Bernie lost but many of his clients won!

The following is an update of an earlier post which originally appeared on my WordPress site. I closed that blog and because of recent events I am revisiting my take on the Madoff Ponzi scheme.
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Bernie Madoff has the right moniker but the wrong spelling. It should be Madeoff as it was originally reported that Bernie made-off with from $50 to $65 billion of his trusting clients’ money. It now appears the media and others over-estimated Bernie’s accomplishments.

Former SEC head Harvey Pitt admitted Madoff "probably inflated the amount of money he had under management." If he had invested it, he might have grown it, but he didn’t and it didn’t. His much ballyhooed profits were ghost profits. Empty claims. Hollow boasts.

A Dec. 2018 Bloomberg article reported claims against Madoff's failed investment firm totalled $19.0 billion. Of that, $13.3 billion had been recovered and $11.3 billion distributed to the claimants. The rest was being held in reserve. At some point in the future, all recovered funds will be paid to Madoff's victims.

Bloomberg reports: "almost 1,400 victims who had claims of $1.38 million or less have been repaid in full." For many, investing with Madoff may not have been all that bad. Edward Zore, Chief Executive Officer of Northwestern Mutual Life Insurance, admitted, “We have stocks in our portfolio that lost 95 per cent.” And if you remember Providian Financial, you will recall it lost 95% of its value amid a spectacular run of credit card defaults.

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.

Something in the order of 70% of Madoff controlled money has now been recovered and almost 60% returned to Madoff investors. If you bought stock in the Canadian oil patch company PennWest when it was at its peak, you'd have been very happy to have recovered 60% of your investment.

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 gone on with his life.

The Huffington Post reports, Federal prosecutors said "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."

But making money with a Madoff investment was not problem free. Bloomberg reported that after the initial chaos, "Irving Picard, a New York lawyer overseeing liquidation of Madoff’s firm in bankruptcy court, focused on a simple formula to recover principal cash for victims: Suing customers who withdrew more money than they put in. The strategy sparked controversy but was ultimately blessed by the courts."

For fun, I took a quick look at Canadian mutual funds using globefund.com (my fave). Check out this chart. If you had invested in this fund, you would have easily bested Madoff's losses. Silly Bernie. He was but a piker at losing money. That said, he was a first rate crook.