Dear SEC - Biggest Hedge fund is a fraund (November 2005)

http://online.wsj.com/documents/Madoff_SECdocs_20081217.pdf

I have to say that I only understood about 2/3 of what this 19 page letter said - never been into puts and calls and all that other stuff.

But some pretty basic things jump out even at a financial ignoramous like me -

That the stated way Madoff was offsetting his risk was buying some sort of hedge - except that the entire market for those wasn't big enough if Madoff had bought 100% of it

That every major player in derivatives thought Madoff couldn't possibly be making the numbers he did (and many called him a fraud)

It's an amazing read - even to folks like me who don't know what half the terms in the WSJ mean. But amazingly enough, this seems to have been Wall Street's most known 'secret' but no one was investigating

Companies started synthesizing bonds out of thin air right after april (or possibly may) 2004. The market for derivatives exploded after that. There was plenty of money to cover the at maximum $50 billion scheme.

things he was reporting was that Madoff was saying he was using these things for years before they even came into being.

I guess the whole thing makes me wonder how much else is out there that we don't know about.

The first is a bit long, but very well done. The second is more specific than the first, so I would suggest reading them in order.

These are the things you don't hear about. The things that are allowed to go on among Wall Street circles is inexcusable. The SEC has miserably failed the people who they were supposed to protect, indeed has failed all Americans time and time again. Be warned, you may get angry after reading some parts.


http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom#


http://theamericanscene.com/2008/12/23/ahi-quanto-a-dir-qual-era-e-cosa-dura-esta-selva-selvaggia-e-aspra-e-forte-che-nel-pensier-rinova-la-paura