals have extended to me: Stanley Abel Howard Baker Frank Baxter Brandon Becker Gil Beebower Jeff Benton Dale Berman Charles Black David Booth Harold Bradley Kurt Bradshaw Pearce Bunting Richard Cangelosi Jim Cochrane David Colker Cromwell Coulson Larry Cuneo David Cushing Harry Davidow Pina DeSantis Mike Edleson Jim Farrell Tom Fay Gene Finn Ed Fleischman Russ Fogler Gifford Fong Stuart Fraser Dean Furbush Jim Gallagher Gary Gastineau Brian Geary Steven Giacoma Jim Gilmore Phil Ginsberg Gary Ginter Keith Goggin Wendy Gramm Dick Grasso Bob Greber Leo Guzman Spence Hilton Dave Hirschfeld Blair Hull Billy Johnson Rick Ketchum Rick Kilcollin Ray Killian Howard Kramer Ken Kramer Arthur Leavitt Charlie Lebens Marty Leibowitz Dave Leinweber Rich Lindsey Evelyn Liszka Bob Litterman Bill Lupien Bernie Madoff Peter Madoff Steven Malin David Malmquist Tim McCormick Dick McDonald Seth Merrin Dick Michaud Mark Minister Nate Most Annette Nazareth Gene Noser Bill Pratt Eddie Rabin Murali Ramaswami Bill Ryan Henry Sasser Evan Schulman Andy Schwarz Christina Sciotto Jim Scott Jim Shapiro David Shaw Katy Sherrerd Fred Siesel Deborah Soesbee George Sofianos Eric Sorensen Olof Stenhammar Rob Telsar Artie Tolendini Jack Treynor Wayne Wagner Jeffery Wecker Genie Williams Steve Wallman Steve Wunsch Steve Youngren Dorit Zeevi Four people particularly influenced the development of this book.

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Its share of total volume is smaller because Madoff’s average trade size is smaller than the average trade size at the NYSE. Madoff obtains most of its order flow through order-preferencing arrangements that it negotiates with retail brokers. Since the firm is not a member of the New York Stock Exchange, it can choose with whom it is willing to trade. Bernie Madoff and his brother Peter have chosen to provide liquidity primarily to retail clients, and primarily in the common stocks of large firms. The Madoffs, along with most investment professionals, believe that retail traders generally are not well-informed traders when they trade large firm stocks. Madoff’s dealers are less exposed to adverse selection than are dealers who trade on the floor of the NYSE, who cannot choose their clients.

The (Honest) Truth About Dishonesty: How We Lie to Everyone, Especially Ourselves
by Dan Ariely
Published 27 Jun 2012

“Is anybody here rich?” he asked. “I know I am, but you college students aren’t. No, you are all poor. But that’s going to change through the power of CHEATING! Let’s do it!” He then recited the names of some infamous cheaters, from Genghis Khan through the present, including a dozen CEOs, Alex Rodriguez, Bernie Madoff, Martha Stewart, and more. “You all want to be like them,” he exhorted. “You want to have power and money! And all that can be yours through cheating. Pay attention, and I will give you the secret!” With that inspiring introduction, it was now time for a group exercise. He asked the students to close their eyes and take three deep, cleansing breaths.

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This first study showed that creativity and dishonesty are correlated, but that doesn’t necessarily mean that creativity is directly linked to dishonesty. For example, what if a third factor such as intelligence was the factor linked to both creativity and dishonesty? The link among intelligence, creativity, and dishonesty seems especially plausible when one considers how clever people such as the Ponzi schemer Bernie Madoff or the famous check forger Frank Abagnale (the author of Catch Me If You Can) must have been to fool so many people. And so our next step was to carry out an experiment in which we checked to see whether creativity or intelligence was a better predictor of dishonesty. Again, picture yourself as one of our participants.

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As I’ve mentioned, the collapse of Enron spiked my interest in the phenomenon of corporate cheating—and my interest continued to grow following the wave of scandals at Kmart, WorldCom, Tyco, Halliburton, Bristol-Myers Squibb, Freddie Mac, Fannie Mae, the financial crisis of 2008, and, of course, Bernard L. Madoff Investment Securities. From the sidelines, it seemed that the frequency of financial scandals was increasing. Was this due to improvements in the detection of dishonest and illegal behavior? Was it due to a deteriorating moral compass and an actual increase in dishonesty? Or was there also an infectious element to dishonesty that was getting a stronger hold on the corporate world?

Boomerang: Travels in the New Third World
by Michael Lewis
Published 2 Oct 2011

The German losses are still being toted up, but at last count they stand at $21 billion in the Icelandic banks, $100 billion in Irish banks, $60 billion in various U.S. subprime-backed bonds, and some yet to be determined amount in Greek bonds. The only financial disaster in the last decade German bankers appear to have missed was investing with Bernie Madoff (perhaps the only advantage to the German financial system of having no Jews). In their own country, however, these seemingly crazed bankers behaved with restraint. The German people did not allow them to behave otherwise. It was another case of clean on the outside, dirty on the inside. The German banks that wanted to get a little dirty needed to go abroad to do it.

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At that point, if not before, the city would be nothing more than a vehicle to pay the retirement costs of its former workers. The only clear solution was if former city workers up and died, soon. But former city workers were, blessedly, living longer than ever. This wasn’t a hypothetical scary situation, said Reed. “It’s a mathematical inevitability.” In spirit it reminded me of Bernard Madoff’s investment business. Anyone who looked at Madoff’s returns and understood them could see he was running a Ponzi scheme; only one person who had understood them bothered to blow the whistle, and no one listened to him. (See No One Would Listen: A True Financial Thriller, by Harry Markopolos.) In his negotiations with the unions, the mayor has gotten nowhere.

The Billionaire's Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund
by Anita Raghavan
Published 4 Jun 2013

Canellos—director, New York office David A. Markowitz—former assistant regional director, New York office Sanjay Wadhwa—assistant regional director, New York office Jason E. Friedman—senior staff attorney John P. Henderson—senior staff attorney The FBI B. J. Kang—special agent who was one of the arresting agents of Bernie Madoff and also worked the Galleon case The US Attorney’s Office, New York Preetinder S. Bharara—US attorney, Southern District of New York Reed Brodsky—assistant US attorney Andrew Z. Michaelson—special assistant US attorney on loan from the SEC Jonathan R. Streeter—assistant US attorney The Galleon Circle The Galleon Group Michael Cardillo—portfolio manager Kris Chellam—former Xilinx executive turned Galleon portfolio manager Caryn Eisenberg—Rajaratnam’s executive assistant Tom Fernandez—Rajaratnam’s Wharton classmate and head of investor relations Michael Fisherman—analyst Ian Horowitz—trader David Lau—Rajaratnam’s Wharton classmate and Asia chief George Lau—chief compliance officer Ananth Muniyappa—trader Gary Rosenbach—portfolio manager Richard Schutte—chief operating officer Leon Shaulov—portfolio manager Adam Smith—Harvard Business School graduate, former Morgan Stanley investment banker, and portfolio manager at Galleon Other Traders William J.

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In 2006, when Christopher Cox, a California congressman, led the SEC, enforcement lawyers often got pushback when they sought formal powers to probe. Cox believed that financial players like investment banks and hedge funds could be trusted to regulate themselves. During his time, the agency missed some stunningly huge fraudsters, such as Bernie Madoff, who ran a Ponzi scheme for nearly two decades. It also overlooked troubling practices such as collateralized debt obligations that led to the financial system’s near meltdown in 2008. For a month, the SEC’s exam staff camped in Sedna’s offices. They turned up instant messages and emails that seemed to point to something suspicious.

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The overwhelming one is God is putting me through a test, and my duty is to do the very best I can and be prepared to accept whatever outcomes. I know I have done nothing wrong and expect to be fully vindicated.” In the same federal courthouse that has seen its share of high-profile cases against boldface names—Martha Stewart and the two Bernies, Madoff and Ebbers—the trial of the United States of America v. Rajat K. Gupta stood out. It was the most uncomfortable trial in recent memory. It pitted one corner of the establishment, represented by Gupta, the former three-time managing director of McKinsey, against the other corner of the establishment, Goldman Sachs & Co.

The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime
by Mj Demarco
Published 8 Nov 2010

Take a look at this chart, which highlights the effect of compound interest and that $10,000 investment. A Slowlane guru preaches that a $10,000 investment grown at 15% will be worth over $2.5 million dollars in 40 years!!! Hooray!!! What don't they tell you? They don't tell you that a 15% return year-after-year is impossible unless you invest with Bernie Madoff or Charles Ponzi. They don't tell you that in 40 years you'll be dead, and if you're not, you'll be close. They don't tell you that in 40 years, your $2.5 million will likely be worth $250,000 in today's dollars and that a gallon of milk will cost $12.00. They don't tell you that this method of wealth acceleration is not what they use.

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If you can't critique good advice from bad you don't have control. For those who hire financial planners, literacy is insurance. Financial advisers do not solve financial illiteracy just as more money doesn't solve poor money management. Financial illiteracy exposes you to risk, and in the worst case scenario, fraud. Bernard Madoff's investment fund defrauded thousands, and billions were lost, but what's more shocking is that the whistle was blown years before. You see, when you are financially illiterate, you are deaf, and when you are deaf, you can't hear the whistle. Chapter Summary: Fastlane Distinctions The Fastlane is the means to your end because dreams cost money.

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Verify First, Trust Later Former president Ronald Reagan once said, “Trust, but verify.” When I hired the liar, I trusted but didn't verify. It took several robberies, video cameras, and public record searches to uncover the truth. I verified too late and it cost me. The most egregious cases of trust are our financial system. Bernard Madoff perpetrated the largest Ponzi scheme ever, and billions of dollars were lost. How does one man siphon billions from millions? Unverified trust. Thousands trusted Madoff and thousands failed to verify. Those who did verify didn't invest and some even blew the whistle. We are a trusting people and we want to believe the best.

The Money Machine: How the City Works
by Philip Coggan
Published 1 Jul 2009

The deposit account which gives the customer the best interest rate may impose penalties for early withdrawals of money. Those investments which offer the best return – shares, options, etc. – also involve the possibility of loss. The safest investments offer a steady but unspectacular return. Investments can also appear safe when they are not. Those who invested money with the fraudster Bernie Madoff thought, erroneously, that they were opting for a conservatively run portfolio. They learnt that the choice of investment manager can be just as important as the choice of investment. So before investors sign away their hard-earned savings, they should consider carefully what they expect from their investments.

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In the UK, the Financial Services Authority looks after the fund managers, rather than the hedge funds themselves; in other countries, there is very little oversight at all. There have been several examples of fraud, usually when the managers lie about the nature or the value of their investments. The Bernard Madoff case is a slightly unusual one. Technically speaking, Madoff did not run a hedge fund, but hedge funds did give him money to invest. The failure to spot the fraud reflects very badly on those funds that did do so: the authorities try to restrict the damage by limiting the type of people who can invest in them; only the very rich and institutions like pension funds and university endowments can qualify.

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis
by Tim Lee , Jamie Lee and Kevin Coldiron
Published 13 Dec 2019

If a Ponzi scheme is to recover from a run, then it will become even larger; the restoration of confidence following the successful test of confidence suggests this, as also does the requirement for the scheme to continue to grow larger because any outflows need to be financed with new inflows. For example, imagine a hypothetical—admittedly completely unrealistic—alternative scenario for the notorious, and huge, Ponzi scheme run by Bernard (“Bernie”) Madoff. Madoff’s giant Ponzi scheme collapsed in December 2008, during the global carry crash associated with the collapse of Lehman Brothers. At the time of the Madoff scheme collapse, Madoff’s clients had an illusory US$65 billion standing to their credit in the scheme. Madoff’s scheme was a classic Ponzi scheme, operated simply by marking up client accounts to reflect fabricated good and consistent returns, while financing any client withdrawals from the scheme with new client inflows.

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis
by Kevin Mellyn
Published 30 Sep 2009

If the average person needs $40,000 a year to live in retirement and will on average live twenty years, that means that they need $800,000 over that period. Obviously, you and I can’t save that kind of cash. There are only two ways to solve the problem. One is pay-as-you-go ‘‘unfunded’’ government pensions like Social Security. These are classic Ponzi schemes, sort of Bernie Madoff on a much vaster scale. Today’s payroll taxes are not invested; individuals have no accounts and don’t have any legal right to a pension. Instead, people working today are taxed to pay benefits to people who are retired or on disability. As long as people mostly died before becoming eligible or didn’t live long in retirement, this worked fine.

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The banks misunderstood their real risks and had too much faith in financial rocket science, but even if we resent the enormous salaries and perks they gave themselves, there is scant evidence of illegality or even conscious recklessness related to the collapse. The poster child of the meltdown has become Bernie Madoff, just as Charles Ponzi is still remembered from the Roaring Twenties. Madoff ’s and other Ponzi schemes by money managers were discovered when the markets plunged, but his scheme was a classic investment scam that had run for decades under the noses of the regulators and had nothing to do with the bankers and instruments at the center of the meltdown.

A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History
by Diana B. Henriques
Published 18 Sep 2017

See Chris Welles, The Last Days of the Club (New York: Dutton, 1975), pp. 86–89. lawyers with the Justice Department: Ibid. said populist lawmakers suspicious of Wall Street: One of the hottest new trading firms in this new market was Bernard L. Madoff Investment Securities, whose well-respected owner would be unmasked in 2008 as the architect of the largest Ponzi scheme in history. See Diana B. Henriques, The Wizard of Lies: Bernie Madoff and the Death of Trust (New York: Times Books/Henry Holt, 2011), pp. 49–50. The Big Board found few friends in Washington: In 1972, NYSE president James Needham initially argued that Wall Street’s finances were too precarious to permit a change in commission rates, then offered to end fixed commissions if regulators shut down the trading in Big Board stocks away from the exchange.

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witching hours (third Friday phenomenon) triple Wunsch, R. Steven Yeutter, Clayton ALSO BY DIANA B. HENRIQUES The Wizard of Lies: Bernie Madoff and the Death of Trust The White Sharks of Wall Street: Thomas Mellon Evans and the Original Corporate Raiders Fidelity’s World: The Secret Life and Public Power of the Mutual Fund Giant The Machinery of Greed: Public Authority Abuse and What to Do About It ABOUT THE AUTHOR DIANA B. HENRIQUES is the author of the New York Times bestseller The Wizard of Lies: Bernie Madoff and the Death of Trust, which has been made into an HBO film starring Robert De Niro and Michelle Pfeiffer.

Lying for Money: How Fraud Makes the World Go Round
by Daniel Davies
Published 14 Jul 2018

Because of this, at every date when repayment is expected, the fraudster has to make the choice whether to shut the fraud down and try to make an escape, or to increase its size; more and more money has to be defrauded in order to keep the scheme going as time progresses. Consider a simple investment fraud, like Ponzi’s or the one run by Bernard Madoff, simplifying away all the detail and concentrating on the mathematics of the investment returns. You take in a million dollars from your investors, promising them a return of 25 per cent on their money. Instead, you steal it. A year goes by, and you aim to keep the fraud going by raising new money from another set of mugs.

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In an investment scam, history has shown us that you are better off doing what you can to manage the outflows directly. If people hardly ever take the money out of your scam, you’re home free. For a while, anyway. Which brings us to: Hedge fund fraud The name synonymous with hedge fund fraud in the twenty-first century is Bernard Madoff. Bernie played a very long game, typically promising returns of only 8–12 per cent to his investors rather than the spectacular numbers usually associated with a Ponzi scheme. But it was this careful management which motivated his investors to keep their money with him, rather than withdrawing it; his fund never had the volatile ups and downs which drive redemptions.

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This fear arose in the aftermath of the collapse of Bayou Capital in 2005. Bayou anticipated almost all the problems of Madoff – and provides a clear insight into the central issue of redemption management and the unique characteristics of a hedge fund Ponzi scheme. It also reads as if a Hollywood studio had commissioned a script for ‘The Bernard Madoff Story’, then handed it to Quentin Tarantino with instructions to punch it up a bit. Bayou Capital Sam Israel had always been a devout believer in the possibility of easy money. As a stock trader specialising in short-term and opportunistic speculative ideas, he had been apprenticed to some of the most legendary names on Wall Street and had learned exactly the wrong lessons from all of them.

The Dollar Meltdown: Surviving the Coming Currency Crisis With Gold, Oil, and Other Unconventional Investments
by Charles Goyette
Published 29 Oct 2009

In December 2008, the Treasury auctioned off $30 billion of four-week Treasury bills for a yield of zero percent. It was as if the buyers were saying, “Wrap this money in foil and put it in the freezer, bury it in the lawn behind the White House, but for goodness’ sake don’t put it in the stock market, don’t give it to Bernie Madoff, and don’t buy securitized mortgages. Just give it back intact in four weeks.” In fact the panic was so great that the very appeal of U.S. Treasury debt was the printing press. Investors knew that they could get dollars back, even if the ink hadn’t dried. The scramble for the printing press guarantee was so great that in the secondary market some were willing to park their money in bonds that yielded less than zero, that is, negative rates, returning slightly less than their cost on maturity.

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Dollarcollapse.com This is a very useful site, providing a daily compendium of links to commentary and breaking news about the economy, the dollar, precious metals, the real estate market, and more. www.dollarcollapse.com. Clusterstock.com Business and financial news and commentary, gossipy at times, but willing to take a close-up look at the dark side of Wall Street. No other source provided as much information about the Bernie Madoff scandal as www.clusterstock.com. Credit Writedowns Featuring news and opinion on finance, economics, and markets, the site seeks to provide early warning signals for what to expect in the global economy. Especially good at spotting European economic news that is missed elsewhere. The site’s “Credit Crisis Timeline” is a comprehensive collection of accounts of the unfolding credit crisis, while it also provides an overview called “The Dummy’s Guide to the U.S.

The Code of Capital: How the Law Creates Wealth and Inequality
by Katharina Pistor
Published 27 May 2019

Johann Plenge, Gründung und Geschichte des Crédit Mobilier (Tübingen: Verlag der H. Laupp’schen Buchhandlung, 1903); the book includes the articles of incorporation of the bank. 62. For a short definition and the description of the original Ponzi scheme, see https://www.investopedia.com/terms/p/ponzischeme.asp (last accessed August 8, 2018). 63. Robert Lenzner, “Bernie Madoff’s $50 Billion Ponzi Scheme,” December 12, 2008, available online at www.forbes.com. 64. Karl Marx, “Crédit Mobilier,” New York Daily Tribune, part III, July 11, 1856. Available online at http://marxengels.public-archive.net/en/ME0978en.html (last accessed August 28, 2018). 65. Ibid. 66. Greece and Portugal could be listed here as well.

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This resembles a Ponzi scheme, named after an Italo-American of the early twentieth century who attracted investors by promising them extraordinary returns, when in fact he simply used the money that new investors paid in to pay out dividends to the previous ones.62 This works as long as enough investors show up every day; indeed, it can work for decades even under the eyes of powerful financial market regulators, such as the SEC, as Bernard Madoff’s secretive Ponzi scheme, which blew up only after the 2008 crisis, has demonstrated.63 Still, at some point some investments must produce some real returns for the company to survive—a tall order in the case of Crédit Mobilier, given that most investments were made in infrastructure projects that, by nature, are long-term investments.

Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud
by Ben McKenzie and Jacob Silverman
Published 17 Jul 2023

The cycle then repeats itself over and over again, drawing in ever more investors, until ultimately it falls apart. Either the supply of new investors dries up, or worse, the current ones wise up to the fraud and demand their money back, only to discover it isn’t there. Ponzi schemes are traditionally thought of as having a central figure coordinating the fraud. Think of Bernie Madoff, whose Ponzi scheme collapsed during the subprime crisis as investors saw the broader market cratering. By conventional measurements, Madoff’s fraud holds the record for the largest Ponzi scheme in history, with some $64 billion lost—at least on paper. But as Shiller describes in Irrational Exuberance (2015), a Ponzi scheme does not need to have a central administrator to fit the broader definition of one.

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The fewer the people who know what you are doing, the less the chance that someone accidentally slips up and reveals the con, or worse yet has a crisis of conscience and starts talking to law enforcement. Thieves also tend to turn on one another if it’s a matter of self-interest. All fraudsters need people they can trust. Bernie Madoff claimed that he hid the inner workings of his Ponzi from even his children, to protect them. Instead, Madoff had his right-hand man, Frank DiPascali, do his dirty work. Rule number one for fraud: Keep the circle of trust small. The third red flag was the personal histories of executives running the company.

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Again, from Dan Davies’s book Lying for Money, “a fraud can be called a Ponzi scheme with greater validity, the greater the extent to which the mechanics of the crime revolve around managing the renewal of its financing and convincing the investor and lender communities to keep their money in the scheme rather than demanding repayment in cash.” Bernie Madoff was a genius when it came to human psychology. Technically, you could withdraw money from his fund at any time with ninety days’ notice. But you were only allowed to invest in one of Madoff’s funds by invitation (or so went the sales pitch), making investors feel it was a privilege to be allowed access to the incredible returns he produced.

Fred Schwed's Where Are the Customers' Yachts?: A Modern-Day Interpretation of an Investment Classic
by Leo Gough
Published 22 Aug 2010

On the broadest level – of intellectual dishonesty, say – one might argue that almost the entire financial services industry, with very few exceptions, is dishonest because it is based on a number of false or misleading premises. Here are some examples: DEFINING IDEA… Your Honor, I cannot offer you an excuse for my behavior. ~ BERNIE MADOFF The fund management business, by and large, not only promotes the idea that active fund managers have a superior ability in stock-picking (which, as we have seen, is not borne out by the evidence) but also connives at producing misleading information about past performance by constantly merging and closing funds, and opening new ones.

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What about the real crooks? They may be in a minority, as Schwed rightly says. Often they seem to start out with good intentions but slowly get drawn into fiddling that mushrooms over the years into a gigantic fraud. Here are just a few of the prominent characters from the Rogues’ Gallery during the last few years: Bernie Madoff, arrested in December 2008 for running a fraudulent investment scheme that collapsed owing more than 60 billion dollars; Bernard Ebbers, former CEO of Worldcom, a large telecommunications company, jailed in 2005 for false financial reporting that resulted in a loss of some 11 billion dollars to investors; Jack Grubman, a stock analyst who was fined and banned for life from the securities industry in 2004 for producing over-optimistic reports and ratings on some of the companies he followed; David Walsh, founder of Bre-X Mining, which went bankrupt in 1997 after it was discovered that a gold mine it owned in Borneo had been fraudulently ‘salted’ with gold; Michael Milken, father of the junk bond industry, convicted of insider trading in 1989.

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It is not an easy job, because people are always complaining that the regulators are either too lax or too zealous. The SEC is usually accused of being overzealous, and of hounding perfectly innocent people, while the FSA (and its predecessors) have often been seen as toothless and afraid to act. But then again, the SEC has been roundly criticised for investigating Bernie Madoff (see chapter 32) several times without finding much wrong (after a number of complaints) before the firm finally collapsed, revealing the biggest fraud in history. And lately the FSA has been getting very tough with some of the smaller players, for example by fining Thinc Group, a financial adviser, £900,000 in 2008 for misselling subprime mortgages.

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown
by Simon Johnson and James Kwak
Published 29 Mar 2010

In the wake of the collapse of Bear Stearns, the SEC inspector general found that the agency not only took no meaningful action under the Consolidated Supervised Entity program, but also did a poor job implementing its Broker-Dealer Risk Assessment program (created in 1992 in response to the failure of Drexel Burnham Lambert). Under that program, the SEC received quarterly and annual reports from 146 broker-dealers—but generally only reviewed six of them.95 Most famously, the SEC managed to overlook Bernie Madoff’s $65 billion Ponzi scheme, despite tips and investigations going back to 1992.96 This failure to regulate the securities markets effectively was a consequence of the deregulatory ideology introduced by Ronald Reagan as well as the political influence of Wall Street. James Coffman, a former assistant director of the SEC’s enforcement division, wrote, Elected deregulators appointed their own kind to head regulatory agencies and they, in turn, removed career regulators from management positions and replaced them with appointees who had worked in or represented the regulated industries.

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Securities and Exchange Commission Office of Inspector General, SEC’s Oversight of Bear Stearns and Related Entities: Broker-Dealer Risk Assessment Program, September 25, 2008, available at http://www.sec-oig.gov/Reports/AuditsInspections/2008/446-b.pdf. 96. U.S. Securities and Exchange Commission, Office of Investigations, Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme—Public Version, August 31, 2009, available at http://graphics8.nytimes.com/packages/pdf/business/20090904secmadoff .pdf. The total amount missing from client accounts was approximately $65 billion, including fake investment returns; the actual amount invested by and not returned to clients was closer to $20 billion. 97.

I Love Capitalism!: An American Story
by Ken Langone
Published 14 May 2018

We at Invemed got $200 million for our ChoicePoint shares. It was a nice time to have a lot of cash. Now the story gets more interesting. A few weeks later, a close friend of mine, a big deal maker who will remain anonymous, called me up and said, “Bernie Madoff knows all about you, and he would love to talk to you.” I’d never met Bernie Madoff. All I knew about him was that he was a weird, reclusive guy with the reputation of being the biggest option player on Wall Street. He had some kind of fund that nobody knew anything about; it was very successful, but nobody understood how it worked.

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I’m not saying Steve and I are smarter than anyone else: we just happened not to like the flavor of what Bernie Madoff was selling. Steve later told me the complete lack of volatility in Madoff’s fund put him off: Steve is a firm believer that volatility is part of the equation in high-end investment, that wealthy investors ought to tolerate more uncertainty in return for higher numbers. Two weeks after the meeting, on December 11, 2008, my office phone rang, and my assistant Pam told me Steve Holzman was on the line. I picked up. “Holy shit, did you hear the news?” Steve said. He’d just seen on his Bloomberg terminal that Bernie Madoff had been arrested for securities fraud.

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Now, I don’t know beans about options: puts and calls and strips and straddles and all this other crap. All I do is pick stocks, and I never buy anything I don’t understand. But I have an investment partner, Steve Holzman, who loves to screw around with options, and he’s done very well with it. So I phoned him and said, “Steve, do me a favor. Bernie Madoff wants to meet with me. I don’t know what the hell he does; would you come along so there’s somebody knowledgeable in the room?” Steve sounded less than interested. Madoff’s fund wasn’t his cup of tea, he said, and it probably wasn’t mine either. “Please, Steve, do me a favor,” I said. “I’m doing this as a courtesy for a guy who’s a very dear friend of mine.”

The Confidence Game: The Psychology of the Con and Why We Fall for It Every Time
by Maria Konnikova
Published 28 Jan 2016

David Maurer describes one victim who, several years after falling for a well-known wire con—the grifter pretends to have a way of getting race results seconds before they are announced, allowing the mark to place a sure-win bet—spotted his deceivers on the street. He ran toward them. Their hearts sank. Surely, he was going to turn them in. Not at all. He was wondering if he could once more play that game he’d lost at way back when. He was certain that, this time, his luck had turned. The men were only too happy to comply. Even someone like Bernie Madoff went undetected for at least twenty years. He was seventy when his scheme crumbled. What if he’d died before it blew up? One can imagine a future where his victims would be none the wiser—as long as new investments kept coming in. In June 2007, Slate writer Justin Peters decided to be creative about his airfare to Italy.

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But among the con men of the early twentieth century, there was another saying. “There’s a sucker born every minute, and one to trim ’em and one to knock ’em.” There’s always something to fall for, and always someone to do the falling. Who is the victim and who, the con man? What kinds of people are the Bernie Madoffs and Captain Hansens of the world? And do a Norfleet and a Peters share some underlying traits that bind them together? Is there a quintessential grifter—and a quintessential mark? * * * Eighteen State Street. A small, two-window-wide cream house. Teal-and-white trimmed shutters. Grass sprouting in between slabs of surrounding concrete.

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Machiavellianism, it seems then, may, like psychopathy, predispose people toward con-like behaviors and make them better able to deliver on them. Delroy Paulhus, a psychologist at the University of British Columbia who specializes in the dark triad traits, goes as far as to suggest that “Machiavellian” is a better descriptor of the con artist than “psychopath.” “It seems clear that malevolent stockbrokers such as Bernie Madoff do not qualify as psychopaths,” he writes. “They are corporate Machiavellians who use deliberate, strategic procedures for exploiting others.” So wherein lies the truth: is the con artist psychopath, narcissist, Machiavellian? A little bit of all? Demara seems to be proof of the “all of the above” choice.

Crisis Economics: A Crash Course in the Future of Finance
by Nouriel Roubini and Stephen Mihm
Published 10 May 2010

Here’s the upshot: absent any direct or indirect oversight from shareholders, traders and bankers have every incentive to do crazy things that maximize their short-term profits and bonuses (like rustling up a bunch of toxic CDOs and leaving them hanging on the bank’s balance sheet). By the time the bank blows up, the traders and bankers have already spent the money on fast cars and that summer place in the Hamptons. And if recent history is any guide, it’s easier to get money back from Bernie Madoff than it is to claw back a trader’s bonus. In an ideal world, shareholders and their representatives would be aware of this problem and create a system of compensation that’s “incentive compatible,” one that stops traders from taking on too much leverage and risk. In theory, this system would align their interests with those of the existing shareholders and make everyone work for the long-term interest of the bank.

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As the amount of unserviceable debt balloons, the system becomes ever more ripe for financial disaster. In Minsky’s view, the trigger is almost irrelevant: it could be the failure of a firm (much as the failure of hedge funds and major banks marked the end of the bubble in 2007 and 2008) or the revelation of a staggering fraud (like the Bernard Madoff scheme, exposed in 2008). When pyramids of debt start to crumble and credit dries up, Minsky realized, otherwise healthy financial institutions, corporations, and consumers may find themselves short of cash, unable to pay their debts without selling off assets at bargain-basement prices. As more and more people rush to sell their assets, the prices of those assets spiral downward, creating a self-perpetuating cycle of fire sales, falling prices, and more fire sales.

Risk: A User's Guide
by Stanley McChrystal and Anna Butrico
Published 4 Oct 2021

hire a team of lawyers: Farnsworth, “Read the Full Investigation into Uber’s Troubled Culture and Management.” The Securities and Exchange Commission (SEC) assumed that Madoff: Stephanie Yang, “5 Years Ago Bernie Madoff Was Sentenced to 150 Years in Prison—Here’s How His Scheme Worked,” Business Insider, July 1, 2014, https://businessinsider.com/how-bernie-madoffs-ponzi-scheme-worked-2014-7. signs of money laundering: “Bernie Madoff,” Encyclopedia Britannica Online, accessed March 24, 2022, https://britannica.com/biography/Bernie-Madoff. ability to think in patterns: Philip E. Tetlock and Dan Gardner, Superforecasting: The Art and Science of Prediction (New York: Broadway Books, 2015), 37.

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The international coupons, though used initially, fell to the wayside, as Ponzi used incoming investment money to pay the phony returns from past investors, pocketing enormous amounts of cash. The operation lasted only nine months. But in that time, from an investment of only $30 in stamps, Ponzi had defrauded $15 million from his investors. Thus, the famed “Ponzi scheme” was born—a version of which the infamous fraudster Bernie Madoff would use more than fifty years later. Kalanick steered Uber to fourteen company-wide cultural values that arguably warranted poor behavior, including “Meritocracy and Toe-Stepping,” “Always Be Hustlin’,” “Let Builders Build,” and “Principled Confrontation.” Workplace harassment reportedly ran rampant, employees were seemingly encouraged to step on one another to achieve company success, and high-performing employees were often protected from the consequences of their inappropriate behavior.

