Red Flags in the Madoff Case

Gregory Zuckerman of the Wall Street Journal put together a story on the Multiple Red Flags in Madoff Case.

  • Steady returns  in every kind of market
  • Operated as a broker dealer with an asset management division. Why not simply act as a hedge fund and pocket big gains, rather than profit from trading commissions. “Why work your magic for pennies on the dollar?”
  • No independent custodian involved who could prove the existence of assets
  • Blatant conflict of interest with a manager using a related-party broker-dealer
  • The size of the fund was enormous compared the market in which it operated
  • Questions about where the assets were
  • Used a small auditing firm
  • Inadequate number of employees in relation to the purported size of the operation
  • Inadequate office space in relation to the purported size of the operation
  • Clients did not have electronic access to their trading files
  • Clients experienced delays in getting their money back
  • Madoff would tell you nothing about how he achieved his returns
  • Lack of transparency