Madoff Pyramids

Scams that shook the world

Litigation is, by definition, something lengthy. The famous American trials drag on for years. This, by far, the most high-profile American trial of recent times, was extremely short - it took a little more than six months ....

Litigation is, by definition, something lengthy. The famous American trials drag on for years. This, by far, the loudest American trial of recent times, was extremely short - it took a little more than six months. "Extraordinary evil" - so the judge described the crime committed. 150 years in prison, a metaphorical guarantee of life imprisonment (that's what he sentenced) is the maximum possible term due for such crimes. “I have no excuse for my behavior,” the defendant beat his chest when he uttered the last word. How can you justify the betrayal of thousands of investors who trusted me with the savings of their lives? How can I justify cheating 200 employees who have worked for me most of their lives? How can I justify lying to my brother and two sons who have helped me build a successful business all their lives? How can you justify lying to a wife who has been there for 50 years?” Cain's repentance had an obvious goal - to shield relatives and friends - accomplices, to save the money that was withdrawn to them. There was no question of defending yourself. The scam was too obvious.

This scam, however, continued unpunished and unchecked for more than two decades - "the largest and longest-running Ponzi Scheme" in the history of financial fraud. Before becoming prisoner #61727-054 with a release date of November 14, 2139, this monster and psychopath - such is the public's now irrevocable verdict - was a prophet and a saint. The stock market prophet and the saint of Wall Street, where the halo is a direct reflection of the number of operated zeros.

The life of a false saint is described in one sentence: all his life he made money. A place where money is made without being distracted by side activities like the real economy is called the stock exchange. Madoff was a stock market bigwig. A player of the highest class, he enriched the practice of the exchange with high-speed technologies for client transactions. It was he who invented and headed the NAZDAK electronic exchange for a long time. Which gave him an impeccable reputation, as if it were cast from pure gold. Which, in turn, served as a wonderful advertising aura for the company, which he created in 1960 and headed until December 11, 2008, the moment of his arrest. All the last decades “Bernard L. Madoff. Investments and Securities” (Bernard L. Madoff Investment Securities LLC) raised and placed funds - unusually successfully. No outrageous promises. No - 10-12% per annum. Solid, and most importantly reliable. The hallmark of Madoff's company was reliability, brought to the absolute. In twenty years, Madoff's yield line has never wavered. It was phenomenal. Actually, as the joke says, if the thermometer stubbornly shows the same temperature, check, maybe you have already died ... On the stock exchange with its volatility, in a market economy with chronic ups and downs, this simply cannot be. But here it is, contrary to all the laws of physics, a thermometer of eternal success! The obvious impossibility of such results only increased the unshakable authority of Madoff. A financial genius who clearly possesses unique insider information! It's not really legal, but if it's been successful for decades...

The real secret of his extraordinary corporate success has only now come to light. Although it has long been known - the Ponzi Scheme. Old customers were paid from the money of new ones. There were no earnings to confirm the phenomenal profitability trajectory. Nevertheless, this could have continued for a long time, if not for the outbreak of the crisis. Clients needed funds - immediately and a lot - seven billion dollars at once. Madoff couldn't draw that kind of money. And the secret became clear.

He admitted to the court that since 1991 his firm had not invested clients' money at all. They were sent directly to Madoff's business account at Chase Manhattan Bank. Investigators believe these stunts began as early as the 1970s. The life of the saint turned out to be a myth. By saying that he had been making money all his life, I involuntarily flattered him. The trouble was not that he was making money, but that he was not making any. From the moment when he stopped making them, but only collected them, he crossed the line ...

In fact, physics was obliged to take revenge earlier. Nobody canceled financial control in the USA. 6 times since at least 1992, the US Securities and Exchange Commission (SEC) has audited. All this time alarm calls came to the commission. Madoff's reported numbers are a bluff, neither legally nor mathematically impossible, financial analyst Harry Markopolos signaled to the commission in 1999. No effect... In 2005, the irrepressible Markopolos submitted a 17-page analytical paper to the commission entitled "The world's largest hedge fund is a scam." Then he turned to the Wall Street Journal: do you need proof that Madoff is operating on a Ponzi Scheme? But the newspaper did not want to investigate this story.