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Only then did Uber hire a team of lawyers to investigate and recommend changes that included hiring a chief operating officer, changing the company’s stated values, and, ironically, creating a stronger, more independent board of directors. Leaders who are perceived as being successful aren’t always given a crown, but often do get a hall pass. Bernie Madoff’s fictional investing genius deceived some relatively sophisticated investors for years, and questionable behavior by corporate leaders like Patrick Byrne and Travis Kalanick was tolerated in apparent deference to their business successes. The Securities and Exchange Commission (SEC) assumed that Madoff—an experienced financier who played a part in launching the Nasdaq stock market and himself advised the SEC on trading securities—was acting responsibly.

Duped: Double Lives, False Identities, and the Con Man I Almost Married
by Abby Ellin
Published 15 Jan 2019

By way of explanation, Lyman says this: “A man can be faithful to himself or to other people, but not to both, at least not happily.”10 The Broadway darling Dear Evan Hansen focused on a morose teenager who pretends to be a close friend of a classmate who committed suicide, fooling his family. The audience was supposed to sympathize with the con man. Of course, there have also been real-world figures leading closeted lives, historical counterparts to our Bernie Madoffs: Thomas Jefferson (who fathered six children with his slave Sally Hemings). Charles Lindbergh (who had three separate families on two continents). J. Edgar Hoover (a racist, cross-dressing, anti-gay gay man). Lance Armstrong. Harvey Weinstein. Pop culture is littered with deceit: Hitchcock’s films are all about deception, from Suspicion to Vertigo to Rear Window.

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We’re all familiar with those stories: a man, maybe powerful, maybe not, lies to his wife, children, employers, colleagues, country about his position, his accomplishments, his romantic entanglements. The deception begins small and then spirals and spirals until it’s got everyone running in circles, including the duper. It’s Bernie Madoff and Lance Armstrong and Arnold Schwarzenegger and thousands of others. I know this story especially well. And frankly, by now it feels overly familiar, even expected. Of course, in the huge range of stories about emotional fraud, those about people, particularly men, lying over the long term in order to have more sex/money/power/fame far outnumber other categories.

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She believes that when a trauma is caused by someone we know—someone with whom we have a relationship—and it feels targeted and personal, it’s much harder to recover from than if a trauma is accidental and impersonal.7 Research backs this up. A 2000 study found that PTSD is less toxic when it’s caused by a natural disaster, like an earthquake, a tornado, or a tsunami, than when it’s caused by humans.8 Still, the betrayal doesn’t have to be perpetrated by a loved one to cause real distress. Eight to ten months after Bernie Madoff’s Ponzi scheme came to light, social worker Audrey Freshman conducted an online survey of 172 Madoff victims using the list of 17 symptoms of PTSD as listed in the DSM-5. Almost 56 percent of the victims met criteria for a presumptive diagnosis of PTSD. Nearly 61 percent had high levels of anxiety, 58 percent had depression, and 34 percent struggled with other health issues.9 Many of the respondents were Jewish, like Madoff, and either knew him personally or had him recommended to them by their own financial advisers, all of which exacerbated their distress.

Willful: How We Choose What We Do
by Richard Robb
Published 12 Nov 2019

The “soft sell” allows prospective buyers to connect the dots. This applies in other arenas as well—in movies, and perhaps in real life, people rebel against the romantic interest who seems too perfect. (The extreme case of the soft sell is the anti-sell, in which customers are actively discouraged. Bernie Madoff was famously a master of this dark art.) Parents try to stake out the middle ground that allows children to choose freely which challenges to pursue, while steering them clear of mistakes. After graduating from college with a degree in archaeology and anthropology, my daughter, Alice, asked me which career was best.

What's Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live
by Rachel Botsman and Roo Rogers
Published 2 Jan 2010

Even those on the isolated peripheries of our society, such as someone in Siberia or on the equator, or someone with a unique hobby such as collecting miniature Polish pipe organs, can find a group to share and connect with based on common interests. Every investigative journalist knows that the key to breaking a news story is that money always leads to the top. Whether it’s Al Capone or Bernard Madoff, taxes or Ponzi schemes, money is linked to power and control. If we apply these principles to Web 2.0, we find a surprising new relationship between money and power. The Internet is inherently democratic and decentralized. One of the first celebrated examples of this autonomous force was in 1991 when a twenty-one-year-old Finnish student posted a simple request on Usenet (a global discussion forum) for help from his mother’s Helsinki apartment.

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Like Meetup, Linux, MyBO, Clickworkers, and Kickstarter, IfWeRanTheWorld it is part of a reestablishment of community relationships not just through local activities but through the vast global infrastructure of the Internet. In this sense, the very concepts of “neighbor” and “community” are being redefined and expanded as the “Me” generation is being replaced by the “We” generation.” Reconnection Beyond Consumerism On June 29, 2009, Bernard Madoff stood in front of Judge Denny Chin of the U.S. District Court in New York, pleaded guilty to an eleven-count criminal complaint, and was sentenced to 150 years in prison, the maximum sentence allowed. Madoff’s notorious crime was the creation of a $65 billion Ponzi scheme, the largest investor fraud ever committed by a single person.

Number Go Up: Inside Crypto's Wild Rise and Staggering Fall
by Zeke Faux
Published 11 Sep 2023

Morgan for the digital age—he was secretly embezzling billions of dollars of his customers’ money and blowing it on bad trades, celebrity endorsements, and an island real-estate shopping spree to rival any drug kingpin’s. I’d like to tell you that I was the person who exposed it all, the heroic investigator who saw through one of history’s greatest frauds. But I got tricked like everyone else. I was sitting next to the biggest con man since Bernie Madoff, with a clear view of his emails, internal chats, and trading records, and I had no idea what he was up to. “You can use me as a resource for information,” Bankman-Fried said, tapping his crew-sock-clad feet aggressively. “That’s one of the biggest things I want to convey.” “That makes sense,” I said to him, nodding amiably

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Completely useless and even a little annoying.” Another theme is Devasini’s disdain for nine-to-fivers and admiration of men of action, who aren’t afraid to take risks—like himself. It seemed a normal attitude for an entrepreneur. But I was taken aback when I came across a post that seemed to extend that respect to Bernie Madoff. In a 2008 post, a week after Madoff’s arrest for running a decades-long Ponzi scheme, Devasini wrote almost admiringly of the man who had just been caught orchestrating a scam so large it amounted to 2.5 percent of Italy’s national debt. The post was titled “So What.” I read it with disbelief.

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And, if he really had bought tons of Bitcoin like his associate had told me, he could have made billions of dollars that way too. As my estimate of Devasini’s potential Bitcoin fortune increased, it seemed increasingly bizarre to me that he was so eager to invest Tether’s deposits in potentially risky places. Did he, like Razzlekhan, take risks to feel alive? After reading what he had written about Bernie Madoff, I wouldn’t have put it past him. But if some of Tether’s investments went bad, it could set off a run. The riskiest move I’d heard of so far was Tether’s 1-billion-coin loan to the quasi-bank Celsius. Its founder, Alex Mashinsky, had told me about it at the Bitcoin 2021 conference in Miami.

Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School
by Andrew Hallam
Published 1 Nov 2011

Paying off credit-card debt that’s charging 18 percent in interest is like making a tax-free 18 percent gain on your money. And there’s no way that your investments can guarantee a gain like that after tax. If any financial adviser, advertisement, or investment group of any kind promises a return of 18 percent annually, think of disgraced U.S. financier Bernie Madoff and run. Nobody can guarantee those kinds of returns. Well, nobody except the credit-card companies. They’re making 18 to 24 percent annually from you (if you carry a balance), not for you. How and Why Stocks Rise in Value You might be wondering how I averaged 10 percent a year on the stock market for 20 years.

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He came into Daryl’s office with a lawyer, but the contract was legally airtight; there was nothing the lawyer could do about it. But, as Daryl explained, he took pity on the woman and gave the motor-home ownership back to the couple. It sounded like an amazing operation. However, nobody can guarantee you 54 percent on your money—ever. Bernie Madoff, the currently incarcerated Ponzi-scheming money manager in the U.S. promised a minimum return of 10 percent annually and he sucked scores of intelligent people into his self-servicing vacuum cleaner—absconding with $65 billion in the process.2 He claimed to be making money for his clients by investing their cash mostly in the stock market, but he just paid them “interest” with new investors’ deposits.

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One friend took out a loan for $50,000 and plunked it down on Insta-Cash Loans, and he began receiving $2,250 a month in interest from the company. Another friend deposited more than $100,000 into the business; he was paid $54,000 in yearly interest. But Alice’s Wonderland was more real than our fool’s paradise. Like Bernie Madoff (who was caught after Daryl) the party eventually ended in 2006 and the carnage was everywhere. We never found out whether Daryl intended for his business to be a Ponzi scheme from the beginning (he was clearly paying interest to investors from the deposits of other investors) or whether his business slowly unraveled after a well-intentioned but ineffective business plan went awry.

Twilight of the Elites: America After Meritocracy
by Chris Hayes
Published 11 Jun 2012

“You have these politicians that are selling this mistrust,” he said in reference to the ceaseless rhetoric from conservatives about government’s inevitable incompetence. “And the federal government sure as hell hasn’t helped.” And yet the private sector has fared no better: from the popping of the tech bubble, to Enron, WorldCom, and Global Crossing, to the Big Three automakers, to Lehman Brothers, subprime, credit default swaps, and Bernie Madoff, the overwhelming story of the private sector in the last decade has been perverse incentives, blinkered groupthink, deception, fraud, opacity, and disaster. So comprehensive and destructive are these failures that even those ideologically disposed to view big business in the best light have had to confront them.

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Beyond left and right isn’t just a motto. Those most devoted to the deepest kinds of structural reform of the system are insistent that they do not fall along the traditional left-right axis. Just as elite failure claims a seemingly unrelated number of victims—the Palm Beach retiree bankrupted by Bernie Madoff and the child left homeless after his mother’s home was foreclosed—so, too, will you find that among those clued in to elite failure, left/right distinctions are less salient than those between what I call insurrectionists and institutionalists. Paul Krugman is one prominent example of an insurrectionist.

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The more you learn about the documented instances of active, coordinated conspiracy and collusion, the harder it is to dismiss even the most seemingly far-fetched allegations of wrongdoing. This applies far more broadly than to the Church. On one hand, we can view scandal and revelation as fundamental proof that ultimately the truth will out. That is how an institutionalist is disposed to interpret things. But we can just as easily take a more cynical view: If, say, Bernie Madoff was allowed to pull off his $50 billion heist for decades with no sanction, if the SEC ignored a detailed letter from a knowledgeable whistle-blower titled simply “The World’s Largest Hedge Fund Is a Fraud,” then what’s to say they’re not ignoring the next Madoff as I write this? In this way, more information and more openness can, perversely, feed more mistrust and more wild speculation: The more we know, the more we realize just how in the dark we truly are.

A Wealth of Common Sense: Why Simplicity Trumps Complexity in Any Investment Plan
by Ben Carlson
Published 14 May 2015

Vetting Your Sources of Financial Advice There seem to be opinions at the extremes for financial professionals that help manage money for others. Either we trust them way too much and expect them to be our saviors, such as Bernie Madoff when people assumed he could do no wrong before his scam was rooted out. Or we assume that they're all crooks and scumbags who can never be trusted, such as Bernie Madoff after his scam was discovered. Any time there are extreme opinions, the truth usually lies somewhere in the middle. While there are many financial professionals out there who are just looking to make a buck at your expense, there are also good, honest people who would like to help you reach your goals and improve your finances.

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In fact, proper temperament will beat high IQ all day. —Michael Mauboussin In December 2008, as the financial world was in the process of crumbling all around us following the near collapse of the banking system and the bankruptcy of Lehman Brothers, there was another event that shook the collective trust of the investing public. Bernie Madoff's Ponzi scheme—the largest in history at almost $65 billion in fake gains promised to clients—finally unraveled after years of lies and deception. That very same month Dr. Stephen Greenspan released a book called Annals of Gullibility: Why We Get Duped and How to Avoid It that focused on human competence or the lack thereof.

How to DeFi
by Coingecko , Darren Lau , Sze Jin Teh , Kristian Kho , Erina Azmi , Tm Lee and Bobby Ong
Published 22 Mar 2020

Retrieved from https://www.synthetix.io/uploads/synthetix_litepaper.pdf ~ Chapter 9: Decentralized Fund Management Making Sense of the Mutual Fund Scandal Everything you may not want to ask (but really should know) about the crisis that's rocking the investment world. (2003, November 24). Retrieved from https://money.cnn.com/magazines/fortune/fortune_archive/2003/11/24/353794/index.htm The Editors of Encyclopaedia Britannica. (2020, February 26). Bernie Madoff. Retrieved from https://www.britannica.com/biography/Bernie-Madoff Frequently Asked Questions on TokenSets. (n.d.). Retrieved from https://www.tokensets.com/faq Liang, R. (2019, April 23). TokenSets is Live: Automate your Crypto Portfolio Now. Retrieved from https://medium.com/set-protocol/tokensets-is-live-automate-your-crypto-portfolio-now-50f88dcc928d Sawinyh, N. (2019, June 17).

The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life
by J L Collins
Published 17 Jun 2016

Investing only seems complex because the financial industry goes to great lengths to make it seem complex. Indeed, many investments are complex. But as you now already understand, not only are simple index investments easier, they are more effective. Advisors are expensive at best and will rob you at worst. Google Bernie Madoff. If you choose to seek advice, seek it cautiously and never give up control. It’s your money and no one will care for it better than you. But many will try hard to make it theirs. Don’t let it happen. When I say investment advisors, I am also referring to money managers, investment managers, brokers, insurance salespeople (who often masquerade as financial planners) and the like.

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Annuities and whole/universal life insurance carry commissions as high as 10%. Worse, these commissions are buried in the investment so you never see them. How such fraud is legal I can’t say. But it is. Hedge funds and private investments all make their salespeople wealthy, along with the operators. Investors? Maybe. Sometimes. Nah, not so much. Remember Bernie Madoff? People literally begged him to take their money. His credentials were impeccable. His track record too. Only the “best” investment advisors could get you in. Mr. Madoff paid them handsomely to do so. As did their clients. Oops. If all this weren’t enough, if you’re not paying attention, there is more money to be mined at your expense by “churning” your account.

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When con men pick a scam they look for people to whom it will naturally appeal. Those are people in the field. People feel secure and safe in those areas they know well. They believe they will be too smart to be caught unawares. Smart people know the areas they don’t know and tend to be far more cautious there. Many of Bernie Madoff’s victims were financial professionals. Rule #3: Con men (and women) don’t look like con men. This isn’t the movies. They’re not going to have slouch hats pulled low over their shifty eyes. Successful con men look like the safest, most trustworthy, honest, stable, comforting people imaginable.

Paper Promises
by Philip Coggan
Published 1 Dec 2011

My father-in-law asked that question in the aftermath of the credit crunch of 2007 and 2008, when house prices, share prices and corporate bond prices all tumbled. It seemed a reasonable point. If all the assets in the world were worth, say, $3 trillion one year and $2 trillion the next, what happened to that missing trillion? To explain the answer, we have to turn to the career of Bernie Madoff, a convicted fraudster. Madoff was an American stockbroker who had a prominent role in the finance industry, serving as chairman of the board of directors of the National Association of Securities Dealers. On the side, he ran an investment operation, looking after the funds of clients. He claimed a near-perfect record, hardly ever losing money in a given month, and reporting steady annual returns.

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The scheme was based on international postal coupons which, he said, could be bought cheaply in Europe and exchanged for stamps in the US.7 The scheme had some basis in fact, although it would never have worked if attempted on a large scale. However, Ponzi did not try to make it work. He simply relied on his charm to entice investors. Should a few investors want to withdraw their money, he could pay them off with the money taken from new applicants. Bernie Madoff effectively used the same system without offering returns on the Ponzi scale; it was the steadiness of his returns, not the size of them, that ought to have made investors suspicious. This kind of fraud is also known as a pyramid scheme and it is a recurrent historical phenomenon. Women Empowering Women was a British version in the 1990s.

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With money doubling every three months, investors would have been 16 times better off in a year and 256 times better off in two. Within five years, anyone who had invested a single dollar would have become a millionaire. We know that pyramids must eventually collapse, and the higher the return (or promised return), the faster that collapse will come. (Bernie Madoff’s scheme lasted so long because he offered reliable, rather than outlandishly high, returns.) The outright frauds have no investment justification at all. But even pyramid markets based on a genuine social change (such as the creation of the Internet) are doomed to eventual failure. The Ponzi stage described by Minsky is often known as a ‘greater fool’ process.

Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World
by Tom Wright and Bradley Hope
Published 17 Sep 2018

But in the fall of 2009, armed with almost endless amounts of money, Low embarked on a period of incessant partying—and networking. Even after the payments to Obaid and others, hundreds of millions of dollars were just sitting in the Good Star account he controlled in Switzerland, for Low to deploy in any way he saw fit. There were no shareholders, no co-investors. His wasn’t a Ponzi scheme like Bernie Madoff’s, which used new money to pay “profits” to earlier investors. Madoff’s fraud led to losses of at least $18 billion, but his take was a fraction of that, as the “profits” were shared among other investors. By the time the scheme imploded in late 2008, Madoff had amassed a paper fortune of $800 million, but most of this was the value of his market-making business; the amount he personally stole was a fraction of the amount lost.

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That extended to anti–money laundering, as Treasury and the Justice Department began to hand out heftier punishments to transgressors. Wachovia Bank, in early 2010, agreed to pay $160 million in penalties for failing to report $8 billion in dodgy transfers. Around this time, the Justice Department was building its case against J.P. Morgan, where Bernie Madoff held his accounts, eventually leading to a record $2 billion fine under the Bank Secrecy Act. These actions were forcing Wall Street and major global banks in Europe and Japan to get their act together on compliance. What Low needed was a smaller bank, one that would be dependent on his business and took compliance even less seriously than Wall Street behemoths.

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More than a billion had been frittered away, more than a billion went into property and businesses, and more than a billion was used to pay off the prime minister and other conspirators. To resolve this crazed theft, Low wagered an IPO of 1MDB’s power plants would bring in billions of dollars. Yet he never spent long cogitating the endgame. Bernie Madoff bet he could always find new investors in his pyramid scheme, which ran more than four decades. But Madoff’s fraud, like many other examples before, collapsed when he could no longer lure new dupes, whose money he needed to pay “profits” to other investors. Low believed government funds were limitless and he could just keep on spending.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Eleventh Edition)
by Burton G. Malkiel
Published 5 Jan 2015

The technicians do not help produce yachts for the customers, but they do help generate the trading that provides yachts for the brokers. APPRAISING THE COUNTERATTACK As you might imagine, the random-walk theory’s dismissal of charting is not altogether popular among technicians. Academic proponents of the theory are greeted in some Wall Street quarters with as much enthusiasm as Bernie Madoff addressing the Better Business Bureau from his jail cell. Technical analysts consider the theory “just plain academic drivel.” Let us pause, then, and appraise the counterattack by beleaguered technicians. Perhaps the most common complaint about the weakness of the random-walk theory is based on a distrust of mathematics and a misconception of what the theory means.

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And Jack Bogle, a legend of the late twentieth century, has remarked, “I do not know of anybody who has done it [market timing] successfully and consistently.” Investors should also never forget the age-old maxim “If something is too good to be true, it is too good to be true.” Heeding this maxim could have saved investors from falling prey to the largest Ponzi scheme ever: the Bernard L. Madoff fraud uncovered in 2008, in which $50 billion was said to have been lost. The real con in the Madoff affair is that people fell for the myth that Madoff could consistently earn between 10 and 12 percent a year for investors in his fund. The “genius” of the fraud was that Madoff offered what seemed to be a modest and safe return.

Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition
by Kindleberger, Charles P. and Robert Z., Aliber
Published 9 Aug 2011

A catalog record for this book is available from the Library of Congress. 10 9 8 7 6 5 4 3 2 1 20 19 18 17 16 15 14 13 12 11 Printed and bound in Great Britain by CPI Antony Rowe, Chippenham and Eastbourne Contents Tables Foreword Robert M. Solow 1 Financial Crisis: a Hardy Perennial 2 The Anatomy of a Typical Crisis 3 Speculative Manias 4 Fueling the Flames: the Expansion of Credit 5 The Critical Stage – When the Bubble Is About To Pop 6 Euphoria and Paper Wealth 7 Bernie Madoff: Frauds, Swindles, and the Credit Cycle 8 International Contagion 1618–1930 9 Bubble Contagion: Mexico City to Tokyo to Bangkok to New York, London and Reykjavik 10 Policy Responses: Benign Neglect, Exhortation, and Bank Holidays 11 The Domestic Lender of Last Resort 12 The International Lender of Last Resort 13 The Lehman Panic – An Avoidable Crash 14 The Lessons of History 15 Epilogue 2010–2020 Appendix Notes Index Tables 8.1 Reported failures in the crisis of 1847–48, by cities 12.1 Official finance commitments Appendix: A Stylized Outline of Financial Crises, 1618 to 2008 Foreword Charlie Kindleberger (CPK from now on) was a delightful colleague: perceptive, responsive, curious about everything, full of character, and, above all, lively.

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The implosion of a bubble always leads to the discovery of frauds and swindles that developed in the froth of the mania; these events are reviewed in Chapter 7. Fraud and corruption are based on mis-information – both falsification and misrepresentation; some fraud also involves the theft of private information before it becomes publicly available. Some of the fraud is personal, some is corporate. Bernie Madoff ran one of the largest Ponzi schemes ever, investors lost more than $20 billion. The owners of some business conglomerates in Iceland had ‘captured’ control of the banks and then borrowed from the banks to increase their consumption and their investments. The combination of failed thrift institutions and the rapid growth of junk bonds in the 1980s cost American taxpayers more than $100 billion; some of these thrifts had been acquired by individuals who relied on the junk bonds for their financing.

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One question is why those outside the Federal Reserve found it easier to recognize that the increase in asset prices in both episodes was non-sustainable. And in that sense the much younger Federal Reserve of the 1920s seems more heroic in its statements about asset price developments. 7 Bernie Madoff: Frauds, Swindles, and the Credit Cycle Charlie Ponzi is the most famous banker in American history, immortalized in the term ‘Ponzi scheme’. Ponzi owned a small firm that sold deposits in one of the Boston suburbs in the early 1920s; he promised to pay the buyers of these IOUs 45 percent interest a year at a time when the traditional banks were paying two or three percent.

The Power of Passive Investing: More Wealth With Less Work
by Richard A. Ferri
Published 4 Nov 2010

What’s often left out of those conversations is the probability of achieving this return. Each investor is left to figure out the probability of success on their own. You’re setting yourself up for trouble if you don’t assess the risk of an investment. Investment frauds lure in their prey by creating the illusion of safety and a high return. Think of Bernie Madoff. He told clients they would earn high returns in the 8 to 10 percent range every year regardless of market risks. Apparently, Madoff followers didn’t ask how this return could be earned year after year with no risk of loss, or perhaps they didn’t want to know. The subprime mortgage meltdown in recent years is another example.

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Trying to make money in illiquid long-term limited partnerships including hedge funds and venture capital funds requires considerable skill in sorting out a few profitable opportunities from the rest. For every successful limited partnership there are at least 10 poor to mediocre ones, including Bernie Madoff–type scams. Most individuals simply do not have access to top private management or have the expertise in selecting private funds. Highly skilled institutional investors pick off the attractive offerings long before the public is invited in. David Swensen, CIO of the Yale endowment fund, eloquently sums up the prospective results from private partnerships in his highly praised book, Unconventional Success.

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Paraphrasing Charles Ellis, it’s easy to tell a good manager from a mediocre one; the mediocre one wants to manage your money! If an active manager were talented, chances are you’ve never heard of him or her, and if you did, you’d never be able to hire them. It is a tragedy when poor investment decisions cripple the ability of a nonprofit organization to help others. Bernie Madoff had almost everyone fooled that he was a top hedge fund manager. He took everyone’s money, literally, and his high reported returns kept rolling in regardless of the amount he managed. Many nonprofits lost millions of dollars when Madoff’s Ponzi scheme collapsed. Other organizations lost a large portion of their assets during the global recession because the investment committees made ill-timed asset allocation decisions.

Numbers Rule Your World: The Hidden Influence of Probability and Statistics on Everything You Do
by Kaiser Fung
Published 25 Jan 2010

From the manipulative politician to the blundering analyst, from the amateur economist to the hard-selling advertiser, we have endless examples of what can go wrong when numbers are misused. Cherry-picking, oversimplifying, obfuscating—we have seen them all. This book takes a different direction, a positive position: I am interested in what happens when things go right, which is to say, what happens when numbers don’t lie. The More We Know We Don’t Know What will we learn from Bernie Madoff, the New York–based fund manager–swindler who impoverished an exclusive club of well-to-do patrons over three decades until he confessed in 2008? Or from the Enron executives whose make-believe accounting wiped out the retirement savings of thousands of employees? Perhaps we ought to know why the reams of financial data, printed statements, and official filings yielded few clues to the investors, auditors, and regulators who fell for the deception.

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The interstitial sections called “Crossovers” take another look at the same stories, the second time around revealing another aspect of statistical thinking. The Discontent of Being Averaged Averages are like sleeping pills: they put you in a state of stupor, and if you overdose, they may kill you. That must have been how the investors in Bernie Madoff’s hedge fund felt in 2008, when they learned the ugly truth about the streak of stable monthly returns they’d been receiving up until then. In the dream world they took as real, each month was an average month; variability was conquered—nothing to worry about. Greed was the root cause of their financial ruin.

The Permanent Portfolio
by Craig Rowland and J. M. Lawson
Published 27 Aug 2012

Despite the Hollywood clichés about Swiss accounts, Swiss banks do have some special features, one of which it that a Swiss account places your money in a legal jurisdiction that has very specific and restrictive rules regarding who can access your account information and for what purpose. “Switzerland has never had a Bernie Madoff.”—Otto Hueppi, Swiss American Advisors, AG A second feature of Swiss banks is that oversight is very robust and Swiss banks do not have the history of corruption, failure, and fraud that has plagued other countries' banking systems (including the United States). As Swiss banker Otto Hueppi commented: “Switzerland has never had a Bernie Madoff.” In terms of absolute safety of bank accounts, Switzerland still represents a good choice if you can find a bank that will do business with you.

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So don't let anyone make you feel guilty for staying away from something that doesn't make sense to you. Rule #10: Don't Depend on Any One Investment, Institution, or Person for Your Safety In the 2008 banking crisis, some institutions that existed for over a century went bankrupt almost overnight inflicting large losses on investors. In the same year Bernie Madoff, one of the founders of the NASDAQ stock exchange, was revealed to have been running a multibillion-dollar Ponzi scheme that caused tremendous losses to investors, many of whom had entrusted him with their life savings. The process above repeated itself in 2011 when another large firm, MF Global, went bankrupt and many investors found that their accounts had apparently been plundered by corrupt management.

Inequality and the 1%
by Danny Dorling
Published 6 Oct 2014

A few months before the Times told us how lucky we were to have so many extraordinarily well-paid bankers in our midst, the Sunday Times had reported that it had been bankers using cocaine who had got us into this terrible mess.32 Verso/Leo Hollis The City of London: expanding its horizon When they were later interviewed about the 2008 crash, UK bankers said they had become ‘over-confident’ and ‘took more risks’, leading to the meltdown. The biggest gamblers of all, in the US, took the most cocaine. People like Bernie Madoff, once described as a financial genius and then lampooned in the tabloids, worked from an office described as ‘the north pole’ – because it contained so much white powder.33 Cocaine is the drug of the 1 per cent and of inequality. The singer Robbie Williams once quipped that cocaine is God’s way of telling you you’ve got too much money.

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Hosking, ‘Britain Tops League of Millionaire Bankers’, The Times, 16 July 2013 – behind a paywall, so read the Guardian instead: J. Treanor, ‘More than 2,400 UK bankers paid €1m-plus, EU regulator says, Guardian, 15 July 2013. 32. ‘Bankers Use Cocaine and Got Us Into this Terrible Mess’, headline reported in The Week, 16 April 2013, covering the story behind the Sunday Times pay-wall. 33. Staff reporter, ‘Fraudster Bernie Madoff “Had So Much Cocaine in His Office It Was Dubbed the North Pole” ’, Daily Mail, 21 October 2009. 34. Robbie Williams may have heard the joke via Richard Pryor: J. Kossoff, ‘Why Cocaine Isn’t Kosher’, The Telegraph Blog, 11 August 2008. Incidentally the UK doesn’t just have the highest rate of cocaine use per head.

Confessions of a Microfinance Heretic
by Hugh Sinclair
Published 4 Oct 2012

Client savings, however obtained, and whether forced or voluntary, could be used to meet such a shortfall, but whether this was legal or not was a valid question. And even if legal, it was no free lunch: the cash may be accessible for use in other areas, but the obligation of the MFI to return these funds to clients did not vanish. In a sense such practices can be likened to Bernie Madoff’s recent Ponzi scheme. For as long as new investors keep pouring money in, there are funds available to return to early investors, and no one need know quite how the underlying portfolio is doing for as long as the dance maintains its momentum. The more recent investors are locked in for some period before they can extract their profits, by which point more investors have been found.

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But when it became clear that Madoff’s underlying investments were not doing so well, or when an MFI has high operating costs and a declining, poor-quality portfolio, the problem rapidly becomes critical. The tide goes out, and those without bathing costumes are left standing in their full glory. Thus the need for tight regulation of any institution that takes money from the general public, regulation that is often absent in developing countries. Even the SEC in America missed Bernie Madoff for some years. How much easier for a bank in a forgotten African nation recovering from a bloody civil war and years of communism? The recent financial crisis has led to endless reams of new regulations in countries already tightly regulated—how much more is this true in countries such as Mozambique?

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If there was ever a country that demonstrated that the funding bodies had entirely lost all track of reality, it was Nicaragua. Many microfinance funds lost millions of dollars as MFIs defaulted—not their dollars, of course, but those of their own investors, thanks to their failure to consider the simple fact that pyramid schemes require permanent new injections of capital and limited withdrawals. But, as Bernie Madoff so elegantly demonstrated, the music can continue for a long time. I worked in Nicaragua frequently, mainly with Triple Jump. I later spent months based in Panama shuttling back and forth to Nicaragua, and I knew many of the MFIs there. The profit potential was excellent. Every fund was desperate to invest there, and every MFI had offers from funds crawling over each other to lend them money.

Flash Boys: Not So Fast: An Insider's Perspective on High-Frequency Trading
by Peter Kovac
Published 10 Dec 2014

In sum, I don’t know how or why Lewis extrapolates from the questionable analysis of a single trade to the entire market, but it clearly isn’t sound. The extrapolation appears as flimsy as the premise itself. When I first heard Lewis say on his press tour that, “The market is rigged,” I thought he had found another Enron or Bernie Madoff, sending legions of unsuspecting investors to the poor house. I didn’t expect to find that, based on a single trade and a few hunches, some old-school big-bank traders speculated that 0.07% of their trades’ potential value was going to another subset of traders using questionable practices. If it turned out to be true, it’s still unethical and wrong.

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Broker-dealers are subject to periodic audits, and the SEC can drop in at any time if they have the slightest suspicion about the broker-dealer’s activities (and they do drop in). It’s a good thing. Personally, I’d be more worried about the hedge funds that ultimately fund Katsuyama’s dark pool, who have virtually no regulator oversight. What do Scott Rothstein, Arthur Nadel, and Bernie Madoff have in common? Serving as hedge fund managers, and serving time in jail. Chapter 5: Sergey Aleynikov There’s not too much to add to this chapter, as (a) it mostly focuses on a single individual, and (b) it’s largely a reprint of Lewis’ September 2013 article, which benefitted from Vanity Fair’s fact-checking team.

