Scam of the day – June 26, 2012 – Latