# If Bernie Madoff hadn't been caught **URL:** \ **Category:** In My Humble Opinion\ **Created:** [April 1, 2013, 10:42pm UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579 "2013-04-01T22:42:49Z")\ **Posts on this page:** 12\ **Page:** 1
**Author:** ![Nobody](https://avatars.discourse-cdn.com/v4/letter/n/94ad74/32.png) [@Nobody](https://boards.straightdope.com/u/Nobody)\ **Post date:** [April 1, 2013, 10:42pm UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/1 "2013-04-01T22:42:49Z")
Let’s say that Madoff wasn’t caught. There are two scenarios I’m wondering about. 1. I’m most curious about this one. Let’s say that Madoff got a conscience and decided the scam had to end. Could he have wound it down and paid everybody off? Let’s say he stopped taking new investors and then tried to slowly pay off the existing ones. Would that have worked? Or would it look too suspicious causing investors to withdraw to much too soon causing the whole thing to collapse? 2. He keeps the scam going. Since it’s all a house of cards it was bound to collapse eventually anyway, but how much longer could he have kept it up? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [April 1, 2013, 10:49pm UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/2 "2013-04-01T22:49:21Z")
> [@Nobody](#): > > Let’s say he stopped taking new investors and then tried to slowly pay off the existing ones. Pay them off with what? The new investors provide all the money to pay the old investors. If they disappear, so does the ability to pay anything. > [@](#): > > Since it’s all a house of cards it was bound to collapse eventually anyway, but how much longer could he have kept it up? Until new investors stop investing, which is what happened when the recession started in 2008. There is no way it could have been sustained any longer than it did. ---
**Author:** ![Telemark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/telemark/32/372_2.png) [@Telemark](https://boards.straightdope.com/u/Telemark)\ **Post date:** [April 1, 2013, 10:52pm UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/3 "2013-04-01T22:52:56Z")
> [@Nobody](#): > > Could he have wound it down and paid everybody off? Let’s say he stopped taking new investors and then tried to slowly pay off the existing ones. Would that have worked? Not a chance, there wasn’t enough money in the system to make the majority of investors whole. There’s no way to wind down a Ponzi scheme. ---
**Author:** ![Bijou\_Drains](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bijou_drains/32/2814_2.png) [@Bijou\_Drains](https://boards.straightdope.com/u/Bijou_Drains)\ **Post date:** [April 1, 2013, 10:55pm UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/4 "2013-04-01T22:55:17Z")
He was actually “caught” by a guy way before he was arrested. The problem is the SEC is run by a bunch of lawyers who know almost zero about finance and stock markets. So they kept ignoring a lot of solid evidence about what he was doing since they could not understand it. This guy figured out it was a ponzi scheme way back > **[Harry Markopolos](https://en.wikipedia.org/wiki/Harry_Markopolos)** > > Harry M. Markopolos (born October 22, 1956) is an American former securities industry executive and a forensic accounting and financial fraud investigator. > From 1999 to 2008, Markopolos uncovered evidence that suggested that Bernie Madoff's wealth management business was a huge Ponzi scheme. In 2000, 2001, and 2005, Markopolos alerted the U.S. Securities and Exchange Commission (SEC) of his views, supplying supporting documents, but each time the SEC ignored him or gave his evidence only a cur... ---
**Author:** ![Bijou\_Drains](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bijou_drains/32/2814_2.png) [@Bijou\_Drains](https://boards.straightdope.com/u/Bijou_Drains)\ **Post date:** [April 1, 2013, 11:14pm UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/5 "2013-04-01T23:14:28Z")
BTW he was not caught by the FBI/SEC, etc. His kids turned him in. ---
**Author:** ![Marley23](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@Marley23](https://boards.straightdope.com/u/Marley23)\ **Post date:** [April 1, 2013, 11:24pm UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/6 "2013-04-01T23:24:33Z")
> [@Nobody](#): > > Could he have wound it down and paid everybody off? Let’s say he stopped taking new investors and then tried to slowly pay off the existing ones. Would that have worked? No. There was nothing to pay them off with. Like **Fear Itself** says, what Madoff was doing taking money from people and tell them he was investing it. He didn’t invest it (or in his version, he invested it early on but stopped doing it years before he was caught). If you invested money with him, every year you got some money and you were told it was the return on your investment, but it was actually just money paid by newer victims. I think that’s all there was to it: > **[Madoff investment scandal](https://en.wikipedia.org/wiki/Madoff_investment_scandal)** > > The Madoff investment scandal was a major case of stock and securities fraud discovered in late 2008. In December of that year, Bernie Madoff, the former Nasdaq chairman and founder of the Wall Street firm Bernard L. Madoff Investment Securities LLC, admitted that the wealth management arm of his business was an elaborate multi-billion-dollar Ponzi scheme. > Madoff founded Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest. The firm employed Madoff's broth... > **[Bernie Madoff | Mechanics of the fraud](https://en.wikipedia.org/wiki/Bernie_Madoff#Mechanics_of_the_fraud)** > > According to an SEC indictment, office workers Annette Bongiorno and Joann Crupi created false trading reports based on the returns that Madoff ordered for each customer. For example, when Madoff determined a customer's return, one of the back office workers would enter a false trade report with a previous date and then enter a false closing trade in the amount required to produce the required profit, according to the indictment. Prosecutors allege that Bongiorno used a computer program spec On a... By “wound it down” I guess he could have given away all his money and sold all of his possessions and paid off a fraction of what he said he’d invested, but he could never have covered all of it. > [@](#): > > Or would it look too suspicious causing investors to withdraw to much too soon causing the whole thing to collapse? If he’d said he was closing the fund for some reason, his investors would have asked for the rest of their money. He could never have repaid them. > [@](#): > > 1. He keeps the scam going. Since it’s all a house of cards it was bound to collapse eventually anyway, but how much longer could he have kept it up? He confessed because the scam was collapsing. People started withdrawing their money because the market was struggling and he couldn’t bring in enough new marks to cover the money that he was supposed to repay. ---