The Joys of Compounding: The Passionate Pursuit of Lifelong Learning, Revised and Updated
by Gautam Baid
Published 1 Jun 2020

Not just trying to get famous. But living a truly satisfying existence with full integrity and helping others around them achieve the same. Bernie Madoff achieved great admiration and wealth over the duration of his Ponzi scheme, but was he happy? He made it clear, after he had been caught, that he wasn’t. Here was a guy who had all the admiration in the world, an external scorecard showing an A+. But what happened when he lost it all? He heaved a sigh of relief. According to New York magazine, “For Bernie Madoff, living a lie had once been a full-time job, which carried with it a constant, nagging anxiety. ‘It was a nightmare for me,’ he told investigators, using the word over and over, as if he were the real victim.

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Benjamin Graham and Jason Zweig, The Intelligent Investor: The Definitive Book on Value Investing, rev. ed. (New York: Harper Business, 2006). 10. Janet Lowe, Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger (Hoboken, NJ: Wiley, 2003), 154. 11. Steve Fishman, “Bernie Madoff, Free at Last,” New York, June 6, 2010, http://nymag.com/news/crimelaw/66468. 12. “Warren Buffett: The Inner Scorecard,” Farnam Street (blog), August 2016, https://www.fs.blog/2016/08/the-inner-scorecard. 13. Charlie Munger, USC School of Law commencement speech, University of Southern California Gould School of Law, May 13, 2007, Los Angeles, CA, https://genius.com/Charlie-munger-usc-law-commencement-speech-annotated. 14.

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Santangel’s Review, May 26, 2010. Audio. http://dericbownds.net/uploaded_images/Buffett_FCIC_transcript.pdf. Firestone, Harvey. Men and Rubber: The Story of Business. Whitefish, MT: Kessinger, 2003. Fisher, Phil. Common Stocks and Uncommon Profits and Other Writings, 2nd ed. Hoboken, NJ: Wiley, 2003. Fishman, Steve. “Bernie Madoff, Free at Last.” New York, June 6, 2010. http://nymag.com/news/crimelaw/66468. Flores, Brian. “Why Investors Must Always Consider Opportunity Costs.” GuruFocus, February 18, 2016. https://www.gurufocus.com/news/393334/why-investors-must-always-consider-opportunity-costs. Foulke, David. “Warren Buffett on LTCM, Blind Spots, Leverage, and Unnecessary Risk.”

Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market Into a Casino
by Jim McTague
Published 1 Mar 2011

No one else had noticed what they had noticed. Regulators had been asleep. They hadn’t blown any time-out whistles or thrown any penalty flags for spoofing or momentum ignition or pinging. This was outrageous, because the SEC and FINRA were supposed to be cleaning up their act after missing abuses like Bernie Madoff’s outrageous Ponzi scheme. But after the two traders disseminated the white paper, nothing happened—nothing at all. Investors in December 2008 had other things on their minds. They were consumed by bailouts, failures, bankruptcies, and the incoming Democratic administration of Barack Obama. The white paper was little more than background noise.

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In the end, the SEC would maintain its turf, but the historic legislation would end up saddling the SEC a to-do list containing more than 80 new chores, including studies and the adoption of new regulations, and a deadline of two years for most of them. Simultaneously, Schapiro struggled to reinvigorate the agency, to make it more aggressive. The SEC had missed uncovering the Bernie Madoff Ponzi scheme because somnambulant bureaucrats had ignored direct complaints between 1992 and 2008. There had been a pair of half-hearted investigations and some cursory exams of Madoff’s firm but, according to a report by the SEC’s inspector general, “a thorough and competent investigation or examination was never performed.”

The Narcissist Next Door
by Jeffrey Kluger
Published 25 Aug 2014

This played out in the same summer that Lady Gaga—she of the meat dress, which may or may not have had much fashion merit, but undeniably drew eyeballs—released a song called “Applause,” in which she repeats over and over the lyric “I live for the applause, applause, applause,” as frank an admission and as powerful an anthem of the age of narcissism as you could imagine. There is Bernie Madoff as well, a man whose multi-decade Ponzi scheme made him exceedingly rich, but at the cost of $65 billion in other people’s wealth, stolen from a victim list that, in the government’s records, ran 165 pages long. Hedge funds and banks made up much of that inventory of the wronged—admittedly, nobody’s idea of sympathetic victims—but there were also pension funds and charities, as well as individuals like Jack Cutter of Longmont, Colorado, a seventy-nine-year-old oil industry worker who was living with his wife on $1 million in retirement savings, a nest egg that vanished in Madoff’s care, forcing Cutter to take a job stocking supermarket shelves.

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None of that is easy, and we often fail at it miserably. “The heart wants what it wants,” said Woody Allen in a supremely narcissistic moment, as he blithely explained away his decision to ditch his longtime partner, Mia Farrow, in favor of her twenty-one-year-old daughter, Soon-Yi Previn. “Well, that’s what I did,” is how Ponzi king Bernie Madoff shrugged it off to a fellow inmate who offered the hard-to-argue-with opinion that stealing money from old ladies was a “fucked-up thing to do.” Both Madoff and Allen wanted and they took. Full stop. The idea that desire equals license is something that comes factory-loaded in all of us, and is the reason babies are not just sad or disappointed when they’re denied something, but downright furious.

Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street
by Sheelah Kolhatkar
Published 7 Feb 2017

The previous fall, Lehman Brothers had gone bankrupt, banks were collapsing, and millions of people were watching the value of their retirement savings go down with the plunging stock market. House prices had plummeted, revealing the corrupt machinery inside investment banks that had packaged low-quality subprime mortgages and sold them to investors all over the world. Bernie Madoff’s $20 billion Ponzi scheme had been discovered, along with the fact that the SEC missed obvious warning signs for many years. Morale had never been lower. For decades after its founding in 1934, the SEC was a feared and respected force on Wall Street, its lawyers priding themselves on their discretion and political independence.

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It wasn’t long ago, in fact, that SEC attorneys were openly discouraged from pestering important people on Wall Street. The leadership of the SEC had often hinted to the staff that the wealthiest, most successful individuals in the financial world were not to be disturbed. It was part of the former SEC chairman’s “hands-off” approach to regulation. But in 2012, post–Bernie Madoff, the agency was in the midst of a transformation. This time, no one questioned the Elan team’s desire to bring Cohen in for a deposition. The new director of enforcement was trying to make it easier for SEC attorneys to do their jobs. On March 12, Riely sent a subpoena requesting that Cohen appear to testify.

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Pension fund managers in particular had enormous, in some cases impossible, financial obligations to fulfill for their retirees, and very few ways of earning the returns they needed. Cohen had made his investors so much money over the years, it was going to take a lot to compel them to leave. And if there was one thing the Bernie Madoff case had shown, it was that even sophisticated investors could fall for the lure of easy money. Once the government’s investigation of SAC reached a certain feverish stage, however, circumstances began to change. Cohen was getting calls from anxious investors seeking an explanation as to why his name was in the newspaper every few days.

Our Final Invention: Artificial Intelligence and the End of the Human Era
by James Barrat
Published 30 Sep 2013

If you don’t count those wars, the direct costs of physical damage, economic impact, and beefed up security is nearly $767 billion. The subprime mortgage scandal that caused the worst global downturn since the Great Depression cost about $10 trillion globally, but around $4 trillion at home. The Enron scandal comes in at about $71 billion, while the Bernie Madoff fraud cost almost as much, at $64.8 billion. These numbers show that in dollar cost per incident, financial fraud competes with the most expensive terrorist act in history, and the subprime mortgage crisis dwarfs it. When researchers put advanced AI into the hands of businessmen, as they imminently will, these people will suddenly possess the most powerful technology ever conceived of.

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The subprime mortgage scandal: International Monetary Fund, “IMF Loss Estimates: Executive Summary,” last modified 2010, http://www.imf.org/external/pubs/ft/weo/2009/01/pdf/exesum.pdf (accessed October 13, 2011). The Enron Scandal comes in at about $71 billion: Laws.Com, “Easy Guide to Understanding ENRON,” last modified December 6, 2011, http://finance.laws.com/enron-scandal-summary (accessed January 14, 2012). while the Bernie Madoff fraud: Graybow, Martha, “Madoff mysteries remain as he nears guilty plea,” Reuters, March 11, 2009, http://www.reuters.com/article/2009/03/11/us-madoff-idUSTRE52A5JK20090311?pageNumber=2&virtualBrandChannel=0&sp=true (accessed February 14, 2012). Enron, the scandal-plagued Texas corporation: Roberts, Joel, “Enron Traders Caught on Tape,” CBSNEWS.COM, December 5, 2007, http://www.cbsnews.com/8301-18563_162-620626.html?

Filthy Rich: A Powerful Billionaire, the Sex Scandal That Undid Him, and All the Justice That Money Can Buy: The Shocking True Story of Jeffrey Epstein
by James Patterson , John Connolly and Tim Malloy
Published 10 Oct 2016

In court, Epstein told the judge that the $10,000 he’d returned was actually the payment for a horse Stroll had sold him. Like many cases involving Epstein, this one was settled out of court, the terms of the final agreement kept secret. CHAPTER 27 Steven Hoffenberg: July 10, 1987 Before there was Bernie Madoff, there was Steven Hoffenberg. In 1987, Hoffenberg was the head of Towers Financial Corporation, a company that bought debts, such as unpaid medical bills, at a very steep discount while pressing the debtors to repay in full. He’d started the company fifteen years earlier with two thousand dollars and just a handful of employees.

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According to Hoffenberg, Epstein handled the attempted takeover of Pan Am—a deal that went sideways almost immediately. Steven Hoffenberg still has a lot to say on the subject. But in listening to him, one must bear in mind that in 1995, he pleaded guilty to criminal conspiracy and fraud charges involving a $460 million swindle, a familiar scheme to anyone who followed the Bernie Madoff case. Like so many others, Hoffenberg had tried to fly very high without the necessary updraft. And despite all the hours he spent at the office, he’d also developed a taste for the high life. He bought his own jet, a luxury yacht, and a Long Island mansion to go with his expensive Manhattan apartment.

The Asylum: The Renegades Who Hijacked the World's Oil Market
by Leah McGrath Goodman
Published 15 Feb 2011

“The press,” Guttman says, sighing. “They build you up just to tear you down. My parents saw the news and they didn’t know what to think. My mother was very upset. Had I robbed somebody? Was I going to jail? In the Jewish community, if you steal someone else’s money, that’s it, your name is blackened forever. Look at Bernie Madoff. A hundred years from now, his name among the Jews will still be synonymous with disgrace. Nobody understood what I was being accused of. So they assumed the worst. I tried to explain to my mother that no, I hadn’t stolen any money, that the regulators were coming after me with this ginned-up legal concept.

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He was fined $850,000 and sentenced to five years at Rikers Island prison, a maximum-security lockup known for its violent gang population of Bloods, Crips, Latin Kings, and members of the murderous MS-13. The punishment was seen as unusually draconian for a commodities trader. “Steve begged the prosecutors to not send him there, saying he would pay them millions,” says a Nymex trader who was his friend. “They would not spare him. Guess we can’t all get the kid-glove treatment of Bernie Madoff.” Karvellas was released in 2009, but he would not discuss his time in prison. “When Steve got out, I was like, ‘How are you?’ and he’s like, ‘Fine,’ and starts talking about his family and other stuff. Then I stopped him and said, ‘No, I mean, you were at Rikers. How are you?’ He clammed up. His punishment was the worst any of us have ever seen or heard of,” says the friend.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing
by Burton G. Malkiel
Published 10 Jan 2011

The technicians do not help produce yachts for the customers, but they do help generate the trading that provides yachts for the brokers. APPRAISING THE COUNTERATTACK As you might imagine, the random-walk theory’s dismissal of charting is not altogether popular among technicians. Academic proponents of the theory are greeted in some Wall Street quarters with as much enthusiasm as Bernie Madoff addressing the Better Business Bureau from his jail cell. Technical analysts consider the theory “just plain academic drivel.” Let us pause, then, and appraise the counterattack by beleaguered technicians. Perhaps the most common complaint about the weakness of the random-walk theory is based on a distrust of mathematics and a misconception of what the theory means.

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And Jack Bogle, a legend of the late twentieth century, has remarked, “I do not know of anybody who has done it [market timing] successfully and consistently.” Investors should also never forget the age-old maxim “If something is too good to be true, it is too good to be true.” Heeding this maxim could have saved investors from falling prey to the largest Ponzi scheme ever: the Bernard L. Madoff fraud uncovered in 2008, in which $50 billion was said to have been lost. The real con in the Madoff affair is that people fell for the myth that Madoff could consistently earn between 10 and 12 percent a year for investors in his fund. The “genius” of the fraud was that Madoff offered what seemed to be a modest and safe return.

The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy's Only Hope
by John A. Allison
Published 20 Sep 2012

What it primarily does is make a massive number of rules designed to provide investors with “transparent” financial and operating information to ensure that they can make sound investments. Based on the performance of capital markets over the last 10 years, there is prima facie evidence that the SEC has failed miserably. Without even considering the fraud and abuse that the SEC failed to detect in cases like Enron, WorldCom, Fannie Mae, Freddie Mac, and Bernie Madoff, simply consider that the S&P 500 today (August 2011) is still 11 percent below where it traded in August 2000. Because the work of the SEC is somewhat eclectic, we will focus on its primary policy mistakes, a number of which have been previously discussed. One of the most significant errors by the SEC is the sanctioning of the rating agencies (Standard & Poor’s [S&P], Moody’s, and Fitch).

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Whim seeking, hedonism, shortsightedness, fraudulent manipulation, and narcissism, are not the acts of a person who is pursuing long-term happiness. These are the acts of a person with low self-esteem. I had a friend who drank 24 beers a day. He developed cirrhosis of the liver and continued to drink. He died. People say he was selfish. I think he was self-destructive. Bernie Madoff is often described as selfish, which is ridiculous. By his own admission, Madoff was miserable before he was caught. He was stealing from his best friends and from his family. He was self-destructive, not selfish. The most important lesson we can teach our children is that they should act in their long-term rational self-interest, properly understood.

Broken Markets: A User's Guide to the Post-Finance Economy
by Kevin Mellyn
Published 18 Jun 2012

The collective delusion of the housing bubble and market forces would not suffice as an explanation for such a calamity. However, there was no single person or group of identifiable individuals to put in the dock, as Ken Lay and Jeff Skilling had been after the collapse of Enron. The discovery and prosecution of Bernie Madoff was a poor substitute, since his Ponzi scheme far predated the bubble and had nothing to do with it. No, finance and, more broadly, greed, were to blame. The general public were of course victims, and the political class would avenge them and see that never again would something like the meltdown be allowed to occur.

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This is unfortunate, because the paranoid style of American politics demands that the whole thing was a plot—bizarre as it is to believe that a bunch of bankers thought they could get rich by blowing up the global economy— and plots need flesh-and-blood villains. The legal destruction of a few Bernie Madoff types might have slaked the public’s thirst for revenge. In the absence of a scapegoat to punish, the public wants to punish the banks as institutions. Of course, as in the insane practice of shareholders suing companies they invest in, punishing the banks means attacking the viability of the only institutions that actually hold and transmit deposit money for the rest of society.

How to Kick Ass on Wall Street
by Andy Kessler
Published 4 Jun 2012

Wall Street provides a needed function in the economy. It is real. It provides real economic value. You will generate wealth, for yourself AND for society. Really. But believe me, it’s hard, if not outright impossible, for most others to see this value. Movies like Wall Street don’t help. Nor does Bernie Madoff or any of the other villains. And what the heck, Goldman Sachs Lloyd Blankfein and JP Morgan’s Jamie Dimon don’t help the cause with their massive compensation. I think they deserve their due, but they should take it all in stock and sell it when they retire. I’m proud of my 20+ years working on Wall Street.

Other People's Money: Masters of the Universe or Servants of the People?
by John Kay
Published 2 Sep 2015

The change had multiple strands, and causes. The monopoly of the New York Stock Exchange (NYSE) was challenged, first by NASDAQ, an electronic exchange established in 1971 by broker–dealers, led by Bernard Madoff. A broker is an agent; a dealer is a trader. The rise of the broker–dealer blurred the distinction between two types of transaction. The conflict of interest inherent in the broker–dealer concept, and the name of Bernard Madoff, will recur in this book. Some hot new companies, such as Intel and Microsoft, chose to list on NASDAQ rather than the NYSE. The technological shift was paralleled by regulatory changes that encouraged competition between exchanges.

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The cyber cafés of Lagos are home to the scammers who invite you to facilitate an illicit transaction in return for a large commission. The criminals call those who fall for their entreaties ‘mugus’ – people who believe they are the beneficiaries of impropriety when they are in fact the victims. There is always a supply of mugus. Some of Bernard Madoff’s clients suspected he was operating illegally, but supposed he was improperly using the information he gained from his other activities to secure exceptional returns. So clients of investment banks often believe that ‘the Edge’ – the inside information about markets obtained by undertaking a wide range of financial services activities – is used for their benefit.

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The theft was not complicated – high returns to savers were achieved by paying any withdrawals from the funds subscribed by new investors. The new investors were attracted by the success of those who had been in the scheme from the beginning. Ponzi schemes break down when the supply of new investors is insufficient to meet the withdrawals of the old. The greatest of all Ponzi schemes in history was that perpetrated by Bernard Madoff, who claimed high returns with low volatility from an investment strategy using derivative securities. In fact, no investment activity took place.25 During the global financial crisis the demand for redemptions increased and incoming funds shrank. Unable to meet withdrawals, Madoff turned himself in to the FBI and was duly sentenced to 140 years in jail.

The Great Stagnation
by Tyler Cowen
Published 24 Jan 2011

For instance, the notion that the United States was seeing a real estate bubble was a staple observation among financial commentators at the time. But it was well known that a real estate bubble had popped before—in the late 1980s—and that the United States had survived that event with a mild recession but not much calamity. The investment frauds of Bernie Madoff reflect some factors behind the broader financial crisis. The point is not that all banking is a fraud, but rather the more subtle point that we rely on the judgments of others when we decide whom to trust. For years, Madoff had been a well-respected figure in the investment community. Madoff’s fraud was possible only because so many people trusted him.

Phishing for Phools: The Economics of Manipulation and Deception
by George A. Akerlof , Robert J. Shiller and Stanley B Resor Professor Of Economics Robert J Shiller
Published 21 Sep 2015

David Kotz, Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme, Report of Investigation Case No. OIG-509, United States Securities and Exchange Commission, Office of Inspector General (2011), pp. 61–77, accessed May 29, 2015, https://www.sec.gov/news/studies/2009/oig-509.pdf. 26. James B. Stewart, “How They Failed to Catch Madoff,” Fortune, May 10, 2011. Accessed May 2, 2015. http://fortune.com/2011/05/10/how-they-failed-to-catch-madoff/. 27. Kotz, Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme, p. 249. 28. Ibid., p. 247. 29. Ibid., p. 250.

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But the deterrence effects of prosecuting whole corporations are far weaker: since penalties against organizations are spread across all their stakeholders; whereas penalties against individuals are targeted to those directly responsible. The Madoff case gives a second, much more detailed glimpse into the workings of the SEC, and as we will see, possibly, into the consequences of budgetary deficiency. It is now common knowledge how the great phisher-for-phools Bernard Madoff duped wealthy investors into a Ponzi scheme. Every month the investors would receive a statement showing how their Madoff-held assets had grown in value: with remarkable regularity. An investment quant from Whitman, Massachusetts, Harry Markopolos, followed up on this and presented his suspicions to the SEC Boston regional office.

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Ibid., p. 250. Markopolos gives a graphic account of the conversation from his perspective: No One Would Listen, Kindle location 2585 and following. See also Suh’s testimony on this subject: Kotz, Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme, p. 251. 30. Lorena Mongelli, “The SEC Watchdog Who Missed Madoff,” New York Post, January 7, 2009. 31. Jeffrey Toobin, “Annals of Law: Money Unlimited: How Chief Justice John Roberts Orchestrated the Citizens United Decision,” New Yorker, May 21, 2012. 32. Cornell University Law School, Legal Information Institute, “Citizens United v.

Hedge Fund Market Wizards
by Jack D. Schwager
Published 24 Apr 2012

Thorp had actually used an equivalent form of the formula to very profitably trade warrants and options for years before the publication of the Black-Scholes model. He was the founder of the first market neutral fund. He established the first successful quant hedge fund. He was the first to implement convertible arbitrage. He was the first to implement statistical arbitrage. He was likely the first person to uncover that Bernie Madoff was a fraud—he developed conclusive evidence of the fraud many years before Harry Markopolos did.4 Thorp, a PhD mathematician, and near PhD physicist, came to the markets via gambling, but not gambling in the conventional sense. Normally, casino games of chance have a negative edge for the player, and the longer one plays, the greater the chance of financial ruin.

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He had lots of energy, as if he had so much to say and had just been waiting for the right person to talk to. The conversation ranged from the paradoxes presented by quantum physics experiments to John’s particular disgust for one fund manager, who he insisted was a fraud. I wouldn’t hear that manager’s name again for nine years, when the financial crisis exposed what John had known all along: Bernie Madoff was a fraud. College was quickly approaching. I went down to my dad’s office to seek his advice on a major. It’s quite embarrassing to say, but at this point, I had still not read Market Wizards. I had no involvement with the markets, and my father was never one to push anyone toward his own desires.

The Once and Future Liberal: After Identity Politics
by Mark Lilla
Published 14 Aug 2017

Americans have always been entrepreneurial and have always believed that to get rich is glorious. But our long-abandoned Calvinism treated wealth as a sign of moral worth, the fruit of discipline and self-denial, not the fruit of looking out for number one. The Horatio Alger stories were not Gordon Gekko stories or Ivan Boesky stories or Bernie Madoff stories. The characters did wear suspenders, but they were not masters of any universe, did not smoke big cigars or drink $1,000 bottles of wine or take clients to strip clubs. For all his social conservatism, Ronald Reagan’s vision of the good life was remarkably amoral. He did not explicitly preach or encourage hedonism; he did not extol the culture of impunity that developed during his presidency.

The Revolution That Wasn't: GameStop, Reddit, and the Fleecing of Small Investors
by Spencer Jakab
Published 1 Feb 2022

Payment for order flow went from being an arcane technical aspect of the brokerage business to a supposed smoking gun overnight when Robinhood suspended trading of the meme stocks. Surely someone very bad had come up with it. Well, that part is at least right. The practice was pioneered in the early 1990s by the late Ponzi schemer Bernard Madoff. As recently as 2004, a prominent lawyer sent a detailed complaint to the SEC urging it to ban payment for order flow for options trading. “This practice distorts order routing decisions, is anti-competitive, and creates an obvious and substantial conflict of interest between broker-dealers and their customers,” he wrote.[23] The man’s employer?

The Enigma of Capital: And the Crises of Capitalism
by David Harvey
Published 1 Jan 2010

For example, they put money in the stock market and stock values go up, so they put even more money in the stock market, irrespective of how well the companies they invest in are actually doing. (remember those predictions in the late 1990s of the dow at 35,000?) The stock market has a Ponzi-like character even without the Bernie Madoffs of this world explicitly organising it so. The rich bid up all manner of asset values, including stocks, property, resources, oil and other commodity futures, as well as the art market. They also invest in cultural capital through sponsorship of museums and all manner of cultural activities (thus making the so-called ‘cultural industries’ a favoured strategy for urban economic development).

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Loss of social relations is impossible to recompense with a money payment. Finally we need to note the role of crises. A crisis, after all, is nothing less than a massive phase of dispossession of assets (cultural as well as tangible). To be sure, the rich as well as the poor suffer, as the cases of housing foreclosures and losses from investing with Bernie Madoff’s crazy Ponzi scheme show. But this is how wealth and power get redistributed both within and between classes. Devalued capital assets left over from bankruptcies and collapses can be bought up at fire-sale prices by those blessed with liquidity and profitably recycled back into circulation. Surplus capital thus finds a new and fertile terrain for renewed accumulation.

Money Men: A Hot Startup, a Billion Dollar Fraud, a Fight for the Truth
by Dan McCrum
Published 15 Jun 2022

‘Sir, this is your 529 plan not a brokerage fund. You’re really not supposed to be trading your children’s education back and forth like this.’ Promising that this was the last time, he was allowed to make the trade. The moment of maximum chaos came in December. News broke that investment funds run by Bernie Madoff, supposedly containing $65bn, weren’t able to meet requests for withdrawals. A former chairman of the Nasdaq exchange, Madoff was Wall Street royalty who had quietly amassed a reputation as a sensational money manager, producing incredibly reliable profits year after year. In the newsroom few people had even heard of Madoff or knew what was going on.

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At that moment in marched Henny Sender, a legendary reporter in her fifties, as usual in a skirt suit with trainers and a backpack over both shoulders. Personally recruited from the Journal by Lionel Barber, the FT editor, she was practically a clearing house for information, on first-name terms with every titan of finance. The news editor saw her and yelled, ‘Hey Henny, you ever hear of Bernie Madoff?’ ‘The Ponzi guy?’ she fired back. ‘Sure, why, what’s happened?’ Sender operated at only one volume, and that morning her calls drifted across the room. ‘I told you not to put money with Madoff …’ It turned out that Madoff had never done any investing, he simply spent the money on living the high life, a luxury yacht named Bull among the many trinkets.

Small Change: Why Business Won't Save the World
by Michael Edwards
Published 4 Jan 2010

Come to think of it, that’s not such a bad idea: It might have saved us from the colossal mismanagement and risk taking by banks and hedge funds that led to the financial crisis — companies that were so successful and well managed that, like Lehman Brothers and its foundation, they collapsed overnight, leaving hundreds of nonprofits to face financial ruin — or it might have spared us Bernard Madoff with his massive Ponzi scheme, who defrauded Jewish charities of huge amounts of money and caused whole philanthropies like the JEHT Foundation to vanish without a trace.9 “In investment banking, it is taken for granted that decisions about how to use capital are based on rigorous research into performance,” say Bishop and Green in their love poem to irrational exuberance 5 philanthrocapitalism; or as we now know, such decisions could be based on raw speculation at everyone else’s expense.

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Philanthrocapitalists sometimes paint reliance on donations, grants, and membership contributions as a weakness for nonprofits, but it can be a source of strength because it connects them to their constituencies and the public — as long as their revenue streams are sufficiently diverse to weather the inevitable storms along the way. In many cases, this would be a safer bet than pulling in more revenue from commercial capital providers with all the risks that that entails — for example, from the Lehman Brothers Foundation or Bernard Madoff ’s “management” of investments by nonprofits. “Nonprofits must understand that the desire to earn income and the desire to use business practices to promote social change are two different and almost entirely incompatible objectives. . . . Don’t mix your models,” warns the Seedco Policy Center in New York.44 Introducing the different logics of civil society and the market into the same organization can have a negative effect by confusing the bottom line still further, complicating accountability and stimulating mission drift.

I.O.U.: Why Everyone Owes Everyone and No One Can Pay
by John Lanchester
Published 14 Dec 2009

Downturns put pressure on earnings, and companies which are less than wholly honest begin to creak at the seams; at the same time, the voices which have been warning that there is something funny about Charles Ponzi (in 1920), Ivar Kreuger the match king (in 1932), Bernie Ebbers (in 2002), or Bernard Madoff (in 2008) begin to gain a hearing. The decline in share prices rolls over a rock, and an unsettling variety of financial beasties emerge. In the case of the millennial dot-com bust, the creature which came crawling out from underneath the rock was a fraud so spectacular and so systematic and so magnificently, reekingly wrong that it was in its way almost a thing of beauty: Enron.

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Celtic Zeppelin? Celtic Zombie? Celtic Car Crash? The undrinkable Galway water was a classic funny smell. In fact, it’s noticeable how often people who speak of or report these things refer to things smelling off or funny. The exact phrase was used to me by a man who turned down an invitation from Bernard Madoff to participate in his hedge fund. This man worked for a big investment bank, which offered clients the chance to participate in a fund-of-funds service: in other words, it offered a fund which consisted of a investments in several different hedge funds. For the banker, this should have been a win-win, because he had clients who were clamoring to join in Madoff’s funds—which were famous for their consistency, returning a steady 10 to 12 percent in all years and all weather—and the inflow of money would in turn generate a steady income in fees.

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Just as President Bush’s Environmental Protection Agency and Consumer Product Safety Commission seemed to have been captured by the very interests they were supposed to be regulating, so it was at the SEC. Much of this doctrinaire laissez-faire involved the nonenforcement of the rules which already existed. An activist SEC, for instance, would never have allowed Bernard Madoff to run his Ponzi scheme; the very consistency of his returns—the funny smell alluded to above—would have been enough to draw their close attention to his accounts. In 2005, a professional investor named Harry Markopolos, a mild-mannered Boston accountant, wrote a twenty-one-page letter to the SEC, pointing out the high probability that Madoff’s fund was a Ponzi scheme.

Against Everything: Essays
by Mark Greif
Published 5 Sep 2016

They ranged in size from one pound, twelve ounces, to two pounds, nine ounces. Only seven had been noted on ultrasound. The eighth, emerging as a minuscule hand clinging to the ob-gyn’s latex glove, amazed the delivery room. I think Octomom deserves another glance, in the midst of our compulsive forgetfulness, as the central actor in perhaps the only non–Bernard Madoff, ostensibly nonfinancial story to stir the boiling pitch of the nation’s passions in those historic months of September 2008 to March 2009, when American news outlets were trying to cope with the greatest financial collapse since the Great Depression. (Also enacting their own greatest moral collapse since their collusion in the 2003 Iraq War, at a rare moment when different messengers might really have led American society on a different path into history.)

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He was someone who must not be blamed, even as he argued for the $173 billion in tax revenues sucked out of government to prop up his new employer. The press didn’t follow up this sentence with the logical next one, naming the chief of AIG in the period for which someone should be blamed. Who was the old chief?*1 But Octomom, Octomom! And Bernard Madoff. Is it in very bad taste to point out that the two villains we gained by name in the months of deepening recession, in early 2009, were a woman and a Jew? Suleman and Madoff. That is to say, at the moment when American capitalism tottered under the mistakes, bad bets, lies, overconfidence, cupidity, and evil of its financial firms, the press groped at traditional scapegoats—and it left one blinking, dumbfounded.

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Then they followed the lineups of congressional hearings from Barney Frank’s House Financial Services Committee, relying on the same live C-Span the rest of us were watching (but without the level of analysis mustered on any week’s Monday Night Football), increasingly uncomfortable, it seemed, with anything that might be fomenting “class war.” Luckily, Bernard Madoff took over the headlines in December 2008, and this fixation on one Jewish banker could not be anti-Semitism, because his prominent Jewish victims also wanted his head. Indeed, we had the sorry spectacle of Elie Wiesel, conscience of humanity, investor with Madoff, becoming the spokesman for vengefulness.

The Irrational Bundle
by Dan Ariely
Published 3 Apr 2013

“Is anybody here rich?” he asked. “I know I am, but you college students aren’t. No, you are all poor. But that’s going to change through the power of CHEATING! Let’s do it!” He then recited the names of some infamous cheaters, from Genghis Khan through the present, including a dozen CEOs, Alex Rodriguez, Bernie Madoff, Martha Stewart, and more. “You all want to be like them,” he exhorted. “You want to have power and money! And all that can be yours through cheating. Pay attention, and I will give you the secret!” With that inspiring introduction, it was now time for a group exercise. He asked the students to close their eyes and take three deep, cleansing breaths.

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This first study showed that creativity and dishonesty are correlated, but that doesn’t necessarily mean that creativity is directly linked to dishonesty. For example, what if a third factor such as intelligence was the factor linked to both creativity and dishonesty? The link among intelligence, creativity, and dishonesty seems especially plausible when one considers how clever people such as the Ponzi schemer Bernie Madoff or the famous check forger Frank Abagnale (the author of Catch Me If You Can) must have been to fool so many people. And so our next step was to carry out an experiment in which we checked to see whether creativity or intelligence was a better predictor of dishonesty. Again, picture yourself as one of our participants.

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As I’ve mentioned, the collapse of Enron spiked my interest in the phenomenon of corporate cheating —and my interest continued to grow following the wave of scandals at Kmart, WorldCom, Tyco, Halliburton, Bristol-Myers Squibb, Freddie Mac, Fannie Mae, the financial crisis of 2008, and, of course, Bernard L. Madoff Investment Securities. From the sidelines, it seemed that the frequency of financial scandals was increasing. Was this due to improvements in the detection of dishonest and illegal behavior? Was it due to a deteriorating moral compass and an actual increase in dishonesty? Or was there also an infectious element to dishonesty that was getting a stronger hold on the corporate world?

The Centrist Manifesto
by Charles Wheelan
Published 18 Apr 2013

Why would you put money in a 401(k) retirement account or buy life insurance if there were no legal assurances that the firms selling those products would not simply walk off with your money? Or to put it slightly differently, when you are stashing away hundreds of thousands of dollars for college tuitions and retirement, who scares you more: Bernie Madoff or the government officials who regulate the financial markets? As any introductory economics book would point out, good government is not the enemy of capitalism; it is a precondition. The Democrats have a natural empathy for the truly disadvantaged. Every one of the world’s major faiths has a core belief built around the notion that society has an obligation to help those who are in need.

The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy
by Stephanie Kelton
Published 8 Jun 2020

Not just to prevent senseless cuts to programs that support tens of millions of Americans but also to have a more enlightened debate about the full range of things we could accomplish if we weren’t so afraid. The debt isn’t the reason we can’t have nice things. Our broken thinking is. To fix our broken thinking, we need to overcome more than just an aversion to big numbers with the word debt attached. We need to beat back every destructive myth that hobbles our thinking. China, Greece, and Bernie Madoff I doubt the woman who placed that bumper sticker on her SUV was simply nervous about the size of the US Treasury market—that is, the national debt. Chances are, she had other concerns. Maybe she’d heard presidential candidate Barack Obama complain that the US was borrowing from China and “driving up our national debt, that we are going to have to pay off.”

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As Margaret Thatcher famously quipped, the problem is that “eventually you run out of other people’s money.” To some people, finding new investors to purchase a never-ending mountain of government debt can start to look like a fraudulent pyramid scheme.13 The kind run by the notorious huckster Bernie Madoff. It isn’t. Madoff was defrauding investors. The United States Treasury is not. As Alan Greenspan explained in an appearance on NBC’s Meet the Press, investors face “zero probability of default” when it comes to US Treasuries.14 And here we should distinguish between voluntary and involuntary default.

The End of Alchemy: Money, Banking and the Future of the Global Economy
by Mervyn King
Published 3 Mar 2016

Towards the end of his investing career he mellowed and put less faith in speculative investments, writing: ‘As time goes on, I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about.’21 Perhaps the enormous losses banks incurred in the crisis, and the fines levied by regulators around the world, will bring a similar change of heart in banking. Banks and other financial intermediaries create wealth by providing valuable services to their customers. But there is always the risk that they create the illusion of wealth – in the extreme case of the fraudster Bernie Madoff and his funds there was quite a long period when the perception of wealth was substantially higher than the reality.22 More generally, many of the substantial bonuses that were paid as a result of trading in derivatives reflected not profits earned in the past year but the capitalised value of a stream of profits projected years into the future.

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Data are for end 2014. 7 Worldwide bank assets are the total assets of the largest 1000 banks in the world, as listed in the Banker Database. 8 The Banker Database, www.thebankerdatabase.com 9 The description ‘socially useless’ was used by Adair Turner, chairman of the Financial Services Authority in the UK from 2008 to 2013, in his Turner Report on the financial crisis in United Kingdom; The phrase ‘doing God’s work’ was used by the CEO of Goldman Sachs, Lloyd Blankfein, in an interview published in the Sunday Times, 8 November 2009. 10 Figures from the Banker Database, www.thebankerdatabase.com, as of end 2014. 11 Because for any bank total assets must equal total liabilities, leverage can be measured by the ratio of either assets or liabilities to equity capital. 12 Brennan, Haldane and Madouros (2010). 13 I prefer ‘too important to fail’ (TITF) to ‘too big to fail’ (TBTF) as a description of the problem, because a small bank can be significant if it is highly interconnected with other banks or if its failure would be a signal leading to contagion to other banks. 14 Wolf (2010). 15 Bank of England (2009). 16 Bank for International Settlements (BIS), Derivative Statistics 2015. 17 Abbey National demutualised in 1989 and has survived as part of Santander UK. 18 That attitude was brilliantly captured in the book Liar’s Poker by Michael Lewis (1989). 19 CCP Research Foundation estimates of conduct costs 2010–14, http://conductcosts.ccpresearchfoundation.com/conduct-costs-results. The estimate includes provisions made by banks of around $70 billion for future settlements of conduct cases relating to past behaviour. 20 Moggridge (1992), p. 95. 21 Keynes in a 1934 letter quoted by Chambers et al. (2014). 22 Bernie Madoff, former chairman of the NASDAQ stock exchange, for many years managed funds for private investors in which the money paid out was financed by new money coming in – what is known as a Ponzi scheme. He is estimated to have defrauded his investors of around $18 billion and in 2009 was sentenced to the maximum term in prison of 150 years. 23 Quoted in Alan Harrington, ‘The Tyranny of Forms’, Life in the Crystal Palace (Knopf, 1959). 24 This is not to say that accounting standards guarantee a fair and accurate description of the health of a bank (Dowd, 2015, Kerr, 2011). 25 The success of an investment in Berkshire Hathaway is in part the judgement of Warren Buffett and in part the fact that he does not operate his company as a hedge fund, which would typically charge an annual fee of 2 per cent of capital and 20 per cent of profits.

People, Power, and Profits: Progressive Capitalism for an Age of Discontent
by Joseph E. Stiglitz
Published 22 Apr 2019

That’s why so many countries and religions have laws and precepts preventing usury, and why the more humane wealthier societies try to do what they can to prevent people from being in these extreme positions where they can be so exploited by others. More generally, there is and should be concern when there is too great an asymmetry in bargaining power. Critics of regulation contend that our legal system is enough of a deterrent to exploitation, that the example of convicted criminals like Bernie Madoff who took advantage of others is sufficient. That is not the case: we need regulations to make it more difficult for the bad behavior to happen in the first place. It is better to prevent these actions than to clean up the mess after they occur because the damage can never be fully repaired—as the Madoff example itself makes abundantly clear.

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Some of the worst banking practices were found abroad. The extensive cheating by car companies as they pretended that their products were more environmentally sound than they were shows that moral turpitude was not limited to finance. Still, in the sheer dollar value of the fraudulent and dishonest activities, the financial sector wins out. The Bernie Madoff pyramid scheme alone represented some $65 billion missing from individuals’ accounts. And because the financial sector touches virtually every other sector of the economy, the financial sector spread the virus through much of the economy. 5.Thus, as the complex securities such as residential backed mortgage securities (RMBS) developed, for these securities containing thousands of mortgages to work, the originators and investments had to issue what could be viewed as equivalent to a money-back guarantee: banks had agreed to buy back any mortgages that were not as represented to those who had invested in or insured the securities.

American Made: Why Making Things Will Return Us to Greatness
by Dan Dimicco
Published 3 Mar 2015

But when you look at the expansions and recessions since 1970, you find deep and lasting damage to the economy. You find a pattern of well-paying jobs disappearing, to never return, and millions of manufacturing jobs being replaced with service industry jobs or financial industry jobs. You find greed, you find cheating and fraud and a wholesale abandonment of ethics. You find Bernie Madoff and Ken Lay and Dennis Kozlowski. You find bubbles that burst with disastrous consequences. The housing bubble, like every other debt-driven bubble before it, was a giant Ponzi scheme. In reality, for every year that housing prices ballooned, and people found more elaborate ways of packaging financial service “products” that nobody really understood, we lost more ground.

The Psychopath Inside: A Neuroscientist's Personal Journey Into the Dark Side of the Brain
by James Fallon
Published 30 Oct 2013

Who the hell else would want to be a president or CEO if they really knew what it involved? You need heavy egotism and a lot of glibness and a bit of bullshit to aspire to that kind of work and to do it well. Robert Hare, the man behind the psychopath checklist, sees psychopathy at work in the finance and banking and investment community, perhaps in some people like Bernie Madoff. (A strong study showing greater psychopathy in business hasn’t been done, but the hypothesis is reasonable.) It could be argued that the only reason these money-managing swindlers exist is that the general public wants to make that quick and easy buck and, while lacking their own combination of high risk and knowledge, use hired guns like Madoff and other investment mavens to do their dirty work for them.

Double Entry: How the Merchants of Venice Shaped the Modern World - and How Their Invention Could Make or Break the Planet
by Jane Gleeson-White
Published 14 May 2011

When railway companies faltered in the late 1840s, struggling to return 10 per cent on investments, many began to fiddle their books. For example, they treated costs as capital investments rather than as expenses, thereby inflating their profits; and used fresh investments instead of profits to pay out dividends (a strategy now known as a Ponzi scheme, made infamous most recently by Bernie Madoff in 2009). The most notorious perpetrator of deceptive railway accounting was the ‘Railway King’, George Hudson (1800–71), who by 1844 controlled over 1600 kilometres of railway in Britain. Hudson overstated his profits and used shareholder investments to pay dividends. When he was eventually exposed by a group of outraged investors, he fled England to escape lawsuits against him for outstanding sums amounting to almost £600,000, a fortune at the time.

Rethinking Narcissism: The Bad---And Surprising Good---About Feeling Special
by Dr. Craig Malkin
Published 6 Jul 2015

In their minds, they cease to exist if people aren’t acknowledging their importance. They’re addicted to attention, and like most addicts, they’d do anything to get their high, so even authentic love takes a backseat. At 10 our humanity collapses under the weight of empty posturing and arrogance. Think of Bernie Madoff, who swindled hundreds of millions of dollars from his clients and who, when caught, scoffed at the “incompetence” of the investigators for not asking the right questions. Even as he faced life in prison, he still managed to feel superior. Being at 1 or 9 isn’t much better. People at 9 are still in the territory of dark narcissism; they can live without elbowing their way into the spotlight, but it pains them to do so—so much so that they need professional help to break the habit.

Trend Following: How Great Traders Make Millions in Up or Down Markets
by Michael W. Covel
Published 19 Mar 2007

Loss I began to realize that the big money must necessarily be in the big swing. Jesse Livermore You are going to have ups and downs in your trading account. Losses are a part of the trading game. You say you want no losses? You want positive returns every month? Well, you could have had your money with the Ponzi-scheme of Bernard Madoff, but we all know how that turned out! Life equals having losses and you’re going to have losses with trend following. “You can’t make money if you are not willing to lose. It’s like breathing in, but not being willing to breathe out.”36 If you don’t have losses, you are not taking risks. If you don’t risk, you won’t ever win big.

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“Are you sitting down?” Hochenberger asked a sleepy Killian. “No, I’m lying down.” It is not unusual to see people frame market wins and losses as a morality tale. These types of questions are designed to absolve the guilt of the market losers for their bad strategies (i.e. Amaranth, Bear Stearns, Bernard Madoff, etc.). The market is no place for political excuses or social engineering. No law changes human nature. If you don’t like losing, examine the strategy of the winners. The performance histories of trend followers during the 2008 market crash, 2000–2002 stock market bubble, the 1998 LongTerm Capital Management (LTCM) crisis, the Asian contagion, the Barings Bank bust in 1995, and the German firm Metallgesellschaft’s collapse in 1993, answer that all important question: “Who won?”

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These behaviors, the antithesis of the way trend followers operate, include: • Lack of discipline: It takes an accumulation of knowledge and sharp focus to trade successfully. Many would rather listen to the advice of others than take the time to learn for themselves. People are lazy when it comes to the education needed for trading. Think about Bernard Madoff. People just wanted to believe. • Impatience: People have an insatiable need for action. It might be the adrenaline rush they’re after—their “gambler’s high.” Trading is about patience and objective decision making, not action addiction. • No objectivity: We are unable to disengage emotionally from the market.

Being Wrong: Adventures in the Margin of Error
by Kathryn Schulz
Published 7 Jun 2010

We get stuck there when we are really wrong about really big things—beliefs so important and far-reaching that we can neither easily replace them nor easily live without them. If our trivial beliefs sometimes burst as lightly as bubbles—just a quick pop of surprise and they’re gone—these gigantic beliefs collapse like stars, leaving only us and a black hole behind. If you mortgaged your family’s future on your faith in Bernie Madoff; if you hitched your whole wagon to a doctrine or a deity you no longer believe in; if you were wrong about someone you loved and the kind of life you thought the two of you would live together; if you have betrayed your own principles in any of the countless dark ways we can surprise ourselves over the course of a lifetime: if any of this or anything like this has happened to you, then you have suffered in the space of pure wrongness.

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Millerism wasn’t one of those religious sects based on secret arcana known only unto high priests; broad dissemination of its tenets and the calculations used to justify them was both the means and the message of the movement. Nor, finally, had the Millerites been defrauded. William Miller was no Bernie Madoff, and his followers, unlike Madoff’s clients, hadn’t been intentionally deceived. They had simply placed their faith in an expert who turned out to be wrong. In that respect, they deserve our sympathy, at least up to a point. As we’ve seen, all societies function on the basis of distributed expertise, and all of us rely on others in areas where our own knowledge falls short.

The Finance Curse: How Global Finance Is Making Us All Poorer
by Nicholas Shaxson
Published 10 Oct 2018

Luxembourg was key to the Elf Affair, Europe’s biggest corruption scandal since the Second World War, which involved the French state oil company Elf Aquitaine serving as a giant offshore slush fund pumping secret finance to all the main French political parties and to the intelligence services, and supplying bribes on behalf of French businesses all around the world, from Venezuela to Germany to Taiwan. The global fraudster Bernie Madoff ran some of his largest scams out of Luxembourg. In fact, almost any large-scale financial and political scandal in western Europe since the 1960s has had a colourful Luxembourg chapter. And things haven’t changed that much: as a Financial Times analysis put it in 2017, ‘Luxembourg sometimes resembles a criminal enterprise with a country attached.’2 If anyone can be called the architect of the modern tax haven of Luxembourg, it’s the man who served as finance minister from 1989, then prime minister from 1995 to 2013 and now president of the European Commission, Jean-Claude Juncker.

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Luxembourg has the world’s second-largest mutual funds sector after the United States, but a courts system ‘the size of a small provincial town’ as one lawyer put it. They can’t possibly police the financial oceans that roil through here – and they don’t want to; competitive policing of finance is after all, part of the point.8 Many of the funds that channelled European investors’ savings into Bernie Madoff’s giant Ponzi scheme were run out of Luxembourg, and ‘the whole set-up violated European law,’ said Erik Bomans, a partner in Deminor, a financial recovery firm representing some 3,000 defrauded Madoff investors. ‘There were no control mechanisms, no yearly due diligence, nothing, nothing, nothing,’ Bomans told me.

Greater: Britain After the Storm
by Penny Mordaunt and Chris Lewis
Published 19 May 2021

Furthermore, African-American women control 19 per cent of those companies, or an estimated 2.2 million businesses.53 Increasing women’s productivity and employment to those of men could add 35 per cent to GDP or £600 billion to the UK economy.54 There’s something else in the gender equality debate that deserves closer scrutiny. What did the scandals at Enron, Oxfam, Volkswagen, the Catholic Church, Bernie Madoff and the major banks have in common? Could it be that reckless overconfidence is behind so many leadership failures? Or because they couldn’t even imagine what might go wrong? More of this later. Professor Tomas Chamorro-Premuzic, from University College London (UCL), has written about how confidence can mask incompetence.

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sh=556f93d970d6 8 https://www.theguardian.com/business/2016/nov/08/rbs-facing-400m-bill-to-compensate-small-business-customers 9 https://www.ft.com/content/87f72e9e-bafb-11e7-9bfb-4a9c83ffa852 10 https://www.theguardian.com/business/2008/dec/28/markets-credit-crunch-banking-2008 11 http://www.businessinsider.com/how-bernie-madoffs-ponzi-scheme-worked-2014-7 12 https://www.forbes.com/sites/greatspeculations/2019/05/03/20-years-since-the-uks-massive-gold-sales-heres-the-big-lesson-for-gold-investors/#51fb3a932ac6 13 https://www.cnn.com/2017/06/29/world/timeline-catholic-church-sexual-abuse-scandals/index.html 14 http://www.bbc.co.uk/news/uk-43121833 15 http://www.bbc.com/news/education-11621391 16 https://www.pwc.com/ee/et/publications/pub/sb87_17208_Are_CEOs_Less_Ethical_Than_in_the_Past.pdf 17 https://www.bbc.co.uk/news/business-34324772 18 https://www.theguardian.com/environment/2015/oct/09/mercedes-honda-mazda-mitsubishi-diesel-emissions-row 19 https://edition.cnn.com/2019/12/30/business/carlos-ghosn-lebanon/index.html 20 https://www.bbc.co.uk/news/business-48755329 21 http://www.bbc.co.uk/news/entertainment-arts-41594672 22 https://www.theguardian.com/media/greenslade/2014/feb/19/newsnight-lord-mcalpine 23 https://www.telegraph.co.uk/news/uknews/crime/jimmy-savile/12172773/Jimmy-Savile-sex-abuse-report-to-be-published-live.html 24 http://www.bbc.co.uk/sport/athletics/43301116 25 https://www.theguardian.com/law/2017/feb/02/iraq-human-rights-lawyer-phil-shiner-disqualified-for-professional-misconduct 26 https://www.theguardian.com/us-news/2018/aug/22/how-many-of-trumps-close-advisers-have-been-convicted-and-who-are-they 27 https://www.icij.org/investigations/panama-papers/ 28 https://www.bostonglobe.com/ideas/2018/01/20/trillions-dollars-have-sloshed-into-offshore-tax-havens-here-how-get-back/2wQAzH5DGRw0mFH0YPqKZJ/story.html 29 https://www.visualcapitalist.com/80-trillion-world-economy-one-chart/ 30 https://uk.reuters.com/article/us-davos-meeting-eu-tax/tax-avoidance-evasion-costs-eu-170-billion-euros-a-year-says-poland-idUKKBN1ZL1H4 31 https://www.theguardian.com/commentisfree/2018/nov/29/im-credited-with-having-coined-the-acronym-terf-heres-how-it-happened 32 https://stonewallhousing.org/wp-content/uploads/2018/09/FindingSafeSpaces_StonewallHousing_LaptopVersion.pdf 33 https://www.telegraph.co.uk/news/2016/11/10/white-working-class-boys-perform-worst-at-gcses-research-shows/ 34 https://www.visualcapitalist.com/the-decline-of-upward-mobility-in-one-chart/ 35 https://www.theguardian.com/society/2020/jan/21/social-mobility-decline-britain-official-survey-finds 36 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/622214/Time_for_Change_report_-_An_assessement_of_government_policies_on_social_mobility_1997-2017.pdf 37 https://www.thetimes.co.uk/article/johnson-says-half-of-mps-should-be-women-vdgnw2gpx 38 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/622214/Time_for_Change_report_-_An_assessement_of_government_policies_on_social_mobility_1997-2017.pdf 39 https://www.gov.uk/government/publications/social-mobility-in-great-britain-state-of-the-nation-2018-to-2019 40 https://www.oecd.org/social/broken-elevator-how-to-promote-social-mobility-9789264301085-en.htm 41 https://www.bbc.com/news/world-africa-36132151 42 https://www.bbc.com/news/uk-politics-53246899 43 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/413347/Music_in_schools_wider_still__and_wider.pdf 44 https://www.statista.com/statistics/685208/number-of-female-ceo-positions-in-ftse-companies-uk/ 45 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/814080/GEO_GEEE_Strategy_Gender_Equality_Monitor_tagged.pdf 46 https://www.telegraph.co.uk/women/work/just-who-are-the-7-women-bosses-of-the-ftse-100/ 47 https://www.bloomberg.com/gei/ 48 https://www.wsj.com/articles/blackrock-companies-should-have-at-least-two-female-directors-1517598407 49 https://www.bloomberg.com/news/articles/2018-02-02/blackrock-asks-companies-to-explain-dearth-of-women-on-boards 50 https://hbr.org/2016/02/study-firms-with-more-women-in-the-c-suite-are-more-profitable 51 https://fortune.com/2015/06/29/black-women-entrepreneurs/ 52 https://www.nawbo.org/resources/women-business-owner-statistics 53 https://www.nawbo.org/resources/women-business-owner-statistics 54 https://www.womensbusinesscouncil.co.uk/wp-content/uploads/2017/02/DfE-WBC-Two-years-on-report_update_AW_CC.pdf 55 https://www.intheblack.com/articles/2016/08/01/challenging-the-myth-that-self-confidence-equals-success 56 https://hbr.org/2014/07/the-dangers-of-confidence 57 https://researchbriefings.files.parliament.uk/documents/SN05878/SN05878.pdf 58 https://www.telegraph.co.uk/culture/charles-dickens/9048771/Gradgrind-My-favourite-Charles-Dickens-character.html 59 https://www.independent.co.uk/news/education/education-news/sir-anthony-seldon-historian-says-test-obsession-wrecks-education-a6779891.html 60 https://www.youtube.com/watch?

The System: Who Rigged It, How We Fix It
by Robert B. Reich
Published 24 Mar 2020

In the bank’s 2013 quarterly report, its list of legal imbroglios ran to nine pages of small print: improper energy trading, fraud in collecting credit card debt, misrepresenting the quality of mortgages in securities sold to investors, misleading credit card customers, bribing officials in foreign countries to buy certain securities, illegally foreclosing on mortgages, covering up Bernie Madoff’s Ponzi scheme, manipulating the foreign exchange market. That year the bank paid out more than $20 billion to settle the claims but still made a profit of $17.9 billion. So JPMorgan’s board voted to boost Dimon’s pay to $20 million, a 74 percent increase over the year before, which came out to about $1 million for every billion dollars JPMorgan had been fined for illegal activities.

The End of Money: Counterfeiters, Preachers, Techies, Dreamers--And the Coming Cashless Society
by David Wolman
Published 14 Feb 2012

It’s not like you’re walking off with a company car. With the stolen Cokes, the rationale is even easier: if there are any what’s-mine-is-yours communities left on Earth, they are college dormitories. These findings help us to understand the thinking—or lack thereof—that goes on in the minds of villains like Bernie Madoff, the architects of the Enron scam, and even bankers who sell legal but toxic assets. Ariely ventures that these people, and millions like them, wouldn’t mug an old lady on the street, and he’s probably right. Fuzzy up the transaction, though, and it brings out the worst in us. “We need to recognize that once cash is a step away,” writes Ariely, “we will cheat by a factor bigger than we could ever imagine.”

With Liberty and Justice for Some: How the Law Is Used to Destroy Equality and Protect the Powerful
by Glenn Greenwald
Published 11 Nov 2011

Over the past several decades, we have witnessed numerous examples of serious lawbreaking on the part of our most powerful political and financial leaders with no consequences of any kind. It is no exaggeration to state that the current consensus among journalists and politicians is that except in the most blatant and sensationalistic cases (typically ones in which other powerful factions are aggrieved—a Bernie Madoff here, a Rod Blagojevich there), criminal prosecutions are simply not appropriate for the country’s elites. Courtrooms, indictments, and prisons are there for ordinary Americans, not for the ruling classes, and virtually never for our highest political leaders. The central promise of the American founding—that all would stand equal before the rule of law no matter what other political and economic inequality was allowed—has been abandoned.

Investing Demystified: How to Invest Without Speculation and Sleepless Nights
by Lars Kroijer
Published 5 Sep 2013

In an even worse scenario than this where property rights are out the window we would probably want to own high-value, yet easy to hide and transfer, goods like gold or jewellery. And in complete mayhem we want to own shelter, security, food and water. And indeed guns and ammo. Avoiding fraud While different from the broader kind of calamity discussed above, for some people Bernie Madoff and other fraudsters like him have become their personal equivalent. Whole books have been written about how to avoid investing with the next Madoff, and rightly so. Madoff is the epitome of the worst the world of finance has to offer. He was stealing from people whose confidence he had gained, and left many people bankrupt while he was living the high life.

The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion
by Eliot Brown and Maureen Farrell
Published 19 Jul 2021

CHAPTER 11 Catnip for Millennials WeWork’s growth was showing no signs of slowing, and by 2015 Adam Neumann needed more bodies and more people he could trust to run things. Thus far, the company had mostly been a family affair. The ranks of WeWork leadership were filled by people close to the Neumanns: friends, family, friends of friends. Rebekah Neumann’s brother-in-law Chris Hill—whose family suffered a large financial loss with Bernie Madoff—ran operations. Neumann’s friend from the navy Ariel Tiger ran finance until 2014. Neumann’s childhood friend Zvika Shachar did odd jobs for Neumann. Rebekah’s cousin Mark Lapidus ran real estate. And Rebekah Neumann had taken over the brand and marketing departments the previous year. Even his recently hired CFO, Michael Gross—who had previously been the CEO of a boutique hotel company—had been a childhood friend of Rebekah’s cousins.

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more of a marketing company: Eliot Brown, “Casper Has Big Dreams, but Wall Street Is Waking Up to Losses as Its IPO Nears,” Wall Street Journal, Jan. 24, 2020. he was impressed with the vibe: Interview with Brandon Shorenstein, Feb. 2020. Neumann said that he personally: Ibid. He was busy, but it rang again: Ibid. He wouldn’t do more deals with them: Ibid. CHAPTER 11: CATNIP FOR MILLENNIALS large financial loss with Bernie Madoff: Kevin McCoy, “Madoff Victims Speak Out—in Writing,” USA Today, Dec. 8, 2014. The office culture was different: Interview with Carl Pierre, May 2020. with the pursuit of utopianism: “Don’t Be Evil: Fred Turner on Utopias, Frontiers, and Brogrammers,” Logic, Dec. 1, 2017. Facebook preached its societal good: George Packer, “Change the World,” New Yorker, May 20, 2013.

ZeroZeroZero
by Roberto Saviano
Published 4 Apr 2013

Martin stirred up troubled waters, he dirtied his hands with numbers in order to reactivate the American banking system’s protections. A single lightning bolt in a cloudless sky. But there are thunder and lightning on the horizon. Controls grew very rigid after September 11, but with the financial crisis that exploded in the midst of Martin’s investigation, the climate changed. Hence the verdicts that send the megaswindler Bernie Madoff to prison for 150 years, and the French trader Jérôme Kerviel for 5, along with repaying Société Générale nearly €5 billion, the amount he’d burned through. These men, who often describe themselves as sacrificial lambs of the system, nevertheless caused enormous harm to individuals, companies, and society as a whole.

The Rich and the Rest of Us
by Tavis Smiley
Published 15 Feb 2012

But Ehrenreich’s point, that the movement to end poverty will more than likely be a “leaderless” movement, is a powerful reflection of the times that we live in. Revolution in the information age demands a new model. There are no exemptions in the body politic; everybody has been hit by various forms of financial distress—from retirees fleeced by Bernie Madoff, to auto workers in Detroit, retirees in Florida, and municipal workers in Wisconsin. Poverty in the 21st century has taught us many lessons—but first and foremost, we have discovered that poverty is an equal opportunity employer and that we are all vulnerable to unpredictable economic maelstroms.

Intertwingled: Information Changes Everything
by Peter Morville
Published 14 May 2014

Our understanding of the complex systems that bind us together into billions of unique mixtures of mind-body-environment is limited. We’re lost in the wilderness in the dark with a tiny flashlight. But we hate feeling helpless and want a quick fix, so we place our trust in the doctor. We’re not good at assigning trust. Bernie Madoff knew that well. We let what we want shift what we know. I do this all the time with the weather. I know the forecast isn’t exact but want to ride my bike, so I try threading the needle between storms and end up soaked to the bone. Sadly, our trust in doctors is even more misplaced, since malpractice isn’t as random as a butterfly flapping its wings.

A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression
by Richard A. Posner
Published 30 Apr 2009

The government was doing nothing to prick the bubble and too little to keep leverage within safe bounds. The longer the world economy went without a depression, the worse the collapse would be when it finally, inevitably, came. Warren Buffett is reported to have said that you don't know who's swimming naked until the tide goes out. The receding stock market tide exposed Bernard Madoff, who is said to have confessed to having pulled off the biggest Ponzi scheme in history. The scheme would have lasted longer and the losses to investors would have been greater had the stock market crash been postponed. The crash reduced the value of Madoff's hedge fund, but more important (because the fund probably had little in the way of assets), the general economic collapse caused requests for redemptions of investments in hedge funds and other investment funds to soar, and Madoff could not honor his investors' requests for redemption and as a result his scheme collapsed.

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A similar but more compelling case can be made for consolidation of the multiplicity of federal agencies that regulate the financial system; and it is beginning to seem likely that there will be such a reorganization. If in the course of it the Securities and Exchange Commission is abolished as punishment for its inaction, Bernard Madoff and Christopher Cox can share the credit. But to reorganize in the midst of crisis, and likewise to regulate or reregulate in the midst of crisis, is a formula for chaos. The argument for doing either is that the ability to change the institutional structure of financial regulation will fade with time; the President's power is at its maximum now, and should be used, and doubtless will be.

When to Rob a Bank: ...And 131 More Warped Suggestions and Well-Intended Rants
by Steven D. Levitt and Stephen J. Dubner
Published 4 May 2015

A 2007 Slate article explains that of the missing children in one recent year, “203,900 were family abductions, 58,200 were nonfamily abductions, and only 115 were ‘stereotypical kidnappings,’ defined in one study as ‘a nonfamily abduction perpetrated by a slight acquaintance or stranger in which a child is detained overnight, transported at least 50 miles, held for ransom, or abducted with the intent to keep the child permanently, or killed.’” So the next time your brain insists on fearing strangers, try to tell it to cool out a bit. It’s not that you necessarily need to insist that it fear your friends and family instead—unless, of course, you are friends with someone like Bernie Madoff. Let’s not forget that the greatest financial fraud in history was committed primarily among friends. And with friends like that, who needs strangers? CHAPTER 6 If You’re Not Cheating, You’re Not Trying ©iStock.com/mstay “Cheating may or may not be human nature,” we wrote in the first chapter of Freakonomics, “but it is certainly a prominent feature in just about every human endeavor.

23 Things They Don't Tell You About Capitalism
by Ha-Joon Chang
Published 1 Jan 2010

There are many stories coming out of the 2008 financial crisis that show how the supposedly smartest people did not truly understand what they were doing. We are not talking about the Hollywood big shots, such as Steven Spielberg and John Malkovich, or the legendary baseball pitcher Sandy Koufax, depositing their money with the fraudster Bernie Madoff. While these people are among the world’s best in what they do, they may not necessarily understand finance. We are talking about the expert fund managers, top bankers (including some of the world’s largest banks, such as the British HSBC and the Spanish Santander), and world-class colleges (New York University and Bard College, which had access to some of the world’s most reputed economics faculty members) falling for the same trick by Madoff.

