The Ethical (And Mathematical) Dilemma Of Madoff Investors Who Took Some Money Out
from the what-to-do? dept
With respect to the Bernard Madoff scam, I'd been hearing plenty of people ask "where did the money go?" since there's none left. The answer has always been pretty straightforward: as a Ponzi scheme, much of the money went back out to the earlier investors who took some money out. The rest was probably invested in various investments whose value has gone down to almost nothing in the last few months. However, this is apparently creating something of a quandary for some of those early investors who took money out -- but still had some money (theoretically) still with Madoff. Should they apply for aid from the Securities Investor Protection Corp?SIPC acts like an FDIC for these types of investments, helping to protect investors in cases of fraud. But some are realizing that if they took money out from Madoff over the years (and some did so profitably), if they go ask for money from the SIPC, it could alert regulators to the fact that they profited from Madoff's scam -- and they could suddenly owe the "profits" they had taken out in the past. The Feds can demand that those who profited from Madoff's scam return the money -- but that will involve actually being able to track them down. For some "victims," it may be better to just keep what they have, keep quiet, and forget what they thought they still had invested with Madoff. But there are concerns for others who have already admitted to cashing out (sometimes a long time ago), are they suddenly going to be forced to return the money they took out of their accounts?
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Filed Under: bernard madoff, ethics, profits, scams
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I think you meant "gone down".
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For many years, it operated successfully, but started to fail and then used the ponzi method to keep going "until the market recovered" Not smart, but that's what happened.
Of course, the market got worse and people pulled money out faster than they could get it in as investors pulled out of the market in general.
So, for many over the years, the profits are legitimate. For some, they invested in good faith and it doesn't seem like a good idea that they should pay back what isn't actually stolen.
On the flip side, it makes you wonder how many of these investment firms may be doing the same thing...
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A scam is not only a scam when it's losing money. A Ponzi scheme is a scam because it can never ultimately turn a profit. It runs out of new investors since you need an ever increasing number of investors to meet your claims of growth. The collapse of the market in general sped this to a close, but it was guaranteed to happen eventually.
My question on the profits is that if they didn't know it was a 'scam' how are they responsible for returning profits that were by all appearances were legit. I thought the Feds had looked at Madoff (albeit fleetingly) and incorrectly determined there wasn't a problem. If the cops say it's legal, isn't it legal? You don't get a fine for driving through a red light when an officer directs you to do you?
Even if you need to return your 'profits' it would only be what you happen to have left rather than punitively asking for everything back if they didn't know it was illegal?
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Are you invested in any like vehicles which without your knowledge could be a Ponzie scam?
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You need to do your research better....
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Oh, and let's not forget the 2001 Barron's article about Madoff being suspicious: http://www.portfolio.com/news-markets/top-5/2008/12/17/madoff-barrons
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A) Safe
B) Protect anyone from liability
C) Smart to do
Sorry for my medical analogy, but it's how I understand it
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Honesty is the best policy...
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No, stocks pay dividends.
That's... pretty basic.
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Dividends?
Say a corporation wanted to start out with a 10 year scheme. Their total yearly profits would be 100%. If they loose too much they go bankrupt and your left with worthless paper. If they make a profit then that 10% is split proportionally among the batch they sold for that year and similarly among the other batches. Every 10 years a given batch would expire and they would sell new issues.
The valuation of a given batch would be determined by how much profit potential investors expected it to make.
If the company wanted to sell longer duration batches they would have to reduce the percentage of profits they have leased shares in so they could support a longer duration. Alternatively they would have to use more complex dilution methods.
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Madoff
Watch as those "losers" start to leave the country within the next year or so. They will all be hotel and casino owners in the "New Middle East"!
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Bernie Madoff
http://www.associatedcontent.com/article/1657671/jail_time_makes_madoff_more_fortunate.html ?singlepage=true&cat=47
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