How Madoff managed to get away with it, what technologies he used - this is what the public is now interested in. Where did the regulators and legislators look, what kind of control is this if it can be led by the nose for years and decades! Or shut his mouth... One can only hypothesize that Madoff's real technologies have entered into a noticeable misalliance with the glorified Protestant ethic, perhaps fundamental to capitalism, but apparently remaining too deep in the foundation. And that the matter is in some other non-working laws, no longer purely physical.

Madoff, of course, is a first-rate scoundrel, he could well claim the first place in the scoundrel exchange. He got into the most seemingly protected elite pockets with the air of a benefactor who still had to be asked to get into your pocket specifically for you.

He threw cans, which in itself is a Guinness record. Among the banks he scammed are the most famous international names: Banco Santander Banking Group, Spain - $3.1 billion; Medici Bank, Austria - 2.1 billion; Fortis Bank, Benelux - 1.35 billion; HSBC International Banking Group - 1 billion; Royal Bank of Scotland - 600 million; BNP Paribas Bank, France – $460 million…

He was a member of the board, of course, without any remuneration - a number of well-known, "non-profitable" organizations in their status. Most often - the treasurer, to whom, if not the famous financier, to entrust the disposal of funds. And he disposed, trustingly transferring all their endowments to his accounts. The technology of a noble crook, which O'Henry's heroes never dreamed of ... As a result of such charity, a number of charitable organizations went bankrupt.

It is unlikely that this was a special chic - to heat those who are connected with you by faith and blood. Most likely, it was more convenient. The Jewish community in the United States was proud of their high-flying son. The list of those robbed by him includes outstanding Jewish names: Elia Wiesel, Steven Spielberg, Zaza Gabor, John Malkovich, Larry King ... If a non-Jew is on this list, do not consider this a mistake. The money itself, for Madoff, had no nationality. His only condition: the money must be big, very big.

It is unlikely that anything significant will be added to the image of the exchange thief by listing what Madoff had in everyday life. A penthouse in Manhattan, a villa in Palm Beach, a house on Cape d'Antibes, paintings, antiques, a yacht - the usual multi-millionaire set. Ours is even cooler. But in numbers, the scam is definitely out of competition.

The court determined the scope of the damage inflicted by him at 18 and 65 billion dollars, counting with or without interest.

Ponzi, Mavrodi and all the rest swindled the poor. Madoff was a Ponzi for the rich. Exclusivity, scale were his signature style. And this required individual work of the highest class. A member of all possible closed clubs, he sat on all presidiums, served on all boards, was a member of all commissions, right there with his contributions to the election campaigns of presidents and senators - Democrats and Republicans ... Guru, trustee, philanthropist, political sponsor - he was multifaceted and ubiquitous. An insider in the highest sense of the word. Or a layer. Our own among our own - among regulators and legislators, among the powerful and the rich. This person is out of control. He is invulnerable.

Well, how could he be controlled by the Commission on Exchange Operations, if he himself controlled it - in a variety of ways, up to very extravagant ones. And laughter, and sin. One of the checks ended with the fact that the controller tied the knot of marriage with Madoff's niece ... And how the old proven straightforward mechanism of bribes worked, the respected participants in the process will certainly try to hide.

The crisis tripped up Madoff. And Madoff has become the personification of the current crisis. The fiat bubble and the ghoul financier are like twin brothers. What/who is the cause/effect here? Go figure it out when both burst so crushingly - menacingly and dirty ... Literally in the style of our cartoons of the 20s, the most authoritative heads in the West excitedly started talking about the inevitable collapse of the criminally vicious system.

Madoff - the highest and last stage of financial imperialism? In a sense, it is. Although capitalism has been buried more than once as a blood-sucker system, so many brilliant careers have been made on it, and it throws out more and more tricks - in the intervals between crises. Despite the crises (or maybe because of them), he managed to create the most capable system that only exists on this Earth. It has become commonplace to say that the current crisis is the strongest and deepest since the Great Depression of the 1930s. They don’t argue with experts, but has anyone seen a similar footprint on the streets of present-day New York, Madrid, London or Berlin? Capitalism is a very imperfect and vicious system, but to reduce it to Macbeth's cauldron of witches dancing around the bubbles of the earth is a bit of an exaggeration. It develops from one crisis to another, by necessity making adjustments, if not to its genetic code, then to its social nature. This is precisely what has always distinguished it from the socialism we know. That confident step progressed from one perfection to another, until it collapsed completely and completely.

As one of Obama's aides put it, it would be a sin to miss such a crisis... In other words, a crisis is not only a shock, but also an opportunity. Although the shock from bursting ghoul bubbles is very strong. The best and sober minds analyze, ring the bells. When, back in the last “dot-com” crisis, the corporate giants Enron and WorldCom, which seemed to be unshakable pillars, burst, this could seem like an accidental aberration. Today, the 2008 Nobel laureate in economics, Paul Krugman, makes a diagnosis that is clearer to us even more than to Americans: "Potemkin corporations with facades of drawn financial statements." That's what it was, he writes in his New York Times column. Alas, not a rare exception. As the current crisis has shown, corporate Potemkin villages are satellite towns of modern capitalism.

And how are the world's most important governments dealing with the crisis? Pumping money into the banking system. Where do they get them from? Literally from tomorrow, borrowing from future generations. The IMF has estimated that by 2014 the G8's public debt will reach 114 percent of GDP. That is, in order to pay it, the population of the most developed countries of the world will have to work for a year and a month absolutely free of charge. The Economist magazine called a forecast article about this "Playing Ponzi".

Diseases are dangerous. Treatment can give such consequences that will be compared in severity with the disease itself ... Will the powerful of the world do this this time or not? Is it enough? Wait and see. The next crisis will show.

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Once upon a time there were three Ponzi. One is Carlo Ponzi. The other is Sergei Mavrodi. The third is Bernard Madoff. But they were all Ponzi...

In fact, the historical Carl Ponzi was not the first. Before him was William Miller, nicknamed Five Hundred Twenty Percent. Back in 1899, he offered the venerable public 10% a week, scored a million and hit the top ten. By the time his future competitor turns around, he will still be alive and even have time to give an interview to the Boston Post, the same one, comparing the achievements of both with the undeniable position of his own superiority ... However, even earlier, in 1880, in the same Boston was Arrested and sentenced to three years in prison Sara Howe. Sarah's finding was that her high-yielding deposit was for women only. It was called "Deposit for the Lady" ...

However, even this venerable lady is hardly worth crowning with laurels. If I had my way, I would rename the Ponzi Scheme to the Merdle Scheme. Remember: "Great Merdle, beauty and pride of the nation, Commercial Colossus, the greatest man of our time"? Do you recognize the character from Little Dorrit?

“Mr Merdle's right hand was occupied by the evening paper, and the evening paper was occupied by Mr Merdle. His extraordinary enterprise, his untold wealth, his miracle bank were today the main food of the evening paper <…>; the entire Compound is engulfed in this fever! After all, wherever I go for rent, everywhere they tell me the same thing. Whether there is money, whether there is no money, everyone has one conversation: Merdle, Merdle, Merdle. All you hear is Merdle."

And here is the bitter hangover when the Merdle Scheme, as it should henceforth be called by right, burst:

“This man came out of nothing; no one could explain where and how he came to his fame, <…> it is completely incomprehensible why he enjoyed the trust of so many people; he never had his own capital, his enterprises were pure adventures, and his expenses were fabulous.

<...> By this time it became known that the illness of the late Mr. Merdle should be called Fraud and Theft. He <...> a dazzling miracle of our time, a new star that showed the way to the Magi with gifts <...> was simply the greatest Fraudster and Thief who ever managed to escape the gallows.

"By this time..." This is Dickensian time. It can be determined to the nearest month. Little Dorrit was published in parts from December 1855 to June 1857.

In the preface to the novel, the author considers it necessary to make a special reservation that the character he brought to light was inspired by the current chronicle. “If I dared to defend the right to exist of such an extravagant character as Mr. Merdle, I would hint that he was conceived after the epic with railway shares, at the time of the activity of a certain Bank of Ireland and one or two other equally respectable institutions.”

From the newspaper chronicle, Dickens created a type for all time.

“I hope,” said Arthur, “that the sad fate of those who let themselves be swindled will serve as a warning to many for the future.

“My dear Mr. Clennam,” said Ferdinand with a laugh, “why do you have such bright hopes? Yes, the first no less talented rogue will achieve the same - there would be a hunt.

This is what the series of heroes of this essay speaks about.

Merdle - Mavrodi - Madoff. Fraudsters are messiahs. Masters of Mathematical Magic. MMM, anyway.