Ego Is the Enemy
by Ryan Holiday
Published 13 Jun 2016

A genuinely good and loyal individual, he was not cut out for the dirty world of Washington, and it made quick work of him. He left office a maligned and controversial figure after two exhausting terms, almost surprised by how poorly it had gone. After the presidency, Grant invested almost every penny he had to create a financial brokerage house with a controversial investor named Ferdinand Ward. Ward, a Bernie Madoff of his day, turned it into a Ponzi scheme, and publicly bankrupted Grant. As Sherman wrote with sympathy and understanding of his friend, Grant had “aimed to rival the millionaires, who would have given their all to have won any of his battles.” Grant had accomplished so much, but to him, it wasn’t enough.

End the Fed
by Ron Paul
Published 5 Feb 2011

In doing either, they are eliminating the most important mechanism needed to adjust supply and demand and rejuvenate markets. This represents a grave danger. When interventionists interfere too much with free-market pricing, we move toward a socialist system that in the twentieth century was proven to be unworkable. The Bernie Madoff fraud case received plenty of attention, and rightly so. Adequate antifraud laws are on the books, and fraud is something every state is capable of handling. The fraud involved in the Enron scandal was prosecuted under Texas state law. Yet the consensus was that there weren’t enough SEC regulations controlling these sorts of things, even though it was active traders, not regulators, who first discovered the problem.

Poking a Dead Frog: Conversations With Today's Top Comedy Writers
by Mike Sacks
Published 23 Jun 2014

We thought it was really obvious, but when people saw that movie, they didn’t really pick up on what we were doing. What do you think they missed? I remember people were blindsided by what we were saying. I was like, “Did you see the movie? The villain is from The Center for American Capitalism. The whole movie is about how chasing small-time drug crimes is meaningless. The real crimes, like the Bernie Madoff situation, are always taking place behind the scenes.” That was the whole premise for the movie. And I was amazed when no one picked up on it. To me it was glaring. Will Ferrell’s character in The Other Guys is interesting. As opposed to the rest of the characters in the film, he did, in fact, have the guts to take on those in power.

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His hearing was incredible. He’d hear things that no other dogs, or people, could hear. The Ferrell character in The Other Guys is like that. He almost had an Asperger’s quality to him. I remember learning about this financial analyst [Harry Markopolos] who uncovered, years before anyone else—way back in 2000—the Bernie Madoff crimes. He knew what Madoff was doing was a Ponzi scheme. He went to the SEC and even The Wall Street Journal. Neither did a thing. Meanwhile, Madoff was making comments about this guy, really dismissive comments: “This guy is a joke. Everyone on Wall Street laughs at that guy.” Well, guess what?

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown
by Philip Mirowski
Published 24 Jun 2013

In this neoliberal perspective, there is also a natural stratification in what classes of law are applicable to different scofflaws: “the criminal law is designed primarily for the nonaffluent; the affluent are kept in line, for the most part, by tort law.”110 In other words, economic competition imposes natural order on the rich, because they have so much to lose. The poor need to be kept in line by a strong state, because they have so little to lose. Hence, the spectacle of (as yet) no major financial figure outside of Bernie Madoff and Raj Rajnarathan going to jail because of the crisis, while thousands of families behind on their mortgages are turfed out into the street by the constabulary, is a direct consequence of this neoliberal precept. [13] The neoliberals have struggled from the outset to have their political/economic theories do dual service as a moral code.

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General-interest magazines, from Business Week to The Economist to the New York Times, which had hitherto volunteered as cheerleaders for the economics profession without encouragement, turned openly hostile in 2008, hectoring whole schools of thought for their failures, grasping randomly for “new paradigms,” rooting around for sixth-round draft picks and telegenic wicked rebels to replace their prior stable of catallactic pundits. Lusting for scapegoats, journalists initially scoured the landscape for miscreants like Bernie Madoff, Dick Fuld, and Joseph Cassano; and then instinctively turned to find their counterparts inside the economics profession. There was even an online ballot for receipt of the Ignoble (or “Dynamite”) Prize, to be awarded to three economists deemed to have contributed the most to the global financial collapse.

J.K. Lasser's New Tax Law Simplified: Tax Relief From the HIRE Act, Health Care Reform, and More
by Barbara Weltman
Published 30 Nov 2010

As recent court decisions have demonstrated, the election cannot be made retroactively and no extension can be granted to make a late election. Thus, the election cannot be made on an amended return (which, by definition, is filed after the due date of the return for the year in question). Investment Losses in Ponzi Schemes The Bernard Madoff Ponzi scheme and other similar financial frauds in 2008 left thousands of investors without their money and with uncertainty about how to handle their losses for tax purposes. Unfortunately for investors, more financial schemes are being uncovered every day. The IRS has created a safe harbor for affected investors under which they can treat losses as a theft loss and claim a deduction.

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The IRS has created a safe harbor for affected investors under which they can treat losses as a theft loss and claim a deduction. The safe harbor avoids problems of proof of how much income reported in prior years was fictitious or a return of capital. Who qualifies? The safe harbor can be used only by an investor in a taxable account if the lead figure, such as Bernard Madoff, has been charged federally or under state law with fraud, embezzlement, or a similar crime and the investor invested solely with such lead figure (and not through a fund or other entity). The safe harbor does not apply to investments made through tax-deferred accounts, such as IRAs. 85 P1: OTA/XYZ P2: ABC c04 JWBT413/Weltman 86 October 14, 2010 14:52 Printer Name: Yet to Come NEW INVESTMENT OPPORTUNITIES AND TRAPS What to deduct?

Navel Gazing: True Tales of Bodies, Mostly Mine (But Also My Mom's, Which I Know Sounds Weird)
by Michael Ian Black
Published 5 Jan 2016

They are either at home building model railroad sets or in jail for touching their nieces. Besides, the idea that a relative of mine would leave behind any kind of worthwhile estate was ridiculous. Other than my gangland namesake, my family has never had much money. If they had, it either would have been squandered on dubious business opportunities or invested with Bernie Madoff or something. To die with more assets than liabilities is as exotic a concept to my family as crunking. When I called the man on the phone a liar, he sighed. “That’s what everybody says when I call, but it’s true. You have a great-uncle on your father’s side who recently died.” He then detailed a fair amount of information to me about myself and my family, and told me he would be sending me a form so I could claim my inheritance.

Starstruck: The Business of Celebrity
by Currid
Published 9 Nov 2010

Contrast this with sports, and to a greater extent with Hollywood, where an audience and visual persona is part of a star’s dossier of success.21 Financial celebrity emerges at times, but it is usually predicated on two conditions: when someone has done something really bad or when someone has actively created a persona that transcends his or her talent. Financial celebrities tend to be cultivated through notoriety. The 1991 Salomon Brothers’ outrage when trader Paul Mozer was found to be submitting false bids to buy U.S. Treasury Department bonds or the $50 billion Ponzi scheme that Bernie Madoff was busted for in 2009 were some of the most speculated about and discussed scandals of their time. Madoff’s private life was endlessly dissected in Vanity Fair and even Tatler, including a tell-all by his secretary and an examination of his privileged (and now broke) social circle. But again, the collective public interest was directly linked to extraordinary circumstances.

Wait: The Art and Science of Delay
by Frank Partnoy
Published 15 Jan 2012

But if we think about future decades, we should instead harvest only a portion of the forest now, and we should periodically replant where we have cut. We should do this not because we love trees necessarily but because we care about the next generation’s needs. Sustainability is a hard-nosed approach to thinking about the future, like the difference between a steady investment and a get-rich-quick scheme. Warren Buffett is sustainable; Bernie Madoff is not. Sustainability is also related to GDP measurement. GDP tells us how well we did last year and may give us a limited sense of the short-term future. But it doesn’t say anything about the long term. It doesn’t tell us whether a country’s citizens are consuming too much of their current wealth, or whether there are enough natural resources and human capital for future decades.

When the Money Runs Out: The End of Western Affluence
by Stephen D. King
Published 17 Jun 2013

Those who woke up to reality early enough might have managed to sell their tickets to the even more gullible without incurring any significant financial loss (although, with eBay not properly established until 1995, finding the even more gullible might not have been particularly easy). Someone, however, would eventually have to take a loss: the tickets, after all, were claims on something destined never to materialize. Selling tickets to Mars would have been a fraudulent act. We have plenty of laws to prevent that sort of thing happening. Bernie Madoff, the disgraced investor, sits behind bars for his own version of fraud. Fraudulent acts are acts of deliberate deception, where one party sets out to rip off others. What happens, however, if all parties share a roughly similar view of the future, which then turns out to be hopelessly wrong, a collective delusion perhaps based on an inappropriate extrapolation of past trends?

Money and Power: How Goldman Sachs Came to Rule the World
by William D. Cohan
Published 11 Apr 2011

We signed every memo ‘Hank, John and John.’ ” But increasingly over time, the other executives at Goldman grew resentful and referred to them as the “owner’s sons.” Resentment continued to build not only after the Internet IPO scandals but also after Goldman’s dot-com initiatives—such as investments in Wit Capital and a number of electronic trading platforms, including Primex Trading, a joint venture among several Wall Street firms and Bernie Madoff’s securities firm—soured and as it became clear that the Spear, Leeds acquisition was basically a bust. “In doing things like that they were hopeful when we were executing,” said one Paulson loyalist about Thornton and Thain, “but when we were dealing with a mess they weren’t around.” As it became clear that Paulson was sticking around, he encouraged both men to use one of Goldman’s supply of “management coaches,” who could help them think through how to adapt to the new situation, and to begin to take on more and more operating responsibilities, to help relieve some of the burden on Paulson.

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But then the SEC stopped responding to S&C and to Goldman, which tried again to contact the SEC during the first quarter of 2010 to see if a settlement could be reached. The next communication from the SEC came with the filing of the complaint on April 16, which happened to be the same day the SEC inspector general issued a critical report about the SEC’s bungling of its investigation into the Ponzi scheme perpetrated by Bernard Madoff. The news media—understandably—focused on the fraud charges against Goldman, rather than the SEC’s poor handling of the Madoff case, a fact Goldman noted in its communications with journalists. When Goldman eventually responded to the SEC’s complaint, it denied all allegations. “The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation,” Goldman said initially.

100 Baggers: Stocks That Return 100-To-1 and How to Find Them
by Christopher W Mayer
Published 21 May 2018

CHAPTER 6: THE KEY TO 100-BAGGERS If a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you’ll end up with a fine result. — Charlie Munger Jason Donville at Donville Kent Asset Management poses an interesting hypothetical. He says, imagine you invested in a fund 15 years ago whose fund manager delivered the returns shown in the nearby table, “Stellar returns.” At first you might think you’ve found the next Bernie Madoff, who also delivered incredibly steady returns for a long time—by making them up. But this isn’t Madoff. This is real. This manager really exists. His name is Gerry Solloway. And he is the CEO of a Canadian consumer-finance company called Home Capital Group (HCG). These returns, though, are not returns on a fund.

The Enlightened Capitalists
by James O'Toole
Published 29 Dec 2018

Typically, most business biographies have either been portraits of larger-than-life executives whose accomplishments are inflated and failures swept under the rug, or of robber barons, rogues, and fabulously wealthy tycoons whose practices were shady at best. In contrast, this look backward entails neither the heroic hagiography found in too many current business biographies nor the Enron/WorldCom/Bernie Madoff brand of corporate crime stories popular of late. Nor will I focus on the behavior of contemporary business executives; as one who wrote a glowing account of the practices of Enron’s leaders just months before their criminal shenanigans were revealed, I am living proof of the foolishness of prematurely judging executive performance.

…

Understandably, the public is deeply worried that it could happen again. But financial shenanigans are not limited to risky mortgages, credit default swaps, and derivatives, or even to such blatantly unethical actions as the millions of false customer accounts fabricated at Wells Fargo. The Enron scandal, followed by Bernie Madoff’s Ponzi scheme, has highlighted the fact that more ethical misbehavior occurs in finance than in any other industry or in any other aspect of corporate management. Significantly, because financial ethics is one arena where the public interest and the interests of investors are often in sync—and because nothing is more important than money—it is safe to predict continuing public demand for greater accountability and transparency from bank executives and corporate financial officers.

The Quants
by Scott Patterson
Published 2 Feb 2010

But only 20 P&G options in total had changed hands that day (this was well before the explosion in options trading that occurred over the following decade). Similar discrepancies appeared for trades on IBM, Disney, and Merck options, among others, Thorp’s research revealed. He told the firm that had made the investment to pull its money out of the fund, which was called Bernard L. Madoff Investment Securities. In late 2008, the fund, run by New York financier Bernard Madoff, was revealed as the greatest Ponzi scheme of all time, a massive fraud that had bilked investors out of tens of billions. Regulators had been repeatedly warned about the fund, but they never could determine whether its trading strategies were legitimate.

…

Gated mansions hunched in the Connecticut cold behind their rows of exotic shrubbery, bereft of their traditional lacings of Christmas glitz. Few of the high-powered occupants of those mansions felt much like celebrating. It was a glum holiday season in Greenwich, hedge fund capital of the world. Making matters worse, a multibillion-dollar money management firm run by a reclusive financier named Bernard Madoff had proved to be a massive Ponzi scheme, one that Ed Thorp had already unearthed in the early 1990s. The losses rippled throughout the industry like shock waves. A cloud of suspicion fell upon an industry already infamous for its paranoia and obsessive secrecy. Ground zero of Greenwich’s hedge fund scene was Two Greenwich Plaza, a nondescript four-story building beside the town’s train station that once had housed a hodgepodge of shippers, manufacturers, and stuffy family law firms.

WTF?: What's the Future and Why It's Up to Us
by Tim O'Reilly
Published 9 Oct 2017

As the near collapse of the world economy in 2008 demonstrated, it is clear that regulatory agencies haven’t been able to keep up with the constant “innovations” of the financial sector pursuing profit without regard to the consequences. There are some promising signs. For example, in the wake of Ponzi schemes like those of Bernie Madoff and Allen Stanford, the SEC instituted algorithmic models that flag for investigation hedge funds whose results meaningfully outperform those of peers using the same stated investment methods. But once flagged, enforcement still goes into a long loop of investigation and negotiation, with problems dealt with on a haphazard, case-by-case basis.

…

He is harnessing all the power of money and technology to do something that today is impossible. The name of his company—Grail—is a conscious testament to the difficulty of the task. Jeff is wrestling with the angel. 2. CREATE MORE VALUE THAN YOU CAPTURE. It’s pretty easy to see that a financial fraud like Bernie Madoff wasn’t following this rule, and neither were the titans of Wall Street who ended up giving out billions of dollars in bonuses to themselves while wrecking the world economy. But most businesses that prosper do create value for their communities and their customers as well as themselves, and the most successful businesses do so in part by creating a self-reinforcing value loop with and for others.

Adapt: Why Success Always Starts With Failure
by Tim Harford
Published 1 Jun 2011

In 2005, a young Japanese trader tried to sell one share at a price of ¥600,000 and instead sold 600,000 shares at the bargain price of ¥1. Traders call these slips ‘fat finger errors’ and this one cost £200 million. Then there are violations, which involve someone deliberately doing the wrong thing. Bewildering accounting tricks like those employed at Enron, or the cruder fraud of Bernard Madoff, are violations, and the incentives for them are much greater in finance than in industry. Most insidious are mistakes. Mistakes are things you do on purpose, but with unintended consequences, because your mental model of the world is wrong. When the supervisors at Piper Alpha switched on a dismantled pump, they made a mistake in this sense.

…

Shortly after the Equity Funding Corporation collapsed, Ray Dirks was rewarded for his efforts: the SEC prosecuted him for insider trading, a charge that would at the very least have ended his career. Dirks fought his case for ten years before eventually being cleared by the US Supreme Court. The SEC seems to have learned few lessons: when a former fund manager, Harry Markopolos, handed them a dossier of evidence that Bernard Madoff was running a gigantic fraud, he was ignored. (At least he was not prosecuted.) It is true that some whistleblowers have an axe to grind. Some are disgruntled former employees looking to make trouble. Mr Markopolos was Mr Madoff’s rival; Paul Moore had plenty of reasons to complain about HBOS, whether or not his complaints had merit.

The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution
by Gregory Zuckerman
Published 5 Nov 2019

A bit later, Patterson helped roll out a new model to trade equity options, but it generated only modest profits, frustrating Simons. “Nick, your options system needs help,” Simons told him in a meeting. “It needs to be better.” Simons pointed to the huge, steady gains that another investor was making trading equity options at his growing firm, Bernard L. Madoff Investment Securities. “Look at what Madoff is doing,” Simons told Patterson. The criticism grated on Patterson, who gave Simons a tart retort: “Maybe you should hire Bernie.” (A few years later, Simons would become suspicious of Madoff’s extraordinary results and pull money he had invested in Madoff’s fund.

…

See Statistical arbitrage Archimedes (yacht), 267, 320 Armstrong, Neil, 170 Artin, Emil, 69 Asness, Clifford, 256–57 Association for Computing Machinery (ACM), 37 astrology, 121–22 autism, xviii, 268, 287, 323–24 Automated Proprietary Trading (APT), 131–32, 133 AWK, 233–34 Ax, Frances, 98 Ax, James, xi, 37, 68–69, 324 at Axcom Limited, 78–83 backgammon, 69, 76–77 background of, 68–69 at Berkeley, 68–69 Berlekamp and, 95–102 conspiracy theories of, 77–78, 99 at Cornell, 69, 70–71 death of, 103 focus on mathematics, 69–70 at Monemetrics, 51–52, 72–73 personality of, 68, 70, 71–72, 98–99 Simons and, 34, 68–69, 99–103, 107 at Stony Brook, 34, 71–72 trading models, 73, 74–75, 77–78, 81–86, 95–101, 107 Axcom Limited, 78–83 disbanding of, 118 trading models, 95–101, 107–18 Ax-Kochen theorem, 69, 70, 103 Bachelier, Louis, 128 backgammon, 69, 76–77 backtesting, 3 Bacon, Louis, 140 Baker House, 15–16 Baltimore City Fire and Police Employees’ Retirement System, 299–300 Bamberger, Gerry, 129–30 BankAmerica Corporation, 212 Bannon, Steve, 279, 280, 280n break with Mercers, 304 at Breitbart, 278–79, 299–300, 301–2 midterm elections of 2018, 304 presidential election of 2016, xviii, 281–82, 284–85, 288–90, 293, 294–95 Barclays Bank, 225, 259 bars, 143–44 Barton, Elizabeth, 272 basket options, 225–27 Baum, Julia Lieberman, 46, 48, 50, 62–63, 65 Baum, Leonard “Lenny,” xi, 45–46, 63–66 background of, 46 currency trading, 28–29, 49–53, 54–60, 62–64, 73 death of, 66 at Harvard, 46 at IDA, 25, 28–29, 46–49, 81 at Monemetrics, 45, 49–60, 63–65 move to Bermuda, 64–65 rift with Simons, 63–65 trading debacle of 1984, 65, 66 Baum, Morris, 46 Baum, Stefi, 48, 62, 63 Baum–Welch algorithm, 47–48, 174, 179 Bayes, Thomas, 174 Bayesian probability, 148, 174 Beane, Billy, 308 Beat the Dealer (Thorp), 127, 163 Beautiful Mind, A (Nasar), 90 behavioral economics, 152, 153 Bell Laboratories, 91–92 Belopolsky, Alexander, 233, 238, 241, 242, 252–54 Bent, Bruce, 173 Berkeley Quantitative, 118 Berkshire Hathaway, 265, 309, 333 Berlekamp, Elwyn, xi at Axcom, 94–97, 102–3, 105–18 background of, 87–90 at Bell Labs, 91–92 at Berkeley, 92–93, 95, 115, 118, 272 at Berkeley Quantitative, 118 death of, 118 at IDA, 93–94 Kelly formula and, 91–92, 96, 127 at MIT, 89–91 Simons and, 2–3, 4, 93–95, 109–10, 113–14, 116–18, 124 trading models and strategies, 2–3, 4, 95–98, 106–18, 317 Berlekamp, Jennifer Wilson, 92 Berlekamp, Waldo, 87–88 Berlin Wall, 164 Bermuda, 64–65, 254 Bernard L. Madoff Investment Securities, 198 betting algorithm, 144, 167 Bezos, Jeffrey, 134 Bezos, MacKenzie, 134 Big Bang, 324–25 Big Bang Theory, The (TV show), 254 Big Bounce, 325 black box investing, 137 Black Monday (1987), 97, 126, 256 Boesky, Ivan, 106 Bolton, John, 305 Bombieri, Enrico, 28 bond trading, 53, 55 bonuses, 200–201 Bookstaber, Richard, 314–15 Bossie, David, 284, 285, 289 Botlo, Michael, 154–55 Box, George, 245 Bozell, Brent, 304 Breakfast Club, The (movie), 183 breakout signals, 83–84 Breck’s (Newton, MA), 9–10 Breitbart, Andrew, 278 Breitbart News, 278, 280–81, 289–90, 295, 299–300, 301–2 Brexit, xviii, 280–81 Bridgewater Associates, 310 British pound, 40, 52, 79, 165 Brookhaven National Laboratory, 154 Brown, Aaron, 171 Brown, Henry, 172–73 Brown, Margaret, 176, 179–80, 229 Brown, Peter, xi background of, 172–73 education of, 187 at IBM, 5, 173–81, 187–88 Brown, Peter, at Renaissance client presentations, 249–50, 251 equity stake, 201 financial crisis and, 257–61 Magerman and, 181–82, 191–95, 241, 294, 296, 297, 299, 318 management, 208–9, 230–31, 232–33, 237, 241–43, 254–55, 275, 289–90, 319, 320 Mercer and political blowback, 296, 297, 299, 319 recruitment of, 169, 179–80 statistical-arbitrage trading system, 187–91, 193–95, 197–99, 204, 205–8, 213–14, 223, 224–27, 229–32, 255 tech bubble, 215–17 Brown University, 103 Buffett, Warren, xvi, 96, 161, 265, 309 Bush, John Ellis “Jeb,” 279 C++, 155, 191–92 Caddell, Patrick, 279–80 Café (movie), 270 Calhoun, Anthony, 299–300 California Institute of Technology, 53–54 Cambridge Analytica, 279, 280–81, 303 Cambridge Junior College, 22 Candide (Voltaire), 230 candlestick pattern, 122 Carlson, Tucker, 285 Carmona, René, 40, 81–86, 96, 98–99 Carnegie Mellon University, 173, 178 Celanese Corporation, 19 “Characteristic Forms and Geometric Invariants” (Chern and Simons), 38 Charlap, Leonard, 33, 36, 71–72, 141 Cheeger, Jeff, 39 Chern, Shiing-Shen, 17–18, 38 Chern–Simons theory, 17–18, 38 chess, 50, 147, 178 Chevron, 79 Chhabra, Ashvin, 308 Chicago Board of Trade, 113–14, 125 Christie, Chris, 285 Chrysler, 251 CIA (Central Intelligence Agency), 208 Citadel Investment Group, 256, 310–11 Citigroup, 123 Citizens United v.

…

* The 5 percent management fee had been determined in 1988, when Straus told Simons he needed about $800,000 to run the firm’s computer system and pay for other operational costs—a figure that amounted to 5 percent of the $16 million managed at the time. The fee seemed about right to Simons, who kept it as the firm grew. * Patterson had more reason for paranoia than even he realized; around the same time, another investor from Long Island, Bernard Madoff, was crafting history’s largest Ponzi scheme. * It wasn’t that the company had a problem hiring women. Like other trading firms, Renaissance didn’t receive many resumes from female scientists or mathematicians. It’s also the case that Simons and others didn’t go out of their way to recruit women or minorities

The Key Man: The True Story of How the Global Elite Was Duped by a Capitalist Fairy Tale
by Simon Clark and Will Louch
Published 14 Jul 2021

The dark side of globalization—a shadowy hinterland of political intrigue and illicit offshore money flows—lurked behind the bright vision of the future Arif championed in public. His investments, in truth, were too good to be true, and his firm had been insolvent for years. Stolen cash propped up Abraaj in what the famed Bernard Madoff investigator Harry Markopolos described to us as a Ponzi scheme with leverage. Abraaj had become one of the largest corporate frauds in history, and Arif, accused of wrongfully holding on to $385 million of the funds he had taken, faced 291 years in a high-security jail. Abraaj employees who naively believed in Arif and his mission of making money and doing good were at a loss to explain what went wrong.

…

Taking money from one private equity fund to benefit investors in another fund amounted to a crude kind of fraud known as a Ponzi scheme. This kind of fraud was named after Charles Ponzi, an Italian-born swindler active in the United States in the 1920s who used money from new investors to pay off earlier investors. Ponzi schemes like the one operated by the American fund manager Bernard Madoff can go undetected for years and usually come to light during an economic downturn, when investors ask for their money back and the fraudster can’t raise funds from new investors to pay them off. Arif and his team transferred money repeatedly between different Abraaj funds and their investors.

The Truth Machine: The Blockchain and the Future of Everything
by Paul Vigna and Michael J. Casey
Published 27 Feb 2018

Grigg envisioned his triple-entry accounting as a software program that would run within, say, a large company or organization. But the third ledger, containing the sequence of all those signed receipts, could be verified publicly, and in real time. Any deviation from its time-stamped records would be an indication of a fraud. Picture a fraud like Bernie Madoff’s, in which Madoff was simply making up transactions and recording them in completely fictitious books, and you can see the value in a system that can verify accounts in real time. Before Grigg, in the 1990s, another visionary had also seen the potential power of a digital ledger. Nick Szabo was an early Cypherpunk* and developed some of the concepts that underlie Bitcoin, which is one reason why some suspect he is Satoshi Nakamoto.

The Pyramid of Lies: Lex Greensill and the Billion-Dollar Scandal
by Duncan Mavin
Published 20 Jul 2022

But his investments were an illusion, using money from new investors to pay off older investors. The whole scam kept running only so long as he could get his hands on more cash. Eventually, the scam was exposed, in part by Dow Jones, my own employer, and Charles Ponzi ended up in jail. Like Greensill, the disgraced American financier Bernie Madoff ran an eponymous investment business and lived the high life for years, attracting the support of wealthy backers and smart investors. Madoff’s establishment connections ran deep and sceptics were dismissed out of hand, told they didn’t understand how clever Madoff was. His fund grew to $65 billion and promised steady returns year after year.

Freezing Order: A True Story of Money Laundering, Murder, and Surviving Vladimir Putin's Wrath
by Bill Browder
Published 11 Apr 2022

“But this is two hundred and thirty million, so there’s—” “Yeah,” he said, cutting me off. “Harder to walk across a field of snow with two hundred and thirty million dollars and not leave a footprint.” His approach was shrewd. If we could find out who had received the money, we’d have leverage to get Sergei out of jail. But then, on December 11, Bernie Madoff was charged in New York with running the world’s largest Ponzi scheme, defrauding investors in his hedge fund of an astonishing $64.8 billion. Why mention Madoff here? Because this scandal was oddly connected to our story. It was right around this time that John Moscow became almost impossible to reach.

The Payoff
by Jeff Connaughton

She responded by reiterating her pledge, which she’d made publicly in response to Ted’s letter, that the SEC would conduct a comprehensive review of market-structure issues and HFT. She added that she had many other issues on her plate. And indeed she had. America had just been through the biggest financial disaster in sixty years; Bernie Madoff’s Ponzi scheme had gone undetected by the SEC for years despite repeated warnings from whistleblowers; investors were rattled and worried that the SEC was toothless. Nevertheless, it was obvious to me that she only had one choice if history was to judge her well: she had to do something. Ted must have been thinking the same thing.

One More Thing: Stories and Other Stories
by B. J. Novak
Published 4 Feb 2014

Finally, she told me that I was no longer the type of person she could trust with her ATM password, but that if it was this important to me, I could wait in the museum with the kids while she went across the street herself to withdraw two hundred dollars from her card, but that she needed me to know she would “never, ever forget what happened today.” I said yes, thank you, it was indeed this important to me. Fortunately, as I said, this story has a happy ending. Inside the secret room was a mind-blowingly elaborate, incredibly well-executed interactive holographic exhibit on the Bernie Madoff hedge fund scam of 2009. It was beyond amazing—just jaw-droppingly intricate and detailed and smart and interesting and well designed. The holograms actually interacted with you, putting you in the mindset of the people who got ripped off, and very compellingly conveyed the scope of the scam he pulled—did you know the numbers involved?

The Money Tree: A Story About Finding the Fortune in Your Own Backyard
by Chris Guillebeau
Published 6 Apr 2020

* * * — “This Just In” Evening Wrap-Up Cheddar Media New York—Shares of the Chinese toymaker Real Action spiked to $127 today, in response to strong demand for its line of reality show contestant action figures. Rupert Howley, who pled guilty to the largest financial fraud scandal since Bernie Madoff, was released from prison after serving a sentence of three days. In startup news, early reports suggest that the social service Buzzard signed up more than ten thousand users in its first day. Kevin Quan, founder, CEO, and COO, claims that the company is “blown away” by the response. “We knew we were on to something big, but this is truly buzzworthy!”

The Decline and Fall of IBM: End of an American Icon?
by Robert X. Cringely
Published 1 Jun 2014

By predicting earnings five years out, Palmisano effectively damped out quarterly earnings issues for IBM. Big Blue had more than reached its first five-year target of $10 per share by 2010, despite the worst recession in 70 years. Who then would bet that Palmisano couldn’t do it again? Bernie Ebbers, Dennis Kozlowski, Bernie Madoff, and Jeff Skilling all played versions of the long con. But maybe Sam Palmisano was different. Maybe Sam could actually do it. It is my opinion that at the beginning of his tenure, Palmisano believed that himself, trusting in the ingenuity and loyalty of the people of IBM. Remember IBM is a feudal culture where the sales organization is dominant.

Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream
by Arianna Huffington
Published 7 Sep 2010

“To this day, I don’t know what it said.… It’s impossible for the average person to understand.” In other words, who could have known? But isn’t it interesting that the complexity and opacity of these things somehow always redounds to the benefit of those in charge? We saw a familiar insistence on ignoring all warnings in the Bernie Madoff scandal.147 “We have worked with Madoff for nearly twenty years,” said Jeffrey Tucker, a former federal regulator and the head of an investment firm that lost billions to Madoff. “We had no indication that we … were the victims of such a highly sophisticated, massive fraudulent scheme.” Who could have known?

Rigged Money: Beating Wall Street at Its Own Game
by Lee Munson
Published 6 Dec 2011

While there is much hype inside the industry, including champions of the fee-only model like the National Association of Personal Financial Advisors, it has never gained the attention it deserves. My take is that people ultimately don’t care about ethics as long as the job gets done. However, isn’t that what investors thought when Bernie Madoff offered a steady 10 percent return per year? In 1999, the SEC started to look at proposals from brokerage firms to end fee-based brokerage programs. What was at stake was if broker-dealers—otherwise known as brokerage firms that hire stockbrokers—would be able to claim exemption under the Advisers Act of 1940.

The Five-Year Party: How Colleges Have Given Up on Educating Your Child and What You Can Do About It
by Craig Brandon
Published 17 Aug 2010

The regional accreditation organizations that are supposed to evaluate the quality of education at our colleges and universities seem to have been soundly sleeping as the colleges dumbed down their programs, inflated grades, and turned themselves into entertainment centers. They are like Securities and Exchange Commission watchdogs, fiddling with forms while corporate raiders fleeced millions of Americans and Bernie Madoff set up his Ponzi schemes. There are six regional accreditation groups in the United States, but they all work pretty much the same way. Colleges apply for membership and then become a part of the organization. The college and individual departments submit regular self-study reports about changes they have made and problems they are experiencing.

