(”Sorry, I’ll get my coat.”)
More to come on Bernard Madoff’s $50bn Ponzi scheme, we think. But in the meantime, here are the early names being touted as likely losers in this extraordinary tale:
Fairfield Greenwich
Kingate Management
Fix Asset Management
Of these, Fairfield Greenwich published a statement on its website, saying: “This is a shocking development and we are working with counsel to assess the situation and take all steps necessary and appropriate to protect our investors and the firm.”
The legal documentation accompanying Madoff’s arrest suggest the money manager only had between 11 and 23 clients at the end. Yet American media reports suggest Madoff was active in raising investment funds directly from wealthy individuals - particularly in Manhattan and Florida.
Both the Boca Rio Golf Club and the Palm Beach Country Club, for example, helped promote Madoff’s services to their membership, according to the Wall St Journal.
Also of note: Naked Shorts - always a good destination when financial crookery is on the agenda - has republished a detailed feature on Madoff Investment Securities dating from 2001 from the now defunct journal MAR/Hedge.
This gives some rare detail on Madoff’s supposed investment strategy - and expresses bafflement that it could possibly produce the sort of consistent, non-volatile returns reported by Madoff month after month, year after year.
We are talking about a “split-strike conversion strategy” here:
They noted that others who use or have used the strategy - described as buying a basket of stocks closely correlated to an index, while concurrently selling out-of-the-money call options on the index and buying out-of-the-money put options on the index - are known to have had nowhere near the same degree of success.
Clearly, evidence that something was not quite right has been available for years.
Related links:
Photo gallery from a 2008 Madoff party - Madoff
Madoff’s ‘Big Lie’ Hits Hedge Funds - Bloomberg
Prominent Trader Accused of Defrauding Clients - NYT
Madoff faces securities fraud charge - FT
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