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New York, 2:03 AM
Mon Nov 30
13 posts in the last 24 hours
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05/13/09
a. Thought Madoff was legit
b. Already took steps to give all the money fictitiously earned back to the pool of Madoff's assets so they can be liquidated.
c. was left money in a will and had no idea it was made from Madoff's returns.
In order to best understand this fully, you have to think of all the money as goods. For example, if someone robbed a bank and then gave you the money as a gift that would be stolen money and it would not rightfully be yours. Likewise, if you buy stolen goods from eBay or a pawn shop with good and fair intentions, you would have to return and you may lose the money you spent on it.
Similarly, now that people know that Madoff was simply stealing other's money to give them "returns" they know by know that they are in possession of stolen goods. If you do not return stolen good once made aware, that makes you a criminal.
If they took the returns received from Madoff and then made more gains from it through other means, they would only be liable for the "returns on investment" they got from Madoff.
I know it sounds awful because people will lose their retirement money or what not, but it would not seem so terrible if, for example, you purchased a painting for $1,000 a small auction. Then, you found that painting was a famous painting and worth 1 million dollars. You will thrilled to hear this and then resold at Sotheby's it for 1 million. You had no idea it was stolen. You used this money to live of of and retired.
Later, it was disclosed that a set of paintings, including yours that was sold, was stolen during the holocaust and the survivor left everything he had to charity. Then, someone who visited the guy with the stolen painting reported it the police and he was dragged into jail and then released when they found he thought he legitimately purchased it. They take the painting from the guy and give it to the rightful owner.
Because Sotheby's is a famous auction house, they should have don't the right investigation to see if the painting was stolen and people may go to jail there.
The guy who bought it for a million may be able to get his money back from Sotheby's since they usually guarantee that they are not selling hot items. But if he resold it for a higher value he would be out the money and so would the man who sold it to Sotheby's.
This all has to do with the basic legal term "buyer beware".
05/13/09
[www.pbs.org]
And Pitt was absolutely pathetic...
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05/13/09
(1) To echo TheRealJR, everyone was bailing out of everything last year, including just about every hedge fund facing margin calls or with its own investors wanting their cash back to get out of the market or to cover for other underperforming investments. Clearly these guys didn't know that everything was about to blow up, or else they wouldn't have left their own personal fortunes with Madoff.
(2) But they're not even claiming that these guys knew what was about to go down: they're saying simply that they should have known that the fund was a fraud. To quote one of the NYT comments, "There's a laughable irony in the trustee suing former Madoff investors, alleging that they should have known their returns were illegitimate, in order to recover money for other Madoff investors, who by the same logic should also have known that their returns were illegitimate."
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05/13/09
He can't sue them for "You knew! You must have, because you withdrew completely after so many years, right?!" but he can sue for "you should have known in your capacity as a fiduciary". It's the equivalent of getting Capone for mail fraud or tax evasion.
05/13/09
The people FUNNELLING their 8% to 20%-earning-clients' money to Madoff were getting returns of 300%/year on THEIR personal accounts. Using, supposedly, the exact same strategy.
And they shouldn't have been, oh, I dunno - a mite suspicious? That maybe their funnelling was what they were getting paid to do?
[newsfeedresearcher.com]
05/13/09
Picower got a 950% return in 1999. 950%!!! Do you know what the S&P 500 did that year? No? WEll, I will tell you: 21%. It would be phenomenal if a manager did double that. It would be miraculous if he did 10 times that.
But 45 times?! Using options ON the S&P (the dreaded "split-strike strategy", if you've been reading about what Madoff claims he invested)? Absolutely impossible. Picower was a sophisticated investor getting a favor.
Madoff's sophisticated investors believed he was front-running, or using info on what his broker-dealer clients were buying and selling, and getting in front of their orders. Only to find out that really THEY were the ones being taken.
Picower didn't take out his money "quick". He took out $7 billion over the years, and put in far, far less (not disclosed what he put in, so far).
Picower, Chais, Fairfield Greenwich, MAXAM, Tremont, Cohmad, etc. etc. all had an inkling something underhanded was going on. They just thought that Madoff would never "screw" them.
05/13/09
That's some pretty good information. I haven't studied the case closely, but this is exactly what I was alluding to in my original post. Evidence that the fraud would have been obvious to a QP.
05/13/09
You will not be found liable of fraud merely because you became aware that Madoff was a fraud and removed your money. In this situation, at most you will have your interest clawed back, not principle.
The fraud claims against Fairfield and Merkin allege (I believe) that they were aware that Madoff was running a ponzi scheme and they still invested their clients' money -- and taking fees. Therefore, Fairfield and Merkin were complicit in Madoff's scam.
Perhaps more interesting is the lawsuit against Chase filed by a victim of Madoff. Basically, the lawsuit alleges that Chase (who had a derivates product tied to Madoff's fund) became aware during their own due diliegence of Madoff's scam. Chase then removed the money it invested with Madoff. However, Chase also had Madoff's depository account which Madoff's investors would deposit money in c/o Madoff.
The lawsuit alleges that at the same time Chase knew about Madoof's fraud, Chase continued to accept millions of dollars into Madoff's Chase account.
The question is did Chase have a resoponsibility to inform the depositors of Madoff's fraud?
05/13/09
Chase (separate from Chais) no question had a fiduciary responsibility to alert its clients. Isn't that the POINT of using and paying a bank, rather than managing your money yourself? I'm going to guess they were afraid of a lawsuit by Madoff of interfering with its business/libel, though that is no excuse.
05/13/09
I'm sure at least a couple of the Madoff redeemers were of that ilk. They needed their money, had no idea of the scam, and redeemed. Does that mean they need to be gone after? I wouldn't think so because in a way they were faultless.
Then again, how can you tell who was who?
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