Money Mavericks: Confessions of a Hedge Fund Manager
by Lars Kroijer
Published 26 Jul 2010

When I set out to write this book it was mainly because I felt the inner workings of the hedge funds were poorly understood by outsiders. Having grown from a small and mainly US investment activity to become a global trillion-dollar circus, the industry is often unfairly portrayed as a fee-charging gambling den populated by dart-throwing chancers and Bernie Madoff’s evil twin. This was nothing like the industry I had been a part of for a decade, and I recognised little of my time at Holte Capital in many of the accounts. The industry I had known largely involved highly intelligent people who were passionate about the world of investing. They would spend endless hours engaging in complex financial analysis to find angles from which their investors might profit.

The Wealth Dragon Way: The Why, the When and the How to Become Infinitely Wealthy
by John Lee
Published 13 Apr 2015

The great father of modern economics, Adam Smith, said, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.” Do you really believe that people who offer to invest your money for you are concerned for your interests ahead of their own? Obviously their first priority is to make money for themselves. Did you feel sorry for Bernie Madoff's clients, or did you secretly think they were a little naive to trust him so implicitly with their money without asking too many questions about how he was allegedly getting such high profits from their investments? The Truth about Your Investments We've been told: Let a (so-called) financial expert invest your money for you.

Trend Commandments: Trading for Exceptional Returns
by Michael W. Covel
Published 14 Jun 2011

If you are able to apply such an unsound principle, you can keep on averaging down by buying 200 at 44, then 400 at 41, 800 at 38, 1600 at 35, 3200 at 32, 6400 at 29, and so on.1 “Don’t frown, double down!” Not smart strategy. Losses are a part of the game. You want no losses? You want positive returns every month? It does not work that way, that is, not unless you were lucky enough to be invested in the Bernard Madoff Ponzi-scheme—which has resulted in assorted criminal convictions and a few suicides. Losses are not your problem. It’s how you react to them. Ignore losses with no plan, or try to double down on your losses to recoup, and those losses will come back like a Mack truck to run over your account.

Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff
by Christine S. Richard
Published 26 Apr 2010

His impatience can make people feel a bit used, and his thoroughness can be seen as obsession, Mayer says. “Look at Markopolos,” Mayer says, referring to Harry Markopolos, the fund manager who tried for 10 years to warn the Securities and Exchange Commission in detailed letters and e-mails about Bernie Madoff’s Ponzi scheme. “Unfortunately, if you write long letters, people think you are crazy,” Mayer says. Even Ackman’s friends poked fun at his relentless pursuit of MBIA. For his 40th birthday, Ackman’s wife Karen threw him a party, inviting more than 100 family members and friends to the Blue Hill at Stone Barns restaurant in upstate New York.

Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens
by Nicholas Shaxson
Published 11 Apr 2011

Financial markets seized up in 2007 because nobody knew, or trusted, what the other players in the market were doing, or what they were worth, or what or where their risks were. It is no coincidence that so many of those involved in great financial trickery, like Enron, or the empire of the fraudster Bernie Madoff, or Sir Allen Stanford’s Stanford Bank, or Long Term Capital Management, or Lehman Brothers, or AIG, were so thoroughly entrenched offshore. The secrecy jurisdictions specialize in bamboozlement. Along with the secrecy, and a curmudgeonly reluctance to co-operate with foreign jurisdictions, the offshore system provides endless incentives for corporations—especially financial ones—to festoon their affairs across jurisdictions, usually a complex mix of onshore and offshore, to fox the regulators.

Super Thinking: The Big Book of Mental Models
by Gabriel Weinberg and Lauren McCann
Published 17 Jun 2019

Research shows that people are more deterred by the certainty they will be caught and convicted than by the specific punishment they might receive. If there is little chance of getting caught, some simply do not care what the punishment is. Further, most people are not even aware of the specific punishments they might face. Financial fraudster Bernie Madoff thought he was never going to be caught and probably never considered the possibility of a 150-year prison sentence. Additionally, there is evidence to suggest that not only does prison time not reduce repeat offenses, but there is actually a chance that it increases the probability of committing a crime again.

Flash Boys: A Wall Street Revolt
by Michael Lewis
Published 30 Mar 2014

There’s no guarantee that anyone will do so; but if they do, he’s certain to win. In his investigation of the people who managed Credit Suisse’s dark pool, one of the first things Schwall noticed was the guy in charge of electronic trading: Josh Stampfli, who had joined Credit Suisse after seven years spent working for Bernie Madoff. (Madoff had pioneered the idea of paying brokers for the right to execute the brokers’ customers’ orders, which should have told people something but apparently did not.) This, of course, only heightened Schwall’s suspicions, and sent him digging around in old articles in trade journals about Credit Suisse’s dark pool.†† There he found references and allusions that made sense only if Credit Suisse had planned, right from the start, to be deeply involved with high-frequency trading firms.

The Trouble With Billionaires
by Linda McQuaig
Published 1 May 2013

Weill, former head of Citigroup, whose extensive lobbying efforts helped kill the Glass–Steagall Act, thereby undermining regulatory supervision of financial markets and allowing Wall Street to turn itself into a giant casino. Indeed, much of Wall Street would fit in one way or another into this non-poster-boy category of billionaires. (And we haven’t even mentioned the likes of out-and-out billionaire crooks such as Bernie Madoff, who, in crossing the line into obvious criminality, have lost any claims to deserving their fortunes.) Of course, if contribution to society were the criterion for determining an individual’s compensation, the income parade would look very different. By most people’s standards, the giants reaching up into the clouds would be people such as nurses, doctors, teachers and social workers, while the bankers and hedge fund managers would find themselves among the dwarves.

You Say Tomato, I Say Shut Up
by Annabelle Gurwitch
Published 31 Aug 2010

It isn’t a stretch to see that these same skills are exactly what are needed to run a family.* In fact, numerous credible sources see a direct correlation between a reliance on positive thinking, which lulls people into optimistic complacency and overconfidence, and lack of oversight, fueling everything from the housing downturn, the stock market debacle, and the Bernie Madoff scandal. If anything puts me in an early grave, I predict it will be the stress of dealing with the health-insurance industry, whose own mission statement appears to be: “Band together to make it as difficult as possible for people to receive the health care benefits they pay for.” By 1:30 a.m., we’d come as close to a marital mission statement as we’ve ever come: “Our shared vision is to realize our dream of divergent futures.”

Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History
by Liam Vaughan
Published 11 May 2020

They said, ‘That’s crazy.’ ” A week later, after Nav sent them his statements, RCG turned him down. When he asked why, they told him they didn’t think it was possible for a trader in his bedroom to make that much money. “They said they believe that it’s a Ponzi scheme,” Nav recounted. “They thought I was Bernie Madoff!” Nav hoped he’d found an alternative when Knight Capital agreed to take him on, but then the firm lost $460 million and he was left brokerless once again. Unable to trade and with few other interests, Nav returned to the proverbial garage to work on his trading machine. The layering algorithm he’d created in 2009 with help from Hadj at Trading Technologies had worked exactly as planned, firing blocks of sell orders into the market to drive prices lower that stayed far enough from the prevailing price to almost never be hit.

Skin in the Game: Hidden Asymmetries in Daily Life
by Nassim Nicholas Taleb
Published 20 Feb 2018

The IYI has been wrong, historically, about Stalinism, Maoism, GMOs, Iraq, Libya, Syria, lobotomies, urban planning, low carbohydrate diets, gym machines, behaviorism, trans-fats, Freudianism, portfolio theory, linear regression, HFCS (High-Fructose Corn Syrup), Gaussianism, Salafism, dynamic stochastic equilibrium modeling, housing projects, marathon running, selfish genes, election-forecasting models, Bernie Madoff (pre-blowup), and p-values. But he is still convinced that his current position is right.fn1 NEVER GOTTEN DRUNK WITH RUSSIANS The IYI joins a club to get travel privileges; if he is a social scientist, he uses statistics without knowing how they are derived (like Steven Pinker and psycholophasters in general); when in the United Kingdom, he goes to literary festivals and eats cucumber sandwiches, taking small bites at a time; he drinks red wine with steak (never white); he used to believe that dietary fat was harmful and has now completely reversed himself (information in both cases is derived from the same source); he takes statins because his doctor told him to do so; he fails to understand ergodicity, and, when explained to him, he forgets about it soon after; he doesn’t use Yiddish words even when talking business; he studies grammar before speaking a language; he has a cousin who worked with someone who knows the Queen; he has never read Frédéric Dard, Libanius Antiochus, Michael Oakeshott, John Gray, Ammianus Marcellinus, Ibn Battuta, Saadia Gaon, or Joseph de Maistre; he has never gotten drunk with Russians; he never drinks to the point where he starts breaking glasses (or, preferably, chairs); he doesn’t even know the difference between Hecate and Hecuba (which in Brooklynese is “can’t tell sh**t from shinola”); he doesn’t know that there is no difference between “pseudointellectual” and “intellectual” in the absence of skin in the game; he has mentioned quantum mechanics at least twice in the past five years in conversations that had nothing to do with physics.

The Wisdom of Psychopaths: What Saints, Spies, and Serial Killers Can Teach Us About Success
by Kevin Dutton
Published 15 Oct 2012

The answer, assuming you think like a psychopath, is this: because she was hoping the man would turn up again at her sister’s funeral. If this was the solution that you came up with … don’t panic. Actually, I lied. Of course it doesn’t mean you think like a psychopath. Like a great many things you stumble upon on the Internet, this tale contains about as much truth as Bernie Madoff’s profit-and-loss account. Sure, on the face of it, the woman’s strategy is certainly psychopathic, there’s no disputing that: cold, ruthless, emotionless, and myopically self-interested. But unfortunately, there’s a problem. When I gave this test to some real psychopaths—rapists, murderers, pedophiles, and armed robbers—who’d been properly diagnosed using standardized clinical procedures, guess what happened?

Thinking in Bets
by Annie Duke
Published 6 Feb 2018

Betting on hiring the wrong person can have a huge cost (as the CEO who fired his president can attest). Recruitment costs can be substantial, and every job offer has an associated opportunity cost. This is the only person you can offer this opportunity. You might have dodged the cost of hiring Bernie Madoff, but you might have lost the benefit of hiring Bill Gates. The John Hennigan story seems so unusual because it started with a discussion about what Des Moines was like and ended with one of the people in the discussion moving there the next day. That happened, though, because when you are betting, you have to back up your belief by putting a price on it.

Bully Market: My Story of Money and Misogyny at Goldman Sachs
by Jamie Fiore Higgins
Published 29 Aug 2022

I ended up borrowing the stock, paying way less than I felt I should have. These tactics, which I thought were underhanded, made my pregnancy heartburn even worse. The industry’s reputation hit new lows after the Emergency Economic Stabilization Act of 2008—often just referred to as the “Bank Bailout of 2008”—was passed in Congress. Then 2008 closed with the Bernie Madoff scandal and the opinion of Wall Street was worse than ever. Protests popped up around the country and some of them made it to Goldman’s front door. These protests morphed over the years into the “Occupy Wall Street” movement. Pete and I went outside after market close for a coffee one day and faced the protestors for the first time.

The Innovation Illusion: How So Little Is Created by So Many Working So Hard
by Fredrik Erixon and Bjorn Weigel
Published 3 Oct 2016

Merchants, explorers, and voyagers had done that for centuries, but the fortunes of the trade they created never spread widely in the economy. The premodern economic system was full of speculative capital and asset bubbles, such as the Dutch tulip mania in the 1600s or the French Mississippi finance bubble in the 1700s. All past ages have had their own financial sharks and Bernie Madoff-type hustlers. A defining characteristic of modern capitalist entrepreneurship, to follow economic historian Alexander Gerschenkron, was rather one of time: investments in big innovation needed far longer to generate expected economic gains. One of the factors separating past entrepreneurs from the new generation emerging after the modernization of entrepreneurship was the latter’s understanding of uncertainty as a necessary ingredient to build private and societal profits.42 The twentieth century witnessed ideological experiments with other economic systems, but capitalism, for all its faults, has stood the test of time.

The Fund: Ray Dalio, Bridgewater Associates, and the Unraveling of a Wall Street Legend
by Rob Copeland
Published 7 Nov 2023

Markopolos couldn’t, but he figured out enough that he soon began chatting with the Securities and Exchange Commission about what turned out to be a fraud in plain sight. Six years later, Markopolos hit his crescendo, submitting to the SEC a report titled “The World’s Largest Hedge Fund Is a Fraud.” When his warnings about Bernie Madoff proved right, Markopolos earned national fame, and the ability to grab the attention of regulators virtually whenever he so chose. To Markopolos, what was happening in Westport raised serious questions. Here lay another giant hedge fund famed for an investment approach that no competitors seemed to fully understand.

The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite
by Duff McDonald
Published 24 Apr 2017

And HBS has never claimed to have eliminated all bad apples from the world, only to be the best at teaching good apples how to stay that way. But to isolate the fraud like that misses the point entirely. Few people actually set out to commit fraud, and that includes Jeff Skilling. Except in the case of a truly talented con artist such as Bernie Madoff, the fraud almost always comes just before the very end, at the point when you’re flat out of new ideas but notice a couple of bad ones lying around. What’s more, the speed with which you can move from day one on the job to running out of new ideas has nothing to do with your ethical compass but rather everything else you bring to the job.

…

Chairman of the Securities and Exchange Commission from 2005 through 2009, Cox later claimed that his agency had no power to keep the financial giants that became leveraged to the point of collapse from doing so, but that’s simply not true. At the very least, he could have demanded more disclosure out of the likes of Merrill Lynch and Lehman Brothers. Instead, he oversaw a dwindling SEC staff. He also missed Bernie Madoff’s towering fraud. Stan O’Neal (’78). The CEO of Merrill Lynch from 2003 to 2007, O’Neal is the perfect example of the big-bank CEO who threw caution to the wind in pursuit of profit. By mid-2006, just before the subprime dam broke, Merrill had $41 billion in subprime CDOs and mortgage bonds on its books.5 John Thain (’79).

Red-Blooded Risk: The Secret History of Wall Street
by Aaron Brown and Eric Kim
Published 10 Oct 2011

John Kenneth Galbraith even pointed out that embezzlement creates capital, since both the embezzler (correctly) and the embezzlee (incorrectly) think they have the “bezzle,” and act and spend accordingly. One of the exacerbating factors in financial crises is the disappearance of this bezzle, as falling asset prices cause frauds to be revealed. Bernie Madoff is just the biggest in a long line. Whether capital is created honestly or dishonestly is important legally, but what matters to an economist is how the capital is allocated. If it is put to good use there is a net increase in wealth. That brings us to the second major function of financial markets, capital allocation.

How Markets Fail: The Logic of Economic Calamities
by John Cassidy
Published 10 Nov 2009

In keeping interest rates too low for too long, Greenspan and Bernanke distorted the price signals that the market sends and created the conditions for an unprecedented housing bubble. Greed is another oft-mentioned factor; stupidity, a third. (How could those boneheads on Wall Street not have known that lending money to folks with no income, no jobs, and no assets—the infamous “NINJA” mortgage loans—was a bad idea?) In the wake of the revelations about Bernie Madoff and his multibillion-dollar Ponzi scheme, criminality is yet another thing to consider. At the risk of outraging some readers, I downplay character issues. Greed is ever present: it is what economists call a “primitive” of the capitalist model. Stupidity is equally ubiquitous, but I don’t think it played a big role here, and neither, with some obvious exceptions, did outright larceny.

Bottle of Lies: The Inside Story of the Generic Drug Boom
by Katherine Eban
Published 13 May 2019

For the first time in its history, TAFEF had invited all the whistleblowers it had helped over the years to spend a weekend together in the Florida Keys. About eighteen of them came. Some were unknown, while others were marquee names, like the financial sleuth Harry Markopolos, who had first alerted the Securities and Exchange Commission to Bernie Madoff’s Ponzi scheme. Cheryl Eckard, a former quality assurance manager at GlaxoSmithKline, helped host the event. She’d been granted $96 million, the largest whistleblower recovery ever, for exposing nonsterile manufacturing at a GSK plant in Puerto Rico. Patrick Burns, the acting executive director of Taxpayers Against Fraud, had been worried about getting whistleblowers together: “They don’t herd well,” he later said.

Investing Amid Low Expected Returns: Making the Most When Markets Offer the Least
by Antti Ilmanen
Published 24 Feb 2022

There are more questionable ways to achieve smooth returns. Avoiding mark-to-market pricing in illiquid assets has been a popular approach. Others include strategies that tend to incur severe but very infrequent losses, which may not be present in any evaluation period (“peso problem”), or those resorting to outright crime (Bernie Madoff's returns were famously smooth). For a given SR, the simplest way to reduce potential losses is to take less risk. In the extreme, cash investments give very smooth but low returns. This approach shifts risks from failing fast to failing slowly (by being too conservative and not earning enough to achieve long-term financial goals).

Financial Fiasco: How America's Infatuation With Homeownership and Easy Money Created the Economic Crisis
by Johan Norberg
Published 14 Sep 2009

If we chop down the jungle of government support, protection, and requirements, investors and savers will be left to their own devices. That is tough. But thinking for yourself should be tough, because the intellectual exercise it provides will train skills that have lain dormant. And they are necessary. Just think about the hedgefund fraudster Bernard Madoff, who may have cheated his established and well-heeled clients out of an unbelievable $50 billion. Despite the phenomenal returns reported by his fund, the big institutional investors stayed away. One of them explained that the fund made a nonserious impression "because when you get to page two of your 30-page due diligence questionnaire, you've already tripped eight alarms and said `I'm out of here."'20 Madoff's fraud was hardly rocket science.

Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank
by John Tamny
Published 30 Apr 2016

Even if she gave everything away, she would still have her Promethean work ethic, her much-admired talent as a songwriter, and her ability to entertain filled-to-capacity stadiums with her performing ability. Swift is the personification of “easy credit” any time, any day, and anywhere. Reversing scenarios, imagine, if by some quirk in the federal sentencing system, that disgraced financier Bernard Madoff was released from prison. If so, no matter the Fed’s loose stance, no matter the fed funds rate, and no matter the central bank’s naive attempts to create credit with quantitative easing, Madoff would be shown the door by any respectable (or not-so-respectable) lender, no matter his willingness to pay usurious rates of interest for credit.

Market Sense and Nonsense
by Jack D. Schwager
Published 5 Oct 2012

Inherent psychological biases lead investors to make distorted risk assessments and ultimately irrational investment decisions when comparing hedge funds with traditional investments. 1 We use the fund of funds index rather than the composite index of individual funds to represent hedge fund performance because, as will be explained in Chapter 14, hedge fund indexes based on individual funds are significantly biased. 2 Bernie Madoff may have been even more prominent, but his was a Ponzi scheme rather than a hedge fund. Madoff simply made up performance results and never did any trading. Also, Madoff lacked all the normal structural checks of a hedge fund, such as an independent broker and administrator. 3 New York: Random House, 2000.

Disrupted: My Misadventure in the Start-Up Bubble
by Dan Lyons
Published 4 Apr 2016

Start-ups seem to believe it is okay for them to bend rules. Some, like Uber and Airbnb, have built their businesses by defying regulations. Then again, if laws are stupid, why follow them? In the World According to Start-ups, when tech companies cut corners it is for the greater good. These start-up founders are not like Gordon Gekko or Bernie Madoff, driven by greed and avarice; they are Rosa Parks and Martin Luther King Jr., engaging in civil disobedience. There’s also a sense among start-ups that it’s okay for them to break the rules because they’re underdogs competing against huge opponents; they’re David, firing his slingshot at Goliath.

Equal Is Unfair: America's Misguided Fight Against Income Inequality
by Don Watkins and Yaron Brook
Published 28 Mar 2016

Terms such as “the rich” and “the 1 percent” are not neutral descriptions of an individual’s income or wealth. They assume that there are such things as economic classes, which are made up of essentially similar people with a coherent set of interests—interests that clash with those of other economic classes. But what did a visionary CEO like Steve Jobs have in common with a con man like Bernie Madoff besides the fact that both had a lot of money? What do the right-leaning Koch brothers have in common with the left-leaning George Soros? What does an innovator like Amazon’s Jeff Bezos have in common with the political favor-seeking CEO of GE, Jeffrey Immelt? How do the interests of a young, ambitious, and poor Sam Walton clash with the interests of an older, ambitious, and successful Sam Walton?

Everything's Trash, but It's Okay
by Phoebe Robinson
Published 15 Oct 2018

It’s kind of like how people are constantly proclaiming how busy they are even though a lot of times we’re goofing off on social media or looking up our potential compatibility with someone based on our zodiac signs. Oh, right. I forgot. I’m the only person who has done this. Riiiiiiiiiiight. Look, whether you wanna fess up or not, I know a lot of you mofos are click-clackin’ on your laptops like you’re the court stenographer during the Bernie Madoff trial, all so you can see if it’s in the stars for you to splurge the extra five dollars to get you and your future boo’s names embroidered on his and hers towels from Bed Bath & Beyond. But you know what I’m talking about. In America, we pride ourselves on being busy and grinding all the time.

The Fourth Revolution: The Global Race to Reinvent the State
by John Micklethwait and Adrian Wooldridge
Published 14 May 2014

These will have to support ever more old people: The old-age dependency ratio (the number of over-sixty-fives as a proportion of the number of twenty-to-sixty-four-year-olds) will rise from 28 percent to 58 percent—and that is assuming that the EU lets in more than a million young immigrants a year.9 Across the Atlantic, America continues to tax itself like a small-government country and spend like a big-government one while hiding its true liabilities by using tactics that would have made Bernie Madoff blush. With the baby boomers aging, the Congressional Budget Office reckons the bill for medical benefits alone will rise by 60 percent over the next decade—its deficit may be manageable now, but the United States faces a choice: Rein in those entitlements, raise taxes to extraordinary levels, or stagger from crisis to crisis.

Late Bloomers: The Power of Patience in a World Obsessed With Early Achievement
by Rich Karlgaard
Published 15 Apr 2019

Her one-in-a-million algorithmic skills made her fluent in Mandarin and an expert computer programmer in high school. She was a President’s Scholar at Stanford, a patent applicant at eighteen, and as an entrepreneur was so smart and charismatic that at nineteen she was able to talk her Stanford adviser into joining her company. But is she actually a born liar and a con artist, a Bernie Madoff wannabe? Here I speculate, but I don’t think so—or at least she didn’t start out that way. I think her fatal flaw was an obsession with early success and the impatience that goes with it. When Theranos didn’t succeed on her magical schedule, she didn’t stop to fix the technology but rather doubled down on her young genius narrative, her TED talks, her private jet trips, and her legal threats to doubters.

Private Equity: A Memoir
by Carrie Sun
Published 13 Feb 2024

Yes, there were flops, notably Long-Term Capital Management, a fund helmed by, among others, two Nobel laureates who had mismodeled risk (and as a result, during the 1998 ruble crisis, their fund imploded)—but, by and large, hedge funds continued to deliver. In 2010 there were 7,200 funds managing over $1.5 trillion. They embodied the American dream at its peak: anyone could start a fund; with hard work, and good luck, anyone could get rich. But after the dot-com crash and the financial crisis in the same decade and the Bernie Madoff scandal in late 2008, the focus of the industry began to change. Hedge fund clients (who are known as Limited Partners, or LPs) demanded more risk controls, transparency, and compliance measures. This, and the regulatory environment resulting from the Dodd-Frank Act, part of which required hedge fund advisers with $150 million or more in AUM in the United States to register with the SEC, made them more expensive to operate.

Start It Up: Why Running Your Own Business Is Easier Than You Think
by Luke Johnson
Published 31 Aug 2011

Only risk-positive entrepreneurs have the guts to risk making fresh investments in this environment, a time when investment is exactly what society needs to pick itself up again. Watch out for an epidemic of petty fraud The economist J. K. Galbraith asserted that fraud rose in a bull market and shrank in a slump. As he put it, the ‘bezzle’ rises in a boom because of lax controls, and fades in a bust. Colossal frauds like Bernard Madoff’s Ponzi scheme suggests Galbraith may be right about large-scale embezzlement, but my experience is the opposite when it comes to petty larceny. One of our restaurant companies suffered a disturbing rise in insurance claims. It wasn’t down to carelessness. Several claims related to apparent falls by suppliers’ workers.

Democracy at Work: A Cure for Capitalism
by Richard D. Wolff
Published 1 Oct 2012

For centuries, in every capitalist country, individual economic actors have been charged, convicted, and imprisoned for violating some law, and businesses have been shut down or sanctioned for similar reasons. But the individuals and businesses that follow sooner or later replicate their behavior. For example, from long before Charles Dickens’s 1857 novel Little Dorrit all the way up through the stunning multibillion-dollar scam of Bernard Madoff, Ponzi schemes have recurred across capitalism’s history. Capitalism produced these schemes, which only grew larger as the system expanded. The slave and feudal systems that preceded capitalism fostered forms of crime rooted in their mixes of economic risks and rewards. But those systems never displayed the recurring boom-and-bust cycles common to all forms of capitalism.

How to Speak Money: What the Money People Say--And What It Really Means
by John Lanchester
Published 5 Oct 2014

fraud A perennial fact in the world of finance and money. As finance has got more virtual and computerized, and as the sums involved have got bigger and can be moved more easily, frauds have got bigger too: it’s noticeable that the biggest fraud trials in the history of the both the United States and the UK, those of Bernard Madoff and Kweku Abodoli, have happened in the last five years. In all the talk about the need to punish bankers, it seems to have gone largely unremarked that the Fraud Act of 2006 has a section dealing with “fraud by failing to reveal information.” That seems to me to cover the PPI scandal, in which banks sold policies that they knew would be of no use to their customers—but nothing has happened about that.

What They Do With Your Money: How the Financial System Fails Us, and How to Fix It
by Stephen Davis , Jon Lukomnik and David Pitt-Watson
Published 30 Apr 2016

But the potential for a conflict of interest is obvious. What is not as obvious is that a corporate official may simply not be as vigilant in overseeing the pension plan if he or she is not overseen by the people with a stake in its performance. In one disheartening case, a corporate pension plan included infamous Ponzi scheme mastermind Bernard Madoff’s fraudulent investment program even though the custodian of the plan refused to take custody of Madoff’s “assets.”16 The challenge is to ensure that those with the power to control funds act in the interests of those who are supposed to benefit from them. When those in charge of the plan are not accountable to members, it is difficult to be sure if, when, how frequently, how energetically, and how skillfully this oversight is carried out.

When the Wolves Bite: Two Billionaires, One Company, and an Epic Wall Street Battle
by Scott Wapner
Published 23 Apr 2018

“And my understanding is that a handful of the people that they’ve hired or that work for them have been interviewed by the FBI.”4 Ackman may have easily explained away the story, but its mere existence was evidence of how successful Herbalife had become in fighting back against his accusations. In January, the company signed George Sard, whose PR firm, Sard Verbinnen, was known for repping businesses and people in crisis. Sard had worked for Martha Stewart during her insider trading scandal, and for the son of Bernard Madoff. He was a seasoned attack dog for his clients.5 In Herbalife, he found a company willing to battle but unseasoned in its execution. “It was like a club softball team playing against major league operations,” said Sard. “We basically brought a discipline. This was a company that, even though it was out of its depth, was not afraid to be aggressive.

Earth Wars: The Battle for Global Resources
by Geoff Hiscock
Published 23 Apr 2012

Among the big resource-rich economies, Russia (ranked a lowly 143 out of 182 countries on Transparency International’s 2011 corruption perceptions index), Brazil (ranked 73), Mexico, and Indonesia (both ranked 100) continue to see their share of crony capitalists, government ministers, and officials with snouts in the public trough. In the United States (ranked 24, well behind Australia, Canada, Germany, Japan, and the United Kingdom), corruption in government and big business is almost an art form—think Enron, lobbyist Jack Abramoff, financier Bernie Madoff, hedge funds Long-Term Capital Management and Galleon, and former Illinois Governor Rod Blagojevich, to name just a few. But the United States has a number of redeeming features, including its ability to renew itself in the face of adversity or threats to its position, and its willingness to shine a light on corporate and political skulduggery.

Beyond Diversification: What Every Investor Needs to Know About Asset Allocation
by Sebastien Page
Published 4 Nov 2020

I was young, starting my career, and I was quite excited to see the strategy beat the pants off the MSCI World Index, with very limited look-ahead bias. (In hindsight, exceptional backtest performance is never that exceptional. A client once told me that he had never seen a backtest that didn’t work. He added that the only people who can consistently generate Sharpe ratios of 3.0 or above were quants running backtests, plus Bernie Madoff. Even without explicit look-ahead bias, researchers benefit from years of published research on what works and what doesn’t, which is itself an implicit look-ahead bias.) The last and hardest building block to forecast is valuation change. Because yearly price changes drive changes in price-to-earnings (or price-to-cash-flows, or price-to-book) ratios, it’s not surprising that valuation changes aren’t correlated from one year to the next.

Split-Second Persuasion: The Ancient Art and New Science of Changing Minds
by Kevin Dutton
Published 3 Feb 2011

But after a week of small talk and slowly getting acquainted, it had reached the point where our fortunes had all but reversed – and I was asking them for cash. Most of the posse I was on first-name terms with, and after shelling out generously for the first couple of days any desire to swell their coffers further had disappeared faster than a Bernie Madoff hedge fund. Or so I thought. Then one night, towards the end of my stay, I notice a guy I haven’t seen before. By this stage I’m building up a bit of immunity to the hard luck stories, and as I pass I give no more than a fleeting glance at the dog-eared piece of cardboard he’s holding out in front of him.

Why the Dutch Are Different: A Journey Into the Hidden Heart of the Netherlands: From Amsterdam to Zwarte Piet, the Acclaimed Guide to Travel in Holland
by Ben Coates
Published 23 Sep 2015

By Dutch standards this was a staggering achievement – the first time in decades the national title had been won by anyone other than the ‘Big Three’ of Ajax, Feyenoord and PSV Eindhoven. His career miraculously resurrected, van Gaal would perhaps have been happy to stay in the Netherlands, but after reportedly losing millions to the swindler Bernie Madoff, he found himself in urgent need of another big-money job. One presented itself in Germany, and he was soon leading Bayern Munich to both the German title and the Champions League final within a single season. However, his prickly style again caused problems – he was alleged to have had a major falling-out with Bayern striker Luca Toni after van Gaal, irritated with the way the player was slouching during a team lunch, pulled the Italian’s ear to make him sit up straight.

Hype: How Scammers, Grifters, and Con Artists Are Taking Over the Internet―and Why We're Following
by Gabrielle Bluestone
Published 5 Apr 2021

The Short Hills, NJ, native—the son of two real-estate developers—launched his first startup (a service that matched websites and designers) at 13, and skipped out on Bucknell University during his freshman year to launch a content-sharing site called Spling,” the paper reported. “From there, it was a short leap to starting his own credit-card company—and only letting in members whom he and his staff of 11 deem cool enough.” The exclusive-membership pitch had been snatched straight out of the Bernie Madoff playbook, including the persnickety detail that almost none of it was true. Like he had done with Spling years before, McFarland had been employing some big-time magical thinking. Despite his claims of a long waitlist, the truth was anyone who applied to Magnises got a card. The much-hyped special offers were limited in scope and largely dropped off after that first year.

The Production of Money: How to Break the Power of Banks
by Ann Pettifor
Published 27 Mar 2017

In reality, the purpose is to ratchet up the value of bitcoins, most of which are owned by originators of the scheme. In this sense, bitcoin miners are no different from goldbugs talking up the value of of a finite quantity of gold, from tulip growers talking up the price of rare tulips in the seventeenth century, or from Bernard Madoff talking up his fraudulent Ponzi scheme. However, some have hyped up the technology used by bitcoin – blockchain, a distributed database or ledger – and argued that it could revolutionise the distribution of wealth and provide transparent accounts of transactions. We should treat these claims cautiously.

