December 21, 2008

Where is Bernie's $50 billion?

Where is the $50 billion Bernie Madoff claims to have lost?

Clearly, some of it went to the guys running the feeder funds, like Walter Noel, but that doesn't appear to add up to close to $50 billion.

There are two kinds of Ponzi schemes: the kind where you do some investment that can't pay off in the long run and the kind where you don't do anything at all and just pretend to invest it. Harry Markopolous demonstrated that Madoff couldn't be actively pursuing the "split-strike" option strategy he claimed to be following because not enough of those types of options were traded in the whole world. So, was Madoff doing anything with the money other than paying it out to earlier investors?

Perhaps he recently started making wild bets in the markets to try to get back to even. But where is the documentation for these trades?

Or do he and his loved ones have it socked away somewhere? So far, his houses and yachts that have surfaced sound like those of a man with hundreds of millions -- but not tens of billions -- of dollars.

It's a $50 billion puzzle ...

My published articles are archived at iSteve.com -- Steve Sailer

20 comments:

Anonymous said...

The 1992 WSJ article says that Madoff was able to show $442 million to the auditors who investigated Aviellano and Bienes.

hcl said...

Ultimately, we need to see the docs and unwind the trade history.

At 11% to 17% compounded from 1994-2008, a lot of that money probably never existed, i.e., true 'paper profits'. (What was the true return of his investments?)

Anonymous said...

Maybe the $50 billion includes money that has already been withdrawn from Madoff's funds by clients over the years.

jimbo said...

I would imagine that the $50 billion includes money that investors left in an "compounded" - I doubt he actually took in anywhere close to that.

Proofreader said...

"A Ponzi scheme that is bigger than Madoff's "


http://www.deepcapture.com/a-ponzi-scheme-that-is-bigger-than-bernies/

Wall Street is rotten to the core. Expect another crunch pretty soon.

Lloyd G. said...

Could be Madoff is trash-talking. He figures he's going to jail regardless, so he might as well claim to have been the biggest thief ever. Instant folk-hero. Sorta like how Henry Lee Lucas claimed to have killed 600 random people. The criminal mind ...

AMac said...

Along the lines of prior commenters:

* What's the total amount Madoff had deposited with him? $50 billion? I suspect the sum is much less, in the range of $15 to $30 billion, with paper profits making up the rest.

* How much was withdrawn in the form of redemptions by clients?

* How much was spent in the course of doing business (e.g. rent for the 17th floor, compensation to that semi-retired auditor and his secretary)?

* How much as commissions, to Fairfield and the other funds-of-funds third parties?

Once there's a handle on these figures, it'll be possible to estimate how much actual money Madoff and his family were able to make disappear. At the moment, nobody seems to have a clue.

David said...

Whatever principal hasn't been spent or paid back is probably in various friends' and relatives' accounts. How much in Israel? We shall probably never know.

Arch Stanton said...

Where's the money? I trust the SEC to find it. Especially with Obama's new Chairman Mary Schapiro at the controls......

http://en.wikipedia.org/wiki/Mary_L._Schapiro

So what if a google search of her name and Madoff's name brings up a ton of troubling info. Like the fact that she gave one of Madoff's sons a job.

http://www.google.com/search?hl=en&q=Mary+Schapiro+madoff&aq=f&oq=


*New SEC chief gave Bernard Madoff's son a job*

business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5364345.ece


*Meet Mary Schapiro, Obama's Horrendous Pick for SEC Chairman*

seekingalpha.com/article/111347-meet-mary-schapiro-obama-s-horrendous-pick-for-sec-chairman


*Mary Schapiro & Madoff family ties profile page and interactive relationship map. A visualization of the relationships between Mary Schapiro & Madoff family*

www.muckety.com/4E95D524CEB68F24C6707F7317B7B572.map?autoGroup=7,7&big=true


The last link has a 'family tree' graphic that will make you want to vomit.

Anonymous said...

my guess is BGK Properties...

