red flags (based on «the World's largest hedge fund is a fraud» ) a. ivanisenko
introduction Bernard Madoff founded the Wall Street firm Bernard L. Madoff Investment Securities LLC, and was its chairman until his arrest. Federal authorities arrested Madoff on December 11, 2008. On March 12, 2009, Madoff pled guilty to 11 federal crimes and admitted to operating what has been the largest Ponzi scheme in history. Before that in 2005, Markopolos sent a detailed memo to the SEC, entitled «The World's Largest Hedge Fund is a Fraud» . The memo specified 29 numbered flags based on 174 months of Madoff trades.
purpose of the presentation 1. Try to make a close study of Red Flags 2. Try to explore concrete examples of Red Flags
menu of main points O Select 3 Red flags O Describe them
red flag № 24: «ties of relationship» The Madoff family has held important leadership positions with the NASD, NASDAQ, SIA, DTC and other prominent industry bodies therefore these organizations would not be inclined to doubt or investigate Madoff Investment Securities, LLC. The NASD and NASDAQ do not exactly have a glorious reputation as vigorous regulators untainted by politics or money.
red flag № 20: «exchange of opinions» Madoff is suspected of being a fraud by some of the world’s largest and most sophisticated financial services firms.
red flag № 10: «magic mathematic tricks» It is mathematically impossible for a strategy using index call options and index put options to have such a low correlation to the market where its returns are supposedly being generated from. This makes no sense.
conclusion Bernard Madoff is a good lesson for us. His scheme was the far-reaching in history.