**Author:** ![Nobody](https://avatars.discourse-cdn.com/v4/letter/n/94ad74/32.png) [@Nobody](https://boards.straightdope.com/u/Nobody)\ **Post date:** [April 2, 2013, 12:53am UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/7 "2013-04-02T00:53:57Z")
OK, consider my ignorance fought. Yeah, I knew about people trying to bust him earlier, and I know it was his kids who finally brought him down, but I didn’t realize that he was already in financial trouble before he was caught. I thought it was the reveal that he was running a pyramid scheme that caused investors to rush in and try to retrieve their money that brought the whole thing down. I also didn’t realize that there was NO investing going on. I thought there was some and he was just keeping all the profits for himself. ---
**Author:** ![Saintly\_Loser](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saintly_loser/32/4045_2.png) [@Saintly\_Loser](https://boards.straightdope.com/u/Saintly_Loser)\ **Post date:** [April 2, 2013, 1:07am UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/8 "2013-04-02T01:07:33Z")
> [@Nobody](#): > > Yeah, I knew about people trying to bust him earlier, and I know it was his kids who finally brought him down, but I didn’t realize that he was already in financial trouble before he was caught. Saying “it was his kids who finally brought him down” makes it sound like they were shocked, _shocked_ to find out there was fraud going on, and decided to do the right thing. It is beyond belief that his sons didn’t know that, at the very least, something fishy was going on. For one thing, _everyone_ knew something fishy was going on. Really. Everyone, or just about everyone, except the suckers who put their money in, knew. Mostly they thought he was front-running, and that was just fine with them. A few of the people running the “feeder funds” probably knew it was a Ponzi, but didn’t care as long as they got their cut. His neice was the firm’s compliance officer. It is not credible that she didn’t know that something was up (her father is doing time right now for his part in the scheme). ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [April 2, 2013, 1:12am UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/9 "2013-04-02T01:12:46Z")
> [@Bijou\_Drains](#): > > He was actually “caught” by a guy way before he was arrested. The problem is the SEC is run by a bunch of lawyers who know almost zero about finance and stock markets. So they kept ignoring a lot of solid evidence about what he was doing since they could not understand it. > This guy figured out it was a ponzi scheme way back > [Harry Markopolos - Wikipedia](http://en.wikipedia.org/wiki/Harry_Markopolos) The problem was _also_ that Harry Markopolos is a screaming, sputtering nutcase. He happened to be absolutely correct about Madoff, but if you actually read his memos to the SEC (or better yet, watch his interviews in the documentary _Chasing Madoff_), it’s apparent how manic, unhinged, and paranoid he is. I can understand why the SEC was loath to take him seriously, although obviously they should have. I’ve often wondered what would have happened if somebody saner had investigated Madoff the way Markopolos did. ---
**Author:** ![Saintly\_Loser](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saintly_loser/32/4045_2.png) [@Saintly\_Loser](https://boards.straightdope.com/u/Saintly_Loser)\ **Post date:** [April 2, 2013, 1:31am UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/10 "2013-04-02T01:31:10Z")
> [@friedo](#): > > The problem was _also_ that Harry Markopolos is a screaming, sputtering nutcase. He happened to be absolutely correct about Madoff, but if you actually read his memos to the SEC (or better yet, watch his interviews in the documentary _Chasing Madoff_), it’s apparent how manic, unhinged, and paranoid he is. I can understand why the SEC was loath to take him seriously, although obviously they should have. > > I’ve often wondered what would have happened if somebody saner had investigated Madoff the way Markopolos did. Yeah, I heard that from a friend who is a lawyer in the SEC’s NY office. And later from others, too. Of course, the SEC has an interest in portraying Markopolos as a head case, but apparently he was/is a bit crazy. As you say, he was right, though. ---
**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\ **Post date:** [April 2, 2013, 2:01am UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/11 "2013-04-02T02:01:31Z")
Madoff could have kept going for quite a while as long as the market didn’t tank as it did. As long as new investments outpaced redemptions, he could have gone on for the rest of his life. Of course, people have a pesky habit of panicking every once in a while, which causes them to sell (redeem) their shares in mutual funds, stocks, etc (thereby exacerbating the problem.) This is what caused Madoff to get caught, not his kids, not any change of heart, not a bad run of luck - his investors panicked and wanted cash. As **Saintly Loser** said, many people knew that there was something fishy about Madoff, but most agreed that it was front running (i.e., if he knew that (example) Bill Gates was going to dump his Microsoft stock and he told his trusty broker Bernie to do so, Bernie would sell _Bernie’s_ MSFT shares prior to placing the Bill Gates order.) Markopolous was one of the people who knew and he built a good case against Bernie, but as mentioned, he had personality issues that hurt his credibility. ---
**Author:** ![Labrador\_Deceiver](https://avatars.discourse-cdn.com/v4/letter/l/7c8e57/32.png) [@Labrador\_Deceiver](https://boards.straightdope.com/u/Labrador_Deceiver)\ **Post date:** [April 2, 2013, 2:37am UTC](https://boards.straightdope.com/t/if-bernie-madoff-hadnt-been-caught/654579/12 "2013-04-02T02:37:30Z")
> [@friedo](#): > > I’ve often wondered what would have happened if somebody saner had investigated Madoff the way Markopolos did. Probably not much. Everybody on Wall Street knew he was a total fraud. I don’t think any other firms would even do business with the guy.