Wealth and Poverty: A New Edition for the Twenty-First Century
by George Gilder
Published 30 Apr 1981

Capitalism doesn’t make sense, morally or rationally, but it does make wealth, and wealth is essential for the very survival of a planet with an ever-growing population. So, they say, don’t knock it. This usual case for capitalism concedes that greed may drive Angelo Mozilla of Country Wide Financial or the egregious Bernie Madoff to criminal behavior. But, runs the argument, greed also makes the system go. Because greed is less trammeled in the United States than in Ethiopia, Harry on the grate eats better than the middle class of Addis Ababa. This was essentially the argument of Adam Smith, the first and still most quoted apologist of capitalism.

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society
by Will Hutton
Published 30 Sep 2010

The quest to generate fabulous personal wealth led not just to unsustainable levels of credit, bad business decisions, increasingly stupid deals, gross misdirection of economic activity and, of course, the crash but malfeasance and fraud. The cast of characters ranged from hedge-fund operator Bernie Madoff, who in effect stole $18 billion from his clients, to RBS CEO Sir Fred Goodwin, who haggled for a £600,000 pension as his bank fought for its very survival. They were the exposed tip of a whole rotten iceberg. Bankers had created a gambling culture in which the moral borders between legitimate trading activity, recklessness and criminal activity became ever more fuzzy – and the disproportionate personal rewards disconnected from any economic and social reality.

Extreme Money: Masters of the Universe and the Cult of Risk
by Satyajit Das
Published 14 Oct 2011

The investigations recalled the investigations and convictions of Ivan Boesky and Michael Milken for corruption on Wall Street in the late 1980s. Regulators suggested that the practice was so widespread as to verge on a “corrupt business model.”16 Some fund managers dispense with pretence and fabricate returns. In 2008, Bernard Madoff confessed to an investment fraud totaling more than $60 billion, involving nearly 5,000 clients. Madoff’s hedge funds, operating from three floors of the Lipstick Building, generated solid returns, trading stocks, and options. In reality, since the mid-1990s, Madoff had operated a Ponzi scheme.

…

Most are glad you have them.” The environment creates a culture where narrow, short-term self-interest dominates. It drives creation and sales of products of no intrinsic value. Fear of liquidation eliminates misgivings about profitable transactions that might result in enormous pain for others. Bernard Madoff perfected affinity fraud, preying upon unwitting members of his religious and ethnic communities, enlisting leading figures to promote fraudulent investments through the country clubs of Long Island and Palm Beach. Former Salomon Brothers economist and Lehman Brothers board member Henry Kaufman, along with stars such as Steven Spielberg, Jeffrey Katzenberg, Kevin Bacon, John Malkovich, Zsa Zsa Gabor, and Larry King lost money.

The Second Curve: Thoughts on Reinventing Society
by Charles Handy
Published 12 Mar 2015

It is not known whether Charles Ponzi in the United States read Dickens but his own scheme, based on the arbitrage of international reply coupons, followed the same principle, diverting any new income to the early investors and to himself. When the scam collapsed in 1920 the sums involved were so large that Ponzi has given his name to all subsequent schemes. More recently Bernard Madoff ran something very similar, an investment fund that promised, and delivered, unusually high returns to investors for almost 50 years. When he was finally exposed, by his two sons, his liabilities were, he admitted, around $50 billion, although his early clients lost no money. He is currently serving a sentence of 150 years.

The Industries of the Future
by Alec Ross
Published 2 Feb 2016

The work of big data is to chew through that spreadsheet, summarize the information, and display the findings in a map, a graph, or some other picture that the Marine will grasp immediately. Finding patterns that we would otherwise overlook and displaying them in ways that we can’t miss is Palantir’s goal. An investor prospectus for Palantir revealed that its software was used to scour 40 years’ worth of records to help convict Bernie Madoff of securities fraud. While it is not forced to disclose its revenues, the private sector now reportedly represents a majority of the firm’s revenue. Alex Karp regards the work of Palantir as sanctified. When recruiting, he says, “We tell people you can help save the world.” To some extent, that’s probably true, but I don’t believe that these kinds of capabilities will stay bottled up and only be put to work in the common interest.

Postcapitalism: A Guide to Our Future
by Paul Mason
Published 29 Jul 2015

Finally, in volume III of Capital, Marx describes how financial crisis happens: credit becomes massively overextended, and then speculation and crime drive it to unsustainable limits where the bust inevitably overcorrects the boom – pushing the economy into a multi-year depression. In one evocative sentence Marx anticipated the world of Enron, Bernie Madoff and the wealthy 1 per cent. The main function of credit, he wrote, is to develop exploitation ‘to the purest and most colossal form of gambling and swindling, and to reduce more and more the number of the few who exploit the social wealth’.2 In 2008 it was the parallels between the collapse of finance and the famous passage quoted above that provoked the articles claiming Marx was right.

Money: The Unauthorized Biography
by Felix Martin
Published 5 Jun 2013

By October the notes of the Bank had been abolished. By December, Law had fled France in fear of his life. So unlikely was the rise, and so precipitous the fall, of the System that it has always been easy to dismiss the whole affair as a typical tale of unscrupulous financial chicanery, with Law in the role of an eighteenth-century Bernie Madoff. The English writer Daniel Defoe painted Law’s career sarcastically as an excellent model for a young man seeking his fortune. “The Case is plain,” he advised, “you must put on a Sword, Kill a Beau or two, get into Newgate, be condemned to be hanged, break Prison, IF YOU CAN,—remember that by the Way,—get over to some Strange Country, turn Stock-Jobber, set up a Mississippi Stock, bubble a Nation, and you may soon be a great Man.”16 Such assessments are too superficial.

Rise of the Robots: Technology and the Threat of a Jobless Future
by Martin Ford
Published 4 May 2015

Imagine a future in which your ability to survive economically is determined almost exclusively by what you own; your labor is worth little or nothing. In that world, there would be no more stories about the person who lost it all and then worked his or her way back to the top. If you make a bad investment or get ripped off by a Bernie Madoff type, then the error might well be unrecoverable. If individuals are ultimately given control over their capital, then it’s inevitable that this scenario would play out for some unlucky people. What would we do for individuals and families who found themselves in this kind of situation? Would they be “too big to fail”?

Don't Be Evil: How Big Tech Betrayed Its Founding Principles--And All of US
by Rana Foroohar
Published 5 Nov 2019

I heard, years later, that Rob Bier had gone on to become an executive coach for Asian CEOs in Singapore, while the always sharp-eyed and sharp-elbowed Harpal Randhawa had gotten into the Zimbabwean diamond business. They fared better than most. Charles Murphy, who later moved back to the United States and worked a series of high-profile hedge fund jobs, became embroiled in the Bernie Madoff scandal after it was revealed that a firm he had worked with in the years following Antfactory had invested money with Madoff on his recommendation. Unable to keep up his glamorous lifestyle, which included a luxurious Upper East Side townhouse, he sank into despair. In March 2017, he threw himself to his death from the twenty-fourth floor of the New York City Sofitel.19 Is This Time Different?

The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century
by Rodrigo Aguilera
Published 10 Mar 2020

This is mostly because markets were never truly “free” in the first place but rigged in favor of the corporate elite with the tacit acceptance and encouragement of the political class. One that only dares to make tolerable reprimands when laissez-faire’s excesses become unjustifiably deviant. Or when they can be pinned on individuals (such as Bernie Madoff, who ran his own fund) rather than institutions (take your pick of Wall Street or City of London banks). For example, only one US investment banker was ever convicted for wrongdoing as a direct result of the financial crisis, and none in the UK at all.28 While in some cases freer markets did do away with some of the handicaps of excessive state intervention from the post-war era, the stunted prosperity of the Western working and middle classes since the 1980s in contrast to the skyrocketing accumulation of wealth by the corporate elite has much to do with governments abdicating on their responsibilities and allowing markets to regulate themselves.

The Great Crash 1929
by John Kenneth Galbraith
Published 15 Dec 2009

(The Post was quoting me. Reached on the phone, Gramm denied it.) There will be Lawrence Summers, impassioned advocate of the repeal of the Glass-Steagall Act in 1999, bounced from Harvard's presidency to Obama's White House—a man whose reputation remains to be rebuilt or buried by events. And Bernard Madoff. The wreckage of bloated reputations is part of the fun of a crash, at least in deep retrospect. And in the renewed prosperity of the 1950s and later years, my father and history were generally content to leave matters there. Of the figures here told of, Charles Mitchell and Samuel Insull were acquitted, Ivar Kreuger committed suicide, and only Richard Whitney entered Sing-Sing.

Think Twice: Harnessing the Power of Counterintuition
by Michael J. Mauboussin
Published 6 Nov 2012

Greenspan, a professor of psychology, explained why we allow other people to take advantage of us and discussed gullibility in fields including finance, academia, and the law. He ended the book with helpful advice on becoming less gullible. The second was the exposure of the greatest Ponzi scheme in history, run by Bernard Madoff, which cost its unsuspecting investors in excess of $60 billion. A Ponzi scheme is a fraudulent operation in which a manager uses funds from new investors to pay off old investors. Since there is no legitimate investment activity, it collapses when the operator can’t find enough additional investors.

The Social Life of Money
by Nigel Dodd
Published 14 May 2014

Paul Krugman described the system that made the crisis possible as “a world gone Madoff,” in which fraud is rife and bankers’ salaries are based merely on the illusion of profit. According to Krugman, “the vast riches being earned … in our bloated financial industry undermined our sense of reality.”25 In a similar vein, Slavoj Žižek called the Bernard Madoff case “an extreme but therefore pure example of what caused the financial breakdown itself” (Žižek 2009: 36). Madoff’s crime (his wealth management business operated as a Ponzi scheme for many years before its collapse in 2008, costing investors around $18 billion) was merely a manifestation of a form of reasoning that is inscribed into the very system of capitalist relations, namely, that the sphere of circulation must be expanded—using “fraudulent” monetary instruments, if necessary—to keep the machinery running: “the temptation to ‘morph’ legitimate business into a pyramid scheme is part of the very nature of the capitalist circulation process” (Žižek 2009: 36).

…

This is where we are today: undecidability, the era of floating theories, as much as floating money” (Baudrillard 1993: 44 n. 3; see also Baudrillard 2001: 53). 23 The terrorist model brings about “an excess of reality” (Baudrillard 2003: 18). 24 In his later analysis, Baudrillard makes the additional point that the towers were an “architectural graphism” embodying capitalism in its digital phase, “a system that is no longer competitive, but digital and countable, and from which competition has disappeared in favour of networks and monopoly” (Baudrillard 2003: 38–39). 25 “The Bernard Madoff story tells us a lot about the nation’s financial mess,” Seattle Times, December 19, 2008. 26 Michael Rowbotham takes a similar line, but in much narrower terms, describing fractional reserve banking per se as a form of legalized counterfeiting (Rowbotham 1998). 27 “Stucco is the triumphant democracy of all artificial signs,” he writes (Baudrillard 1993: 51). 28 As we see in Chapter 8, the idea behind Bitcoin is that no such copies are possible: each Bitcoin is unique. 29 Circulating at speed, speculative currencies are the epitome of an uncontrollable drifting of signs: “a simple play of flotation can ruin any national economy” (Baudrillard 1993: 23).

Class Warfare: Inside the Fight to Fix America's Schools
by Steven Brill
Published 15 Aug 2011

“Because the union contract says that teachers who contribute into this fund [in addition to the other, larger pension fund set up for them that the city contributes to] are guaranteed 8.25 percent,” the fund clerk told him. “If the investments fall short, the city has to make up the rest.” Klein had just learned about a benefit written into the union contract that was another underfunded time bomb. “Who else but Bernie Madoff guarantees 8.25 percent a year permanently?” Klein chuckled. • • • After the announcement of Black’s appointment, the UFT’s Michael Mulgrew told a November 2010 meeting of a community group sympathetic to his union that “mayoral control [of the schools] is due to sunset in three years, and there is no way it is coming back.”

We Were Eight Years in Power: An American Tragedy
by Ta-Nehisi Coates
Published 2 Oct 2017

It was not so much that the black layabouts and deadbeats Obama invoked in his speeches were unrecognizable. I had seen those people too. But I’d also seen the same among white people. If black men were overrepresented among drug dealers and absentee dads of the world, it was directly related to their being underrepresented among the Bernie Madoffs and Kenneth Lays of the world. Power was what mattered, and what characterized the differences between black and white America was not a difference in work ethic, but a system engineered to place one on top of the other. The mark of that system is visible at every level of American society, regardless of the quality of one’s choices.

System Error: Where Big Tech Went Wrong and How We Can Reboot
by Rob Reich , Mehran Sahami and Jeremy M. Weinstein
Published 6 Sep 2021

The fraudulent representations of its technology were exposed when some young whistleblower employees reported their concerns to state officials and investigative journalists at the Wall Street Journal. Holmes is currently facing criminal charges, and the company was shuttered in 2018. Such stories exist in every profession: the deceptions of the financier Bernie Madoff; the doping by the bicyclist Lance Armstrong; the corruption of politicians such as Richard Nixon. The issue of personal ethics is often a real problem, because some people do in fact sometimes conduct themselves, steer their businesses, or lead public agencies in an unethical manner. But these are actually the least interesting ethical questions that arise.

Moneyland: Why Thieves and Crooks Now Rule the World and How to Take It Back
by Oliver Bullough
Published 5 Sep 2018

‘I’m struggling to think of any more cowardly abuse of the mighty institution that is diplomatic immunity,’ wrote Mark Stephens, a renowned British solicitor and former president of the Commonwealth Lawyers Association, a few months later. ‘Is the international community really prepared to accept the prospect of wealthy fraudsters and crooks – perhaps the next Bernie Madoff, criminals like drugs kingpin El Chapo or even sponsors of terrorism – skirting around legitimate justice systems simply because they had a diplomatic passport from an impoverished nation?’ It is all very well to lay out the problem like that, but much harder to think of anything that can be done about it.

Philanthrocapitalism
by Matthew Bishop , Michael Green and Bill Clinton
Published 29 Sep 2008

Despite the start of what was generally regarded as the worst economic crisis since the 1930s, overall giving by Americans of all incomes fell by just 2 percent in 2008, to what was still the second highest total ever, $307 billion, according to the annual Giving USA report. The failure of the financial markets and headline-grabbing fraud scandals such as those involving Bernie Madoff and Allen Stanford, both of whom were high-profile philanthropists (though not among those featured in Philanthrocapitalism), have rightly raised the level of public skepticism both about the legitimacy of wealth created on Wall Street and the merits of some of finance’s best-known givers. There are important lessons to be learned here.

Fault Lines: How Hidden Fractures Still Threaten the World Economy
by Raghuram Rajan
Published 24 May 2010

In the jargon, such excess returns are known as “alpha.” Why should a manager care about generating alpha? If she wants to attract substantial new inflows of money, which is the key to being paid large amounts, she has to give the appearance of superior performance. The most direct way is to fudge returns. In recent times, some fund managers, like Bernard Madoff, simply made up their numbers, while others who held complex, rarely traded securities attributed excessively high prices to them based on models that had only a nodding acquaintance with reality. But it is easy to track and audit the returns most financial managers generate, so fudging is usually not an option, even for those with consciences untroubled by committing fraud.

Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions
by Dan Ariely
Published 19 Feb 2007

But, when our ability to perform at a satisfactory level is low or nonexistent, and when our failures can hurt ourselves and others (think about driving)—this is when regulations are very handy boundaries to apply. (2) What caused bankers to lose sight of the economy? The financial crisis of 2008 left a lot of people feeling that the investment bankers involved were fundamentally evil human beings, and that the economic crisis resulted from their deceitfulness and greed. Certainly, people like Bernard Madoff were out to cheat their investors for personal gain. But personally, I think calculated cheating was the exception rather than the rule in this financial fiasco. I’m not suggesting in any way that the bankers were innocent bystanders, but I do think that the story of their actions is more complicated than simply accusing them of being bad apples.

The Einstein of Money: The Life and Timeless Financial Wisdom of Benjamin Graham
by Joe Carlen
Published 14 Apr 2012

As Galbraith writes, “There are few times when an author can have such affirmation of what he or she has written.”34 Indeed, from 2001 to 2004, Enron (massive hidden losses35), WorldCom (“personal loans”36 to the CEO), Tyco (enormous theft by the CEO and CFO37), and Health South (wildly inflated earnings38) dominated the headlines. Since 2004, the scandals have continued unabated, with such headline-grabbers as AIG ($1.7 billion in loans were recorded as “revenue”39), Bernard Madoff (massive Ponzi scheme40), and Lehman Brothers (hidden losses prior to the firm's bankruptcy41). Of course, these are the most egregious, even sensational, examples. Nonetheless, Graham would have been disappointed regarding the persistence of what Lawrence Cunningham describes as the “small population of true owner-orientated U.S. managers”42 and the various forms of shareholder abuse that result from this systemic weakness.

The End of Wall Street
by Roger Lowenstein
Published 15 Jan 2010

One would have imagined that, at the very least, banks would not have needed coercion from regulators to take measures to safeguard their own precious capital. 26 Such was the central tenet of Greenspanism: people are rational; markets reflect the sum of many participants’ rational decisions. In fact, lenders, like the victims of a Bernie Madoff, engage in a willful self-delusion. By 2004, the number of Americans who “owned” their homes had climbed to an unprecedented 69 percent. By then, more than $2 trillion subprime and Alt-A no-doc loans were outstanding, and fully a third of new financings were for risky mortgages of one type or another—loans that, a short while ago, had been either unavailable or highly restricted.

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else
by Chrystia Freeland
Published 11 Oct 2012

Winner-Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class. Simon & Schuster, 2010. Hayek, Friedrich A. Law, Legislation, and Liberty, Volume 2: The Mirage of Social Justice. University of Chicago Press, 1978. Henriques, Diana B. The Wizard of Lies: Bernie Madoff and the Death of Trust. Times Books, 2011. Hoffman, David E. The Oligarchs: Wealth and Power in the New Russia. Public Affairs, 2002. Hoffman, Reid. The Start-Up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career. Crown Business, 2012. Hsieh, Tony. Delivering Happiness: A Path to Profits, Passion, and Purpose.

Happy City: Transforming Our Lives Through Urban Design
by Charles Montgomery
Published 12 Nov 2013

Smyrna’s council members had risked their political necks, raising property taxes in order to help bankroll the project, but after the village opened, land values within a mile radius went through the roof, inflating the city’s tax revenue twentyfold. The city started raking in so much money that the city council cut the tax rate by 30 percent, making it near the lowest in the state. “It sounds like a Bernie Madoff scheme, but it’s true!” one councilor gushed. The success made Mayor Bacon, who spearheaded the scheme, something of a hero in Smyrna. On the day of our walk through the Market Village, passersby kept slapping him on the back and thanking him. Village Sushi, a restaurant on the strip, even named a dish after him: the Max Bacon Sushi Roll.

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated)
by Charles Wheelan
Published 18 Apr 2010

The next time an investment adviser comes to you promising a 20 or 40 percent return, you know that one of three things must be true: (1) This must be a very risky investment in order to justify such a high expected return—think Harvard endowment; (2) your investment adviser has stumbled upon an opportunity still undiscovered by all the world’s sophisticated investors, and he has been kind enough to share it with you—please call me; or (3) your investment adviser is incompetent and/or dishonest—think Bernie Madoff. All too often the answer is (3). The fascinating thing about economics is that the fundamental ideas don’t change. Monarchs in the Middle Ages needed to raise capital (usually to fight wars), just as biotech startups do today. I have no idea what the planet will look like in one hundred years.

The Black Box Society: The Secret Algorithms That Control Money and Information
by Frank Pasquale
Published 17 Nov 2014

Matt Taibbi, “Is the SEC Covering Up Wall Street Crimes?,” Rolling Stone, August 17, 2011, http://www.rollingstone.com /politics/news/is-the-sec -covering-up-wall-street-crimes-20110817?print=true. 129. For example, agency critics like Harry Markopolos have berated it for years for failing to catch Bernie Madoff earlier; the (now-deleted) MUI file about him might have led to some accountability for the individuals who failed to follow up on complaints about Madoff. Harry Markopolos, No One Would Listen: A True Financial Thriller (Hoboken, NJ: John Wiley & Sons, Inc., 2010). Past bad behavior can contextualize current accusations.

The Economics Anti-Textbook: A Critical Thinker's Guide to Microeconomics
by Rod Hill and Anthony Myatt
Published 15 Mar 2010

Redelmeier, D., P. Rozin and D. Kahneman (1993) ‘Understanding patients’ decisions: cognitive and emotional perspectives’, Journal of the American Medical Association, 72: 73. Ricardo, D. (2005 [1817]) The Principles of Political Economy and Taxation, Indianapolis: Liberty Press. Rick, F. (2009) ‘Bernie Madoff is no John Dillinger’, New York Times, 4 July. Ritchie, G. (2006) ‘Peace in our time’, ­Ottawa Citizen, 29 April. Robinson, J. (1933) Economics of Imperfect Competition, London and New York: Macmillan. — (1965) ‘Teaching economics’, Collected Economic Papers, vol. 3, ch. 1, Oxford: Basil Blackwell. — (1972) ‘The second crisis of economic theory’, American Economic Review, 62(2); reprinted in Collected Economic Papers, vol. 4, ch. 10, Oxford: Basil Blackwell. — (1973a) ‘The new mercantilism’, Collected Economic Papers, vol. 4, ch. 1, Oxford: Basil Blackwell. — (1973b) ‘Marginal productivity’, Collected Economic Papers, vol. 4, ch. 14, Oxford: Basil Blackwell.

Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy
by Cathy O'Neil
Published 5 Sep 2016

The small and underfunded teams who handle that work, from the FBI to investigators at the Securities and Exchange Commission, have learned through the decades that bankers are virtually invulnerable. They spend heavily on our politicians, which always helps, and are also viewed as crucial to our economy. That protects them. If their banks go south, our economy could go with them. (The poor have no such argument.) So except for a couple of criminal outliers, such as Ponzi-scheme master Bernard Madoff, financiers don’t get arrested. As a group, they made it through the 2008 market crash practically unscathed. What could ever burn them now? My point is that police make choices about where they direct their attention. Today they focus almost exclusively on the poor. That’s their heritage, and their mission, as they understand it.

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
by Kevin Phillips
Published 31 Mar 2008

The incoming Roosevelt administration of 1933 had no similar link. Gallup’s November poll had found 60 percent of those sampled calling it critical or very important for Obama to impose stricter regulation on financial institutions. Then December’s revelation of the $50 billion Ponzi scheme run by financier Bernard Madoff further soured the public. In December’s CNN/opinion research poll, 74 percent of those sampled said they believed Madoff’s behavior was common among financial advisers and institutions, and 59 percent said that government regulated the stock market and financial institutions too loosely, up from 50 percent in September.

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future
by Paul Krugman
Published 28 Jan 2020

Realistically, however, it won’t make more than a small dent in the subprime problem. The bottom line is that policymakers left the financial industry free to innovate—and what it did was to innovate itself, and the rest of us, into a big, nasty mess. THE MADOFF ECONOMY December 19, 2008 The revelation that Bernard Madoff—brilliant investor (or so almost everyone thought), philanthropist, pillar of the community—was a phony has shocked the world, and understandably so. The scale of his alleged $50 billion Ponzi scheme is hard to comprehend. Yet surely I’m not the only person to ask the obvious question: How different, really, is Mr.

Power Hungry: The Myths of "Green" Energy and the Real Fuels of the Future
by Robert Bryce
Published 26 Apr 2011

Bush and his cronies used trumped-up intelligence to justify the Second Iraq War, a ruinously expensive campaign that will haunt the United States for decades to come. We had the fraud perpetrated by Dennis Kozlowski of Tyco International, who felt entitled to a $6,000 shower curtain.7 There were the two Bernies: Bernie Ebbers of WorldCom, who’s now serving a twenty-five-year sentence for fraud and conspiracy, and, of course, Bernie Madoff, the gold-digging mastermind of a multibillion-dollar Ponzi scheme who’s now serving 150 years in prison. The sports pages were full of news about cheaters, from Major League Baseball players such as Mark Mc-Gwire and Barry Bonds to the ongoing doping scandals at the Tour de France. And we saw the carnage created by the pirates on Wall Street who engineered a multitrillion-dollar mess of toxic derivatives—from collateralized debt obligations to credit default swaps—that would have made even a privateer such as Enron’s Jeffrey Skilling blush in embarrassment.8 We cannot, must not, be Enroned when it comes to energy and energy policy.

Liars and Outliers: How Security Holds Society Together
by Bruce Schneier
Published 14 Feb 2012

Reno, and Robert B. Cialdini (2000), “A Focus Theory of Normative Conduct: When Norms Do and Do Not Affect Behavior,” Personality & Social Psychology Bulletin, 26:1002–12. general breakdown James B. Stewart (2011), Tangled Webs: How False Statements Are Undermining America: From Martha Stewart to Bernie Madoff, Penguin Press. unpunished free rider Robert O. Kurzban and Daniel Houser (2001), “Individual Differences in Cooperation in a Circular Public Goods Game,” European Journal of Personality, 15:S37–S52. David P. Myatt and Chris Wallace (2008), “When Does One Bad Apple Spoil the Barrel? An Evolutionary Analysis of Collective Action,” Review of Economic Studies, 75:499–527.

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money
by Steven Drobny
Published 18 Mar 2010

How important is China in your thinking about the world right now? I was very fortunate to receive an invitation recently to present to a Chinese bank. Yet I had the misfortune of them asking me my view of the world, which is not very bullish on China. My view on China is one of irony and paradox. I jokingly suggest that it is as though we put Bernie Madoff in charge of America’s GDP accounting. Of course he would overstate it. In a similar manner I believe that all the credit card and home-equity spending of the last decade served to overstate the true size of the American economy. And the surplus nations bought into the dream that American GDP was $15 trillion.

Vultures' Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores
by Greg Palast
Published 14 Nov 2011

Contracts that are the fruit of crime cannot be enforced. BP, France’s Total, ConocoPhillips, Texaco, Italy’s ENI, and the rest of the gang, if indicted, would be out of the Caspian on their keisters. China, giggling on the sidelines, would end up with the whole caboodle. A huge scrum of reporters is down the hall, covering a blonde in the Bernie Madoff trial. I am the only reporter covering the Bribery Case of the Century. Lucky me. Now, Schwartz stands. Giffen’s mouthpiece is about to earn his $600 an hour. At a dark-wood lectern, tall and dramatic, the attorney says that his client had merely “failed to tick a box on a tax form”—that was his only crime, to which he now confessed.

Misbehaving: The Making of Behavioral Economics
by Richard H. Thaler
Published 10 May 2015

After a brief wait, he could not stand it anymore. But rather than ring the bell, he carefully opened each cookie, licked out the yummy white filling, and then put the cookie back together, arranging the three cookies as best he could to avoid detection. In my imagination, this kid grows up to be Bernie Madoff. The other behavioral scientist whose work captured my attention was a practicing psychiatrist named George Ainslie who was doing research in his spare time, while holding a job treating patients in a veterans’ hospital. In a paper published in 1975, which I had studied carefully during my year at Stanford, Ainslie summarized everything academics knew about self-control at the time.

Whole Earth: The Many Lives of Stewart Brand
by John Markoff
Published 22 Mar 2022

Through Paul Hawken, they had been introduced to Reed Slatkin, the initial investor in and cofounder of EarthLink, a high-flying internet service provider. Slatkin was a former Scientology minister who between 1986 and 2001 bilked roughly eight hundred investors in a Ponzi scheme that was outdone only by Bernie Madoff. Brand and Phelan had the misfortune of being among the very last people to invest with Slatkin. Late in 2000, he had dinner with the couple on the deck of the Mirene, appearing to carefully weigh whether to let them in on his remarkable portfolio. It was not something he would usually do, he told them.

Kleptopia: How Dirty Money Is Conquering the World
by Tom Burgis
Published 7 Sep 2020

As they ate, Bota explained that the Kazakh authorities who had seized Ablyazov’s bank were trying to turn the tale on its head. They were saying that Ablyazov had looted BTA so greedily that, when the financial crisis struck, it would have collapsed had the state not stepped in to nationalise it. In this account, the scheming oligarch was no ordinary crook. He was the Bernie Madoff of the steppe. Immediately Peter thought back to Putin’s first moves against Khodorkovsky. He remembered how Yukos’s auditors, the British firm PwC, had, after encouragement from the Kremlin, withdrawn ten years of the company’s accounts. That had helped the prosecutors to manufacture their narrative that Khodorkovsky had stolen billions.

Unscripted: The Epic Battle for a Media Empire and the Redstone Family Legacy
by James B Stewart and Rachel Abrams
Published 14 Feb 2023

ALSO BY JAMES B. STEWART Deep State: Trump, the FBI, and the Rule of Law Tangled Webs: How False Statements Are Undermining America: From Martha Stewart to Bernie Madoff Disney War: The Battle for the Magic Kingdom Heart of a Soldier: A Story of Love, Heroism, and September 11th Blind Eye: The Terrifying Story of a Doctor Who Got Away with Murder Blood Sport: The President and His Adversaries Den of Thieves The Prosecutors: Inside the Offices of the Government’s Most Powerful Lawyers The Partners: Inside America’s Most Powerful Law Firms PENGUIN PRESS An imprint of Penguin Random House LLC penguinrandomhouse.com Copyright © 2023 by James B.

The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds
by Maneet Ahuja , Myron Scholes and Mohamed El-Erian
Published 29 May 2012

AHL was up in 2008 but was down 17 percent in 2009, and in 2010 was still 3.7 percent below its high-water mark. Man’s fees suffered accordingly; in March 2010, fees amounted to $97 million, down from $358 million the year before. In addition, RMF, Man’s fund-of-funds business, lost $360 million in the collapse of Bernard Madoff’s Ponzi scheme, and others strategies suffered significant losses as well. In the face of these losses, Man’s CEO Peter Clarke began the search for new assets. GLG was the first place he turned, and he found receptive listeners. Between the market turmoil of 2008 and Coffey’s departure, GLG’s stock price tanked, and the amount of assets under management fell to $17.3 billion, reportedly threatening to put GLG in breach of a covenant on a $570 million loan from Citigroup.

The New Economics: A Bigger Picture
by David Boyle and Andrew Simms
Published 14 Jun 2009

The junk bond revolution was led by a California company called Drexel Burnham Lambert, whose senior executive vice president, Michael Milkin, was the so-called ‘junk bond king’. Evidence obtained from the insider trader Ivan Boesky led to Wall Street’s biggest criminal prosecution ever (at least until the Bernard Madoff affair in 2008), after which 98 indictments of fraud and racketeering were brought against Milkin. He was sentenced to ten years in jail and agreed to pay $600 million in fines. Without his leadership, the junk bonds faltered. It is widely believed that the temporary decline of the junk bond market led to a credit crunch that contributed to the 1990 recession.

Losing Control: The Emerging Threats to Western Prosperity
by Stephen D. King
Published 14 Jun 2010

As they did so, they allowed banks to raise funds well beyond their deposits through the creation of securitized products. Many of these funds were lent to US households with questionable credit histories in the form of sub-prime mortgages. Some of the funds raised, though, were lent back to the emerging economies. This wasn’t quite a Ponzi scheme (although Ponzi schemes, most obviously Bernard L. Madoff Investment Securities LLC, nevertheless developed), but it had much the same effect. The combination of rapidly growing emerging economies, 1990s Asian failures and a hunt for yield left investors with the belief that capital gains had to be plucked from the tree without any real regard for risk.

