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ppauper
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hedge fund ponzi scheme

December 12th, 2008, 2:14 pm

$50bn fraud charge at hedge fundanyone here involved in this ?Bernard Madoff ( former chairman of the Nasdaq) ran a hedge fund which ran up $50bn (£33.5bn) of fraudulent losses
 
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daveangel
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hedge fund ponzi scheme

December 12th, 2008, 2:16 pm

wow - this is unf*cking believable
knowledge comes, wisdom lingers
 
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Paul
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hedge fund ponzi scheme

December 12th, 2008, 2:27 pm

Not surprising that someone should try to do this. Surprising (or at least it was once surprising) that there don't seem to be any auditors etc. stopping this happening.What was the name of the fund?P
 
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Traden4Alpha
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hedge fund ponzi scheme

December 12th, 2008, 2:30 pm

Yes, some people thought that Madoff's returns were far too smooth and now we know why.It's just another example of how rewards for stability lead to increasing risk-taking behavior. The less risky something seems, the more risky it really is.
Last edited by Traden4Alpha on December 13th, 2008, 11:00 pm, edited 1 time in total.
 
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daveangel
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hedge fund ponzi scheme

December 12th, 2008, 2:31 pm

there were a number of feeders into the Madoff operation - FFG Sentry was one of them. I think there were plenty of auditors etc - hard to believe that this was pulled off.
knowledge comes, wisdom lingers
 
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Martinghoul
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hedge fund ponzi scheme

December 12th, 2008, 2:50 pm

QuoteOriginally posted by: daveangelthere were a number of feeders into the Madoff operation - FFG Sentry was one of them. I think there were plenty of auditors etc - hard to believe that this was pulled off.Hmmm, not so sure about the auditors. This out of the BBG article:"...Madoff’s auditor, Friehling & Horowitz, operated from a 13-by-18-foot office in Rockland County, New York. Vos had an investigator stake out the office. A call to the New City, New York, office of Friehling & Horowitz after business hours wasn’t returned"
 
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daveangel
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hedge fund ponzi scheme

December 12th, 2008, 2:54 pm

QuoteOriginally posted by: MartinghoulQuoteOriginally posted by: daveangelthere were a number of feeders into the Madoff operation - FFG Sentry was one of them. I think there were plenty of auditors etc - hard to believe that this was pulled off.Hmmm, not so sure about the auditors. This out of the BBG article:"...Madoff’s auditor, Friehling & Horowitz, operated from a 13-by-18-foot office in Rockland County, New York. Vos had an investigator stake out the office. A call to the New City, New York, office of Friehling & Horowitz after business hours wasn’t returned"I think that referes to the auditors of Madoff's business rather than the funds' auditors.
knowledge comes, wisdom lingers
 
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2face
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hedge fund ponzi scheme

December 13th, 2008, 11:55 am

Hit big namesBNP..Nomura.. especially my favorite Man Group Now i understand what they mean when they say they follow sophisticated alternative investment strategies
 
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Alan
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hedge fund ponzi scheme

December 13th, 2008, 2:19 pm

From what I have read so far, the lesson here is pretty clear for investors: youshould -never- let your money manager also have custody of the assets. You want a reliablethird party custodian who also values the portfolio.
 
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ppauper
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hedge fund ponzi scheme

December 13th, 2008, 2:35 pm

'PONZI SCHEME' AT CITI
 
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PaperCut
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hedge fund ponzi scheme

December 14th, 2008, 3:13 am

QuoteOriginally posted by: ppauper'PONZI SCHEME' AT CITIOh my
 
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PaperCut
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Joined: May 14th, 2004, 6:45 pm

hedge fund ponzi scheme

December 14th, 2008, 3:14 am

QuoteOriginally posted by: AlanFrom what I have read so far, the lesson here is pretty clear for investors: youshould -never- let your money manager also have custody of the assets. You want a reliablethird party custodian who also values the portfolio.Yeah that seems very wise.
 
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acastaldo
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Joined: October 11th, 2002, 11:24 pm

hedge fund ponzi scheme

December 14th, 2008, 6:21 am

QuoteOriginally posted by: AlanFrom what I have read so far, the lesson here is pretty clear for investors: you should -never- let your money manager also have custody of the assets. You want a reliable third party custodian who also values the portfolio.Yes. And this is the way major hedge funds are usually set up, with a management company (e.g. S0r0s Fund Management) completely separate from the administrator/custodian (e.g. Bk of New York). The administrator receives trading statements daily directly from the broker and is responsible for receiving/paying out customer funds. The management company makes all the buying/selling decisions. Investors should insist on this dual structure which, AFAIK, has never resulted in a fraud.The problem at M@doff was that the management company and brokerage/custody were not truly separate, as they were controlled by the same person.
 
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BullBear
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hedge fund ponzi scheme

December 14th, 2008, 4:29 pm

QuoteOriginally posted by: Traden4AlphaYes, some people thought that Madoff's returns were far too smooth and now we know why.It's just another example of how rewards for stability lead to increasing risk-taking behavior. The less risky something seems, the more risky it really is.There was also a kind of "ponzi scheme" on Banks. Banks were also managing and smoothing earnings...Banks earnings were (some still are) far too smooth. and they are all bankrupt [technically if it were not for taxpayer's money]... Guess who are the Auditors?
 
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Traden4Alpha
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hedge fund ponzi scheme

December 14th, 2008, 10:14 pm

QuoteOriginally posted by: BullBearQuoteOriginally posted by: Traden4AlphaYes, some people thought that Madoff's returns were far too smooth and now we know why.It's just another example of how rewards for stability lead to increasing risk-taking behavior. The less risky something seems, the more risky it really is.There was also a kind of "ponzi scheme" on Banks. Banks were also managing and smoothing earnings...Banks earnings were (some still are) far too smooth. and they are all bankrupt [technically if it were not for taxpayer's money]... Guess who are the Auditors?It's not just banks, but other companies such as GE and Cisco that have been suspected of smoothing earnings to always meet analysts expectation or beat them by exactly one penny. It doesn't even require any real fraud. A minor push or pull on the sales force or projects is enough to shift recognizable revenue or accrued costs across quarter boundaries. Most companies can "close the books" on less than 24 hours notice, so it's pretty easy to keep track of the state of earnings and manage the end-of-quarter accordingly. Some might even argue that it maximizes shareholder value as long as those little quarter-end adjustments are evenly distributed about zero.Nonetheless, earnings management is a dangerously seductive practice. Like a Ponzi scheme (which earnings management is in a mild form) the thing collapses violently when the company runs out of buffered and borrowed earnings.It's interesting that Madoff was able to keep his scheme running for so long. Some suspect he might have been doing this for decades. The key to his success was by not being too greedy or over-promising too much. A 10% pay-out (plus a few percent skimmed) can be maintained for many years even if no new investors appear. And if one can create a multi-year track-record for steady returns and an upper-crust social life, then the scheme can persist for an extremely long time. Had we not had a housing bubble, Madoff probably would have taken the secret to his deathbed. Instead, I suspect that unanticipated redemptions by investors (to cover margin calls and other unrelated financial problems) probably lead to Madoff's exposure. This won't be the last fraudulent financial wreck uncovered by the retreating waters of liquidity of this crisis.
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