The following is an update of a June post which originally appeared on my WordPress site. I'm closing that blog, and because of recent events I am revisiting my take on the Madoff Ponzi scheme.
Old Bernie Madoff carries the right moniker, Madoff. It was originally reported that Bernie made-off with 50 billion of his trusting clients’ money. It now appears that Bloomberg.com and others have over-estimated Bernie’s accomplishments.
Although it was claimed he controlled $50 billion, he may have had well less than $17 billion in deposits. If he had invested it, he might have grown it, but he didn’t and it didn’t.
Former SEC head Harvey Pitt said that Madoff “probably inflated the amount of money he had under management.” Pitt predicted the actual loss would fall below $17 billion. As of September 23, 2009, a search of financial records, including microfilm records dating back to 1979, show investors suffering net losses exceeding $13 billion — a mere fraction of the original estimates.
How much is left? Hard to say but as of September 23 the Huffington Post tells us that "authorities have identified more than $1 billion in assets that can be distributed to victims."
Wait, Bernie only lost 94% of the money — maybe less! That’s it! Edward Zore, Chief Executive Officer of Northwestern Mutual Life Insurance, said recently, “We have stocks in our portfolio that lost 95 per cent.” And do you remember Providian Financial? It lost 95% of its value amid a spectacular run of credit card defaults. Oops!
Investors who bought into the American mutual fund ProFunds UltraOTC,when it was at its peak and rode it down to its June 2009 low, watched 95% of their wealth disappear. Will anyone go to jail? Of course not. This is legal. Losing money in the market is an everyday occurrence.
Silly Bernie just cut out the middle man and lost the money directly. Dumb. He could have invested the money, taken his well-earned bonuses for losing the investments and gotten on with his life.
Now, The Huffington Post reports, "Federal prosecutors said Tuesday that a review of most accounts held by financier Bernard Madoff's customers when he was arrested show that about half of the customers had not lost money because they withdrew more money than they originally invested."