…

(i) Alaska (i), (ii) Albert, Prince (i) allocation of resources (i), (ii), (iii), (iv), (v), (vi) American International Group (i) Anglo-Russian Entente (i) Annan, Daniel (i) Argentina (i), (ii), (iii) Asia economic growth (i) inflation (i) Russian energy supply (i) trade (i) the West’s diminished status (i), (ii), (iii), (iv), (v), (vi) Asian economic crisis anarchy in capital markets (i), (ii), (iii) migration (i) price stability (i), (ii), (iii) state capitalism (i) Asiatic Barred Zone Act (i) asset-backed securities (i), (ii), (iii), (iv) assets China’s reserve currency (i) population demographics (i), (ii), (iii) price stability (i), (ii), (iii), (iv) savings (i) state capitalism (i), (ii), (iii), (iv), (v) Audi (i), (ii), (iii) Austria (i), (ii) baby-boomer generation (i), (ii), (iii), (iv), (v) balance of payments (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix) Balassa, Bela (i) Balassa–Samuelson condition (i), (ii) Bank of England (i), (ii), (iii), (iv), (v) banks anarchy in capital markets (i), (ii), (iii), (iv), (v) capital controls (i) price stability (i) printing money (i), (ii) protectionism (i) state capitalism (i), (ii), (iii) trade (i) Barbone, L. (i) Beattie, Alan (i) Beijing (i), (ii), (iii), (iv), (v), (vi), (vii) Belarus (i), (ii) Bernanke, Ben (i), (ii) Bernard L. Madoff Investment Securities LLC (i) Besley, Timothy (i) Big Mac index (i) bilateral deals (i), (ii), (iii), (iv), (v) billionaires (i) bio-fuels (i) Blair, Tony (i) Bloomberg (i) Bloom, David E. (i) Boeing (i) Bolshevik Revolution (i), (ii) bonds (i), (ii), (iii), (iv), (v), (vi), (vii) Bontch-Osmolovsky, M.

SuperFreakonomics
by Steven D. Levitt and Stephen J. Dubner
Published 19 Oct 2009

. / 66 Back-dated stock options: see Mark Maremont, Charles Forelle, and James Bandler, “Companies Say Backdating Used in Days After 9/11,” The Wall Street Journal, March 7, 2007. / 66 Police resources shifted to terrorism: see Selwyn Raab, Five Families: The Rise, Decline and Resurgence of America’s Most Powerful Mafia Empires (Macmillan, 2005); Janelle Nanos, “Stiffed,” New York, November 6, 2006; Suzy Jagger, “F.B.I. Diverts Anti-Terror Agents to Bernard Madoff $50 Billion Swindle,” The Times (London), December 22, 2008; and Eric Lichtblau, “Federal Cases of Stock Fraud Drop Sharply,” The New York Times, December 24, 2008. / 66 Influenza and airline travel: see John Brownstein, Cecily Wolfe, and Kenneth Mandl, “Empirical Evidence for the Effect of Airline Travel on Interregional Influenza Spread in the United States,” PloS Medicine, October 2006. / 66 Crime drop in D.C.: see Jonathan Klick and Alexander Tabarrok, “Using Terror Alert Levels to Estimate the Effect of Police on Crime,” Journal of Law and Economics 48, no. 1 (April 2005). / 66 A California pot bonanza: see “Home-Grown,” The Economist, October 18, 2007; and Jeffrey Miron, “The Budgetary Implications of Drug Prohibition,” Harvard University, December 2008.

Finance and the Good Society
by Robert J. Shiller
Published 1 Jan 2012

In his 2010 book No One Would Listen, stock market analyst Harry Markopolos argued that government regulators can be deaf to evidence of nancial excess, even fraud, if the culprit appears to have legitimacy and prestige. The regulators quickly go after small-time crooks, Markopolos argued, but when it comes to large companies, they are “captive to the companies they are supposed to regulate.” Markopolos uncovered substantial evidence that the massive hedge fund run by the respected Wall Street gure Bernard Madoff was nothing more than a Ponzi scheme, a fraudulent investment scheme built on a plan for social contagion of enthusiasm among investors. The fund was eventually exposed in 2008. But Markopolos had complained about Mado ’s scheme to the SEC as early as 2000. In 2005, three years before the ultimate collapse of the scheme, Markopolos presented a twenty-one-page document to SEC New York Branch Chief Meaghan Cheung and explained his ndings.

The Missing Billionaires: A Guide to Better Financial Decisions
by Victor Haghani and James White
Published 27 Aug 2023

Other calls for caution in the use of options include “Sharpening Sharpe Ratios,” in which the authors show how option selling strategies can be optimized to artificially inflate portfolio performance statistics.15 It is not surprising that options played a role in the Ponzi scheme operated by Bernard Madoff, who claimed to be pursuing a “split strike conversion” options strategy. Hedging the Options You're Stuck With Throughout our discussion so far, we've evaluated the proactive use of options to create return patterns that might be more attractive to individual investors than what they could achieve through simpler means.

The Social Animal: The Hidden Sources of Love, Character, and Achievement
by David Brooks
Published 8 Mar 2011

As long as everybody was civil and genial, the way they were, then their way of thinking made sense. As long as everything was neat and orderly, they could retreat and live inside the formulas they’d learned in school. But, much of the time, because the world is not neat and gentle, they were the babes of the universe. They fell for Bernie Madoff schemes, subprime mortgages, and derivatives they didn’t understand. They were suckers for every moronic management fad, every bubble mania. They wandered about in the mist, blown about by deeper forces they could not understand. Fortunately, God, in his infinite and redeeming mercy, had also sent down a tight-abbed, small-boned Chinese-Chicana woman to rescue the innocents.

Model Thinker: What You Need to Know to Make Data Work for You
by Scott E. Page
Published 27 Nov 2018

If Berkshire had a 50% chance of beating the market, it should have outperformed the market twenty-five times during that fifty-year period, with a standard deviation of 3.5 years The actual number of years Berkshire beat the market lies about four standard deviations above the mean, a one-in-a-million event. We can rule out luck. Given that Berkshire reveals its investments, we can also rule out fraud. Bernie Madoff did not reveal his investments. His proclaimed streak of successes—decades of consecutive positive returns—was so unlikely that his clients should have demanded transparency.6 Random Walk Models Our next model, the simple random walk model, builds on the Bernoulli urn model by keeping running totals of past outcomes.

Bleeding Edge: A Novel
by Thomas Pynchon
Published 16 Sep 2013

“Strange things happen to men in Spetsnaz,” replies Igor. “Not to mention upper altitudes.” “Ask her,” Rocky leaning in toward Igor’s ear. “Go ahead, she’s OK.” “Ask me what?” “Know anything about these people?” Igor slides a folder in front of her. “Madoff Securities. Hmm, maybe some industry scuttlebutt. Bernie Madoff, a legend on the street. Said to do quite well, I recall.” “One to two percent per month.” “Nice average return, so what’s the problem?” “Not average. Same every month.” “Uh-oh.” She flips pages, has a look at the graph. “What the fuck. It’s a perfect straight line, slanting up forever?” “Seem a little abnormal to you?”

Pandora's Box: How Guts, Guile, and Greed Upended TV
by Peter Biskind
Published 6 Nov 2023

Damages . . . was trying to take the anti-hero genre in a different direction.”26 Or he may have been pressured by parent company Fox, which was hesitant to air a show about a meth dealer. Written by Daniel Zelman and the Kessler brothers, Glenn and Todd A., of fired-by-David Chase fame, each season of Damages was based on a ripped-from-the-headlines case, like Enron and Bernie Madoff. The cable shows, however, were still having trouble getting A-list talent. Thus, once again, it was Glenn Close to the rescue, for the role of a scheming lawyer, Patty Hewes, mentoring Rose Byrne. With Close attached, the show was able to attract a starry cast that would have been the envy of HBO: Ted Danson, William Hurt, Lily Tomlin, John Goodman, and others.

The Rational Optimist: How Prosperity Evolves
by Matt Ridley
Published 17 May 2010

More immediately, the financial crash of 2008 has caused a deep and painful recession that will generate mass unemployment and real hardship in many parts of the world. The reality of rising living standards feels to many today to be a trick, a pyramid scheme achieved by borrowing from the future. Until he was rumbled in 2008, Bernard Madoff offered his investors high and steady returns of more than 1 per cent a month on their money for thirty years. He did so by paying new investors’ capital out to old investors as revenue, a chain-letter con trick that could not last. When the music stopped, $65 billion of investors’ funds had been looted.

The Art of Scalability: Scalable Web Architecture, Processes, and Organizations for the Modern Enterprise
by Martin L. Abbott and Michael T. Fisher
Published 1 Dec 2009

One of our favorite quotes goes something like “What you allow you teach and what you teach becomes your standard.” Here, allowance means either yourself or others. Nowhere does that ring more true than with ethical violations large and small. We’re not sure how issues like Tyco or Enron ultimately start. Nor are we certain how a Ponzi scheme as large as Bernie Madoff’s, which destroyed billions of dollars of wealth, can possibly exist for so many years. We do know, however, that they could have been stopped long before the problems grew to legendary sizes and that each of these events destroyed the size and scale of the companies in question along with a great deal of shareholder value We don’t believe that people start out plotting billion dollar Ponzi schemes and we don’t believe that people start off by misstating tens or hundreds of millions of dollars of revenue or embezzling tens of millions of dollars of money from a company.

The Meritocracy Myth
by Stephen J. McNamee
Published 17 Jul 2013

It is more difficult to detect white-collar crime since enforcement efforts of the criminal-justice system are directed toward crimes committed by the poor rather than the rich (Messner and Rosenfeld 2007; Reiman and Leighton 2013), and people are often unaware that they have been victimized. When white-collar crimes are exposed, the sums procured in their commission are often shocking—often totaling in the millions and sometimes even in the billions of dollars. The Ponzi scheme stock fraud perpetrated by Bernard Madoff (an ironic surname for a white-collar criminal) totaling $65 billion is one particularly noteworthy example. Other examples include the notorious and illegal stock manipulations of Ivan Boesky (deal stocks), Michael Milken (junk bonds), and Charles Keating (the savings-and-loan scandal); corporate wrongdoing, including ethics scandals at Enron, WorldCom, Arthur Andersen, Adelphia, Global Crossing, Tyco, and many others; and suspected misconduct in the vast mutual funds and mortgage industries that led to the near collapse of credit markets and the debilitating Great Recession that followed.

A Generation of Sociopaths: How the Baby Boomers Betrayed America
by Bruce Cannon Gibney
Published 7 Mar 2017

In the more than eighteen months between April 2007, when the SEC relaxed capital requirements and authorized banks to model their own risks, and the late summer of 2008, when the wheels came off, the special office assigned to monitor the results of deregulation completed zero investigations (it also had no director).23 Even though it is clear that neither government nor firms had adequate insight into systemic risk, the trend has been to less transparency and understanding. The accounting profession’s craven accommodations did not make it any easier to understand what was going on. Sometimes the auditors simply committed fraud, as happened when Bernie Madoff’s accountants helped his Ponzi scheme. More usually, it took the form of industry opinions that allowed substantial and unwise discretion on the part of financial officers. Older and more conservative standards, like holding assets at book value, gave way to mark-to-market and mark-to-model accounting.

Not Working: Where Have All the Good Jobs Gone?
by David G. Blanchflower
Published 12 Apr 2021

He says, colorfully, the IYI has been wrong, historically, on “Stalinism, Maoism, GMOs, Iraq, Libya, Syria, lobotomies, urban planning, low carbohydrate diets, gym machines, behaviorism, transfats, Freudianism, portfolio theory, linear regression, Gaussianism, Salafism, dynamic stochastic equilibrium modeling, housing projects, selfish gene, election forecasting models, Bernie Madoff (pre-blowup) and p-values. But he is convinced that his current position is right.” He doesn’t mean me of course! 24. Letter to the Queen from the British Academy signed by 33 economists including 9 members, ex- and future, of the MPC and civil servants: http://www.feed-charity.org/user/image/besley-hennessy2009a.pdf. 25.

The Everything Store: Jeff Bezos and the Age of Amazon
by Brad Stone
Published 14 Oct 2013

By 1993, he was remotely running the firm’s Chicago-based options trading group and then its high-profile entry into the third-market business, an alternative over-the-counter exchange that allowed retail investors to trade equities without the usual commissions collected by the New York Stock Exchange.4 Brian Marsh, a programmer for the firm who would later work at Amazon, says that Bezos was “incredibly charismatic and persuasive about the third-market project. It was easy to see then he was a great leader.” Bezos’s division faced constant challenges, however. The dominant player in the space was one Bernard Madoff (the architect of a massive Ponzi scheme that would unravel in 2008). Madoff’s own third-market division pioneered the business and preserved its market lead. Bezos and his team could see Madoff’s offices in the Lipstick Building on the East Side through their windows high above the city. While the rest of Wall Street saw D.

More Money Than God: Hedge Funds and the Making of a New Elite
by Sebastian Mallaby
Published 9 Jun 2010

In 1995 the firm launched the Internet service provider Juno Online, as well as FarSight, an early venture in online banking and brokerage. Alongside its efforts in options market making, Shaw waded into the so-called third market, in which listed equities were traded away from the stock exchange. This business was dominated by a genial networker named Bernie Madoff, and so Shaw’s team jumped in, figuring that its quantitative edge would allow it to make decent money. But Madoff had ways of making up for his lack of cutting-edge analysis, and Shaw’s quants failed to turn a profit. Shaw’s willingness to experiment was both a strength and a weakness. By launching multiple ventures, he diversified his risks, and some of the new ventures paid off handsomely.

Stress Test: Reflections on Financial Crises
by Timothy F. Geithner
Published 11 May 2014

I still didn’t think firehouses caused fires—as Stan Fischer put it during the emerging-market crises, condoms don’t cause sex—but resolutions of financial crises always create some moral hazard, and I wanted our reforms to limit moral hazard going forward. It was also tempting, and intuitively satisfying, to blame the crisis on the deceit and fraud and other misbehavior that flourished during the boom—duplicitous brokers luring borrowers into mortgages they couldn’t afford, Bernie Madoff types running wild, securities firms dumping toxic products on unsuspecting clients. These abuses were terrible and unfair, but they were more a feature of the mania than a significant cause of the crisis, fueled by the dominant belief that risk-taking was no longer particularly risky. Promises of easy money seemed plausible in those days, because a lot of easy money was being made.

The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance
by Eswar S. Prasad
Published 27 Sep 2021

Financial Stability The main goal of financial regulation is to ensure that finance works well in supporting economic activity and attaining the other objectives for which it is designed and, more importantly, that it does not become a source of instability itself. The notion that market forces favor safer and more efficient firms and cull riskier and less efficient ones does not seem to hold in finance. From Ponzi schemes à la Bernie Madoff to large investment banks such as Bear Stearns and Lehman Brothers that took on vast amounts of risk and came crashing down, finance run amok causes pain across broad swaths of society. When stock markets fall, investors take a hit to their portfolios. When a company files for bankruptcy, owners of that company’s equities or debt could lose their investments.

The Wrecking Crew: How Conservatives Rule
by Thomas Frank
Published 5 Aug 2008

Its overworked staffers, whose pay was comparable to that of other federal employees, were expected to face down some of the most highly paid corporation lawyers in the world—a disparity that led, here as elsewhere, to the revolving door. By the time of the crash, the SEC was so utterly clueless that it completely missed the greatest Ponzi scheme of all time, the investment firm run by Bernard Madoff, despite having received numerous tips on the megafraud. It took years for conservatives to transform the SEC into the laughingstock it became in 2008. Their vandalism began, as we have seen elsewhere, with personnel decisions: Before the 1980s, SEC commissioners were drawn from within the agency; from Reagan’s presidency on, they came from Wall Street.

Geek Heresy: Rescuing Social Change From the Cult of Technology
by Kentaro Toyama
Published 25 May 2015

Lawrence Kohlberg was inspired by Piaget to investigate stages of moral development (Kohlberg et al. 1983). 19.I don’t claim that all such change always moves in a positive direction. Sometimes, someone of praiseworthy achievement decides to make a terrible step backward in intrinsic growth – a prominent example is Bernard Madoff, whose hedge-fund pyramid scheme cheated his investors out of billions. Nevertheless, my main point here is that forward growth and maturation is not an unusual thing. Contrary to anyone who believes that human nature is fixed and economically focused, positive human change at an individual level is common and often not at all about money. 20.See, for example, Haggbloom et al. (2002).

It's Better Than It Looks: Reasons for Optimism in an Age of Fear
by Gregg Easterbrook
Published 20 Feb 2018

At the same time federal debt has distended, state pension accounts have gone into the red. The Pew Trusts has found that states have at least $1 trillion in unfunded liabilities, perhaps as much as $3 trillion. State pension funds make the unrealistic assumption their investments will post an average return of 7.6 percent, almost exactly the promise that Bernard Madoff employed to fleece his marks. Projecting unrealistic returns at unspecified future dates allows governors and mayors to pretend to be fiscally responsible and allows state and local pension fund managers to award themselves generous bonuses, while distributing current revenues as if they were investment yields—exactly the manner in which Ponzi schemes function.

The Making of Modern Britain
by Andrew Marr
Published 16 May 2007

There were property bubbles, notably a hysterical and fraudulent one in Florida devised by an Italian immigrant called Charles Ponzi, who sold tiny blocks of land for development, some of them actually underwater. Ponzi gave his name to a financial scam which again hit the headlines in 2008–9 with the arrest of the New York financier and former stock exchange chairman Bernard Madoff, who had modelled his investment con on the original 1920s model. Ponzi’s Florida scheme was an early indication of the US economy running out of control but the warning signs were largely ignored in Washington, just as later ‘sub-prime’ mortgage assets took a while to become notorious as ‘toxic debts’.

Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis
by Scott Patterson
Published 5 Jun 2023

“Nassim would be euphoric when we were doing well and despondent when we weren’t,” Spitznagel recalls. “It was bad for his health.” There was another irritant that preyed on Taleb’s mental health. Clients or prospective clients kept asking him why he couldn’t match the performance of another successful trading firm that also claimed to have a cutting-edge option-trading strategy: Bernard L. Madoff Investment Securities LLC. “If you’re so smart, why can’t you do the same as Madoff?” they’d ask. “How come he can do it, and you can’t?” Then they’d show him Madoff’s performance—the uncanny 15 or 20 percent returns per month, every month, year after year. Taleb tried to replicate a strategy on his computer that would provide such unearthly gains.

Sacred Economics: Money, Gift, and Society in the Age of Transition
by Charles Eisenstein
Published 11 Jul 2011

In an economy plagued by overproduction, such opportunities are rare. So, the financial industry played numbers games instead. The CDOs and so on were a symptom, not a cause, of the financial crisis that originated in the impossibility of economic growth keeping pace with interest. Various pundits have observed that Bernard Madoff’s Ponzi scheme was not so different from the financial industry’s pyramid of mortgaged-based derivatives and other instruments, which themselves formed a bubble that, like Madoff’s, could only sustain itself through an unceasing, indeed exponentially growing, influx of new money. As such, it is a symbol of our times—and even more than people suppose.

The Signal and the Noise: Why So Many Predictions Fail-But Some Don't
by Nate Silver
Published 31 Aug 2012

One disturbing example is that members of Congress, who often gain access to inside information about a company while they are lobbied and who also have some ability to influence the fate of companies through legislation, return a profit on their investments that beats market averages by 5 to 10 percent per year,33 a remarkable rate that would make even Bernie Madoff blush. But the debates over the weak form and semistrong forms of the hypothesis have been perhaps the hottest topic in all the social sciences. Almost nine hundred academic papers are published on the efficient-market hypothesis every year,34 and it is now discussed almost as often in financial journals35 as the theory of evolution is discussed in biological ones.36 Efficient-market hypothesis is sometimes mistaken for an excuse for the excesses of Wall Street; whatever else those guys are doing, it seems to assert, at least they’re behaving rationally.

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal
by Ludwig B. Chincarini
Published 29 Jul 2012

More theoretical and applied research is needed to examine the relationship between leverage in the financial system, long-run growth, and short-run fluctuations. 4. For example, Citigroup’s management admitted that it should have made mortgage market deterioration known throughout the firm. While some divisions were creating new mortgages, others were avoiding or taking positions against them. See FCIC (2010), p. 261. 5. Bernie Madoff had a legitimate broker-dealer business, which was separate from his money management business. It was the money management business that committed fraud and brought down the legitimate business. MF Global was a cash and derivatives broker-dealer led by Jon Corzine that went bankrupt due to large bets placed on Greece and other countries. 6.

Behave: The Biology of Humans at Our Best and Worst
by Robert M. Sapolsky
Published 1 May 2017

Automatic features of Us/Them-ing can extend to magical contagion, a belief that the essentialism of people can transfer to objects or other organisms.39 This can be a plus or a minus—one study showed that washing a sweater worn by JFK would decrease its value at auction, whereas sterilizing one worn by Bernie Madoff would increase its value. This is sheer irrationality—it’s not like an unwashed JFK sweater still contains his magical armpit essence, while an unwashed Madoff sweater swarms with moral-taint cooties. And magical contagion has occurred elsewhere—Nazis killed supposedly contaminated “Jewish dogs” along with their owners.*40 The heart of cognition catching up with affect is, of course, rationalization.

Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers
by Timothy Ferriss
Published 6 Dec 2016

He will ask the most obvious question without any sort of concern about it. . . . So he asks lots and lots of ‘dumb,’ in the best sense of that word, questions. He’ll say to someone, ‘I don’t understand. Explain that to me.’ He’ll just keep asking questions until he gets it right, and I grew up listening to him do this in every conceivable setting. [If my father had met Bernie Madoff, he] never would have invested money with him because he would have said, ‘I don’t understand’ a hundred times. ‘I don’t understand how that works,’ in this kind of dumb, slow voice. ‘I don’t understand, sir. What is going on?’” (See Alex Blumberg, page 303.) ✸ Malcolm’s role models in the public speaking world “Niall Ferguson, the historian, gave a birthday toast, which is just the best toast I’ve ever heard in my life.

Tailspin: The People and Forces Behind America's Fifty-Year Fall--And Those Fighting to Reverse It
by Steven Brill
Published 28 May 2018

In fact, the papers referred mainly to the bank’s Asia subsidiary, as if no one at the New York headquarters would have had any way of knowing what was going on in this key profit center, and even though some of the laughably incompetent hires were placed in the New York office. Since 2010, JPMorgan had settled three other criminal cases by the time the Sons and Daughters deal was announced by paying hundreds of millions of dollars in fines and agreeing to clean up its act. The crimes involved helping to facilitate famed Ponzi-schemer Bernard Madoff’s fraud, rigging bids on municipal bond offerings, and participating in an elaborate multibank conspiracy to defraud clients by fixing rates in a key $500-billion-a-day international exchange rate market. The bank had also paid fines and penalties (some of which were tax-deductible) of over $32.4 billion to resolve fifty-five Justice Department, SEC, and other enforcement proceedings alleging civil violations of various banking laws and regulations—including cheating credit card customers with fraudulent debt collection practices, manipulating electricity markets, illegally foreclosing on homes owned by people serving in the armed forces, and fraudulently selling toxic mortgage-backed securities in the run-up to the 2009 crash.

Expected Returns: An Investor's Guide to Harvesting Market Rewards
by Antti Ilmanen
Published 4 Apr 2011

Here I just make some observations:• Higher moment tradeoffs include peso problems and the greater likelihood, with asymmetric payoff strategies, that the historical track record is biased—overstating returns and understating risks when the rare bad event has not yet materialized in the sample. • The combination of (apparent) high returns and low volatility is often indicative of hidden blowup risks. Low volatility may be achieved by questionable or fraudulent return smoothing (Bernie Madoff’s Ponzi scheme did not offer fantastically high returns but the returns were suspiciously consistent), by holding illiquid assets which are rarely if ever marked to market, or by selling various forms of tail risk insurance. • Even at the asset class level, low volatility in good times may conceal growing imbalances, excessive leverage, stretched market valuations, and vulnerability to regime change.

Merchants of Truth: The Business of News and the Fight for Facts
by Jill Abramson
Published 5 Feb 2019

CONCLUSION The Lipstick Building in midtown Manhattan, so named for its red color and tubular shape, was an unlikely spot for a media uprising. No major news company was headquartered there. The building, codesigned by Philip Johnson, had last seen picketing protesters a decade before, during the financial crisis, because the offices of Wall Street swindler Bernie Madoff were located there. On this day in May 2018, the street outside was occupied by a group of reporters, editors, and press operators decrying another kind of swindle. They were representatives of a group of regional and local newspapers who had traveled from cities such as Denver and St. Paul and whose newspapers had been acquired and then cut to shreds by a vulture capital fund, Alden Global Capital, which occupied a top floor of the Lipstick Building.

The Relentless Revolution: A History of Capitalism
by Joyce Appleby
Published 22 Dec 2009

Named after Charles Ponzi, the notorious swindler of the Roaring Twenties, such flimflams rely on enticing ever more people to invest in order to pay off those who have already bought into the fake firm. Buoyed by strong earnings, the shareholders then become informal salesmen of their remunerative investment. Bernard Madoff, a respected Wall Street financier, acknowledged that he had bilked fifty billion dollars from his clients, selling shares in one of his firms across a large swath of the world, including the United States, Canada, Europe, Middle Eastern countries, and China, before he ran out of new prospects.13 So indifferent to its charge was the Securities and Exchange Commission that despite an insistent expert who told it repeatedly that the emperor Madoff had no clothes, it refused to investigate.

Growth: From Microorganisms to Megacities
by Vaclav Smil
Published 23 Sep 2019

Second, exponential growth, natural or anthropogenic, is always only a temporary phenomenon, to be terminated due to a variety of physical, environmental, economic, technical, or social constraints. Nuclear chain reactions end as surely (due to the limited mass of fissile material) as do Ponzi (pyramid investment) schemes (once the inflow of new monies sinks below the redemptions). But in the latter case it can take a while: think of Bernard Madoff, who was able to carry on his fraudulent activities—a Ponzi scheme so elaborate that it had eluded the oversight authorities who had repeatedly investigated his company (although certainly not as diligently as they should have)—for more than 30 years and to defraud about $65 billion from his investors before he was finally undone by the greatest post-WWII economic crisis in the fall of 2008 (Ross 2016).

Unreal Estate: Money, Ambition, and the Lust for Land in Los Angeles
by Michael Gross
Published 1 Nov 2011

Her neighbors there include her best friend, the jewelry designer Loree Rodkin, Elton John, who owns two apartments, Diahann Carroll, Matthew Perry, P. J. Harvey, Joan Collins, and renter Jane Fonda. Past residents include Peter Lawford, George Hamilton, Stanley Chais (who funneled Hollywood money to Ponzi schemer Bernard Madoff), Vincent Gallo, Sidney Poitier, and Lindsay Lohan, who famously drove her car into a tree on Sunset Boulevard, just over the Beverly Hills line. “There are hookers and drug dealers in and out at all hours,” says one resident, who doesn’t seem to mind. Cher’s tenure in Holmby Hills wasn’t very long, but it left her with a passion for trophy real estate that’s been the longest, most stable love affair of her life.

The Glass Hotel
by Emily St. John Mandel
Published 14 Jun 2020

Acknowledgments I would like to thank the kind people at Lloyd’s List for granting me a trial subscription to read more about shipping, and would also like to thank Rose George for her fascinating book on the industry, Ninety Percent of Everything. While all of the characters in this book are entirely fictional, the financial crime in the narrative is modeled on Bernard L. Madoff’s Ponzi scheme, which collapsed in December 2008. I am indebted to two excellent books on the subject: Erin Arvedlund’s Too Good to Be True and Diana B. Henriques’s The Wizard of Lies. * * * — With thanks to my wonderful agent, Katherine Fausset, and her colleagues at Curtis Brown in New York; my editors—Jennifer Jackson, Sophie Jonathan, and Jennifer Lambert—and their colleagues at Knopf in New York, Picador in London, and HarperCollins Canada in Toronto; Anna Weber and her colleagues at United Agents in the U.K.; Lauren Cerand and Kevin Mandel for reading early drafts of the manuscript; and Michelle Jones, my daughter’s former nanny, for taking excellent care of my daughter during the time I spent writing this book.

The Rough Guide to New York City
by Rough Guides
Published 21 May 2018

Third, Second and First avenues The construction of the Citigroup Center spurred the development of Third Avenue in the late 1970s. One 1980s postmodern entry on that stretch, the so-called Lipstick Building at no. 885, is a tiered, oval-shaped steel tower created by Philip Johnson and John Burgee; it also holds the former offices of disgraced (and incarcerated) Ponzi-scheme broker Bernard Madoff. Nightlife, however, congregates on Second Avenue, which also has some architectural attractions lying on or around 42nd Street. Daily News Building 220 E 42nd St • Closed Sat & Sun • Subway S, #4, #5, #6, #7 to Grand Central-42nd St The stone facade of the sombre yet elegant former Daily News Building fronts a surprising Art Deco interior.

Days of Fire: Bush and Cheney in the White House
by Peter Baker
Published 21 Oct 2013

New York: Thomas Dunne Books, 2012. Stevens, Stuart. The Big Enchilada: Campaign Adventures with the Cockeyed Optimists from Texas Who Won the Biggest Prize in Politics. New York: Free Press, 2001. Stewart, James B. Tangled Webs: How False Statements Are Undermining America: From Martha Stewart to Bernie Madoff. New York: Penguin Press, 2011. Stothard, Peter. Thirty Days: Tony Blair and the Test of History. London: HarperCollins, 2003. Suskind, Ron. The One Percent Doctrine: Deep Inside America’s Pursuit of Its Enemies Since 9/11. New York: Simon & Schuster, 2006. ———. The Price of Loyalty: George W.

The Great Divide: Unequal Societies and What We Can Do About Them
by Joseph E. Stiglitz
Published 15 Mar 2015

It’s hard to know just how far we’ve gone down the path toward complete trust disintegration, but the evidence is not encouraging. Economic inequality, political inequality, and an inequality-promoting legal system all mutually reinforce one another. We get a legal system that provides privileges to the rich and powerful. Occasionally, individual egregious behavior is punished (Bernard L. Madoff comes to mind); but none of those who headed our mighty banks are held accountable. As always, it is the poor and the unconnected who suffer most from this, and who are the most repeatedly deceived. Nowhere was this more evident than in the foreclosure crisis. The subprime mortgage hawkers, putting themselves forward as experts in finance, assured unqualified borrowers that repayment would be no problem.

Principles of Corporate Finance
by Richard A. Brealey , Stewart C. Myers and Franklin Allen
Published 15 Feb 2014

Of course trust is sometimes misplaced. Charlatans and swindlers are often able to hide behind booming markets. It is only “when the tide goes out that you learn who’s been swimming naked.”8 The tide went out in 2008 and a number of frauds were exposed. One notorious example was the Ponzi scheme run by the New York financier Bernard Madoff.9 Individuals and institutions put about $65 billion in the scheme before it collapsed in 2008. (It’s not clear what Madoff did with all this money, but much of it was apparently paid out to early investors in the scheme to create an impression of superior investment performance.) With hindsight, the investors should not have trusted Madoff or the financial advisers who steered money to Madoff.

The New Science of Asset Allocation: Risk Management in a Multi-Asset World
by Thomas Schneeweis , Garry B. Crowder and Hossein Kazemi
Published 8 Mar 2010

Siege: Trump Under Fire
by Michael Wolff
Published 3 Jun 2019

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It
by Anat Admati and Martin Hellwig
Published 15 Feb 2013

The Atlantic and Its Enemies: A History of the Cold War
by Norman Stone
Published 15 Feb 2010