Frauds have a tendency to be revealed through the bursting of bubbles; no one asks questions when many people are intoxicated with money when times were good. The Bernard Madoff case will go down ever sold as the most severe fraud in modern American history. Fortunately, the majority of the losses are accruing to the wealthy, who can afford to take losses, and to “sophisticated” institutional and hedge fund investors. I’m not trying to unsympathetic to the victims however the damage won’t be as heartbreaking as situations such as Enron, where working-class and middle class lost their whole life savings nearly.
There will be an indirect impact on everyone but it should be largely contained to those who blindly gave their capital to Madoff and his associates. It will also be observed that some speculate that some of Madoff’s investors thought he was doing something unlawful but didn’t realize that allying with the devil doesn’t guarantee your success.
These investors are thought to have assumed that Madoff was profiting from insider trading or front-running and wished in on the structure. So far no term on his affiliates and others who were part of the scheme but details will surely turn out once the police and the SEC start digging. One thing about American officials is that, they may not prevent all offenses from happening (who can?) but they are very challenging on white-collar crime. In developing countries, the rich and the well-connected can get off easily, for murder even.
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Even countries like Canada have generally been accused of being a safe haven for white training collar criminals. You can’t say the same about US specialists. However, my opinion is that US law enforcement is weak in other crimes such as their habit of granting asylum or easy passage for battle criminals, tyrants, drug dealers, political allies who committed crimes against mankind, etc. Anyway, I’d like to refer you to the scam involving of Rae Cowan, an investment consultant/portfolio manager. The Globe & Mail do a great job detailing this case from last year. This is an extremely small Canadian case with limited losses but it can give you an internal perspective on what can occur.
I suspect the Madoff case is similar but on a very large scale. None of the has anything regarding improving your investing skills but if you want some light reading, browse the article. THE PRESSURE WAS BUILDING. For weeks he’d been fending off questions from anxious clients who have been worried about their investments and the whereabouts of the checks he used to send so regularly. And these weren’t ordinary clients. They were his father, mom, aunt, friends from senior high school, college buddies.
Many of these had been counting on him for years to manage their life savings. They included people like Altaf Hussain, who was counting on Cowan to help put his daughter, Aisha, through college or university. 1,200 regular pensions. And Judie Benyei, who needed Cowan to ensure there was enough money to settle the bills at her octogenarian aunt’s nursing home.
How could he tell them he’d made some bad wagers on the foreign currency markets and that most of the money was gone? 700 and that the Lamborghini, the Porsche, and the pricey condo in a trendy Toronto neighborhood were all for show? So he required the elevator from his ninth-floor condo to the car parking garage down. A hose was run by him from the exhaust pipe of his Lamborghini and placed it through the window. Then he got in and fired up the engine. Monday It was, Nov. 26, 2007. Rae Cowan was 36 years of age.