Note that the SEC received complaints only from Madoff's competitors.
Not one Madoff investor ever filed a complaint. Now there are two legal principles operating here:
LEGAL PRINCIPLE ONE Under the legal doctrine of "fraudulent conveyance" . investors who withdrew their money before the fraud was revealed, must return their profits or even part of their initial investments. Legally, one cannot profit from a fraud. The recovery process identifies remaining assets that are then redustributed to those who were defrauded.
Some of Madoff's clients should be facing serious legal problems----some investors were writing personal checks that were placed with a separate Madoff financial entity that was not listed on the SEC. That might be construed as money-laundering and tax evasion.
Keep in mind Bernie‘s investors were savvy, astute successful business people, accustomed to constructing, picking apart and analyzing financial statements. One investor who spoke to reporters was a stockbroker (her family invested with Bernie for generations---the family's patriarch founded the wildly successful Stop and Shop supermarket chain). Other inevstors gave Madoff $100-500 millions to "invest" for years and years.
LEGAL PRINCIPLE TWO The compelling legal principle of . “condonation” ---implied forgiveness for certain behavior. . This should foreclose any cockamamie ideas that taxpayers are gonna bailout these mega-millionaires (who most assuredly have money stashed offshore). Investors implicitly “condoned” Madoff’s actions over a period of time--sometimes for decades---- willingly acquiescing to Madoff's activities in several ways:
(1) Sending Madoff enormous sums of money, sums that were spread out over time (some families invested for generations), even AFTER they had the opportunity to assess their investments;
(2) Referring other investors to Madoff (if the investment was so bad, why did they bring in other investors?);
(3) Taking profits out of the investment, rolling it over, or putting more money in;
(4) Writing PERSONAL checks to Madoff's subrosa spinoff vehicle that was not listed on the Securities Exchange (tax evasion modus);
(5) Accepting, without question, Madoff’s obviously flawed monthly statements.
============================================
REFERENCE BY Ronald D. Orol, a MarketWatch reporter, based in Washington.
EXCERPT There were several things that alerted some in the hedge-fund industry that an investment with Madoff may not have been as safe as it initially appeared. Aksia LLC, which researches hedge funds and advises institutions about investing in the industry, said that it never recommended that clients put money in some of the "feeder funds" that allocated their capital to Madoff. On the surface, these feeder funds looked like institutional-quality vehicles, but there were "a host of red flags," Aksia Chief Executive Jim Vos and colleague Jake Walthour wrote in a letter to clients after the Madoff scandal erupted last week.
The funds were marketed as using a "split-strike conversion" investment strategy that is "remarkably" simple, but the returns it purportedly generated could not be replicated by Aksia's quantitative analyst, Vos and Walthour wrote.
The Madoff funds supposedly traded in the Standard & Poor's 100 index options market, but that market is relatively small and may not have been able to handle trading by vehicles with roughly $13 billion in assets, they said. The feeder funds had almost all their assets custodied with Madoff Securities, the brokerage unit of Madoff's firm.
Aksia checked into the auditor of Madoff Securities and discovered it was a firm called Friehling & Horowitz, which had three employees -- one of whom was 78 years old and another was a secretary. The firm's office in upstate New York was 13 feet by 18 feet. Madoff's Web site claimed the firm was technologically-advanced, but it sent paper confirmations of trades via US mail at the end of each day, rather than providing electronic access to this important information.
Paper copies provide a hedge-fund manager with the end-of-the-day ability to manufacture trade tickets that confirm the investment results.
THE RELIGIOUS, SOCIAL, AND BUSINESS LABYRINTH OF
4800 INVESTORS MADOFF USED TO RAKE IN BILLIONS.
MAP IS INTERACTIVE AT WEB SITE
WEB SITE http://news.muckety.com/2008/12/28/madoff-used-social-family-networks-to-rake-in-billions/9031
ANOTHER MADOFF FEEDER FUND Brighton Co Investments is headed by Stanley Chais, a Beverly Hills "philanthropist" who served on "charitable" boards with Madoff. Chais (pronounced Chase) told the Jewish Journal of Los Angeles that he personally invested with Madoff but also "facilitated" others who wished to do likewise. However, spokesmen for the SEC and the California Dept of Corporations said they could find no record of Chais registering as an investment advisor or a broker.
Stanley Chais offers remarks at the Weizmann Institute of Science.