FGG=> Jeffrey Tucker=>Fred Kolber+Eddie Gilbert

From Forbes:
"Convicted embezzler and stock manipulator Edward M. Gilbert is back in business. And if you're sure that you would never pour money into a real estate partnership assembled by a two-time prison resident who once fled from the U.S. to Brazil to escape lenders, then you don't know Eddie Gilbert. The charismatic 76-year-old is a seductive salesman...."
http://members.forbes.com/global/1999/0503/0209068a_print.html

From FGG PPM:
"Jeffrey Tucker entered the securities industry in 1987 as a general partner of Fred Kolber & Co. , a broker dealer. At Kolber, Mr. Tucker was responsible for the development and administration of the firm's options company.
FGG began its association with Kolber at that time as a marketing agent, and the firms subsequently merged activities. Throughout FGG's development, Mr. Tucker has been responsible for directing its business and operational development and has been a director or general partner for a variety of its investment funds. In 1989, Mr. Tucker introduced the Madoff Securities relationship to FGG, which became the basis for FGG's Fairfield Sentry Fund."
In 1991, Fred Kolber co-founded BGK Properties with Edward Gilbert and Edward Berman, to invest in real estate limited partnerships.

Anonymous said...

re: Bernie Madoff and front running profits.

If Madoff handles the order, there is a chance to make money off of front running. However, the profit from front running is proportional to the square of the length of time that Madoff holds the order. That is, the longer he is allowed to hold the order, the greater the possibility for profit. I read that Madoff Securities promised a five second execution time in the early 1990s. That is not a lot of time. Also, there are statistics which deal with price improvement -how often the broker executes the order at a better price. Customers use these to judge which broker to send the order to. In sum, it is theoretically possible that Madoff did engage in front running (more likely early in his career), although I doubt he did so recently.

El Muchacho said...

"The last link has a 'family tree' graphic that will make you want to vomit."

There's nothing there.

How stupid do you think people are?

Oh, that's right...Her name is Schapiro, so clearly the International Jewish Conspiracy (tm) must be up to something.

Nice try.

Byrdmachine said...

The $50 billion is becoming a 'legend number', maybe to be dwarfed by what is yet to come, perhaps the end of St. Francis Delano's Ultimate Ponzi Scheme?

Anonymous said...

http://www.deepcapture.com/a-ponzi-scheme-that-is-bigger-than-bernies/

Don't ignore this link - it's on a site put up by the founder of overstock.com after they were nearly driven under by naked short selling.

I heard an interview off of financialsense.com with a guy named Bud Burrell where he claimed that offshore hedge funds or somesuch had skimmed off $1 trillion or so via naked short selling in the past 10 years. This is what is discussed in the link cited (along with the potential link of Madoff as an enabler of this scheme).

If it were true and known, it's the kind of stuff that would cause revolution in a society not numbed by American Idol and Prozac and web porn.

All a bit conspiratorial, but if you're on this website, you should be open to the possibility. Something rotten is going on.

Dutch Boy said...

A numbered bank account in Switzerland or Liechtenstein?

anony-mouse said...

As with all Ponzi schemes, a substantial amount of money is sitting with the people who took their money out before (sometimes long before) the scheme crashed.

Its also intersting to note that this scheme occured almost entirely within the US and Europe. With the exception of a relatively small amount from one bank, no one in Canada, for example, was affected.

As for (yawn) money being in Israel, there doesn't seem to be any evidence Madoff ever went there and only 2 Israeli organisations lost money. No Israeli names have shown up (I'm sure if they had Steve or someone else would have pointed this out.)

All the pople here hoping that AIPAC, etc are out of money are out of luck.

Anonymous said...

"...the International Jewish Conspiracy (tm) must be up to something."

Strawman.

Also a nice try.

Anonymous said...

Makes one quite nostalgic for the likes of Nick Leeson and his trifling $1.4 billion loss.

airtommy said...

No doubt some of the money was spent in the West Bank.

David said...

Total amount of gold stolen by Nazis: $5.6 billion (1997 dollars). Here.

Total amount stolen by Bernie: $50 billion (2008 dollars).

Think Bernie's will be tracked down to the penny, by efforts across decades? Nah.