Tuesday, December 16, 2008

SIPC to Liquidate Madoff Broker-Dealer. Why?

We are not getting the whole story. If the Ponzi scheme involved 25 investment adviser clients, why is SIPC liquidating the broker-dealer? Why is the broker-dealer out of business if the scheme involved on the investment adviser clients?

One answer is that this scam involved the brokerage firm, which means to me that Madoff could not possibly have pulled this off by himself.

Brokerage firm customers receive confirmation slips and monthly account statements. If accurate statements were sent out, surely someone would notice that there was a billion dollars missing from their account. That leads to the conclusion, that at a minimum, statements were not going out, or someone was doctoring them before they went out.

There is also the issue of commingling of funds, I suppose. There is an allegation that Madoff's "ill gotten gains" are in the brokerage firm. That would support the appointment of a receiver, but not the liquidation of the firm.

S.I.P.C. Moves to Liquidate Madoffs Firm - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times
The Securities Investor Protection Corporation announced Monday that it would be liquidating the investment firm run by Bernard L. Madoff, the trader accused of running a $50 billion Ponzi scheme, in an effort to return cash and securities to the firm’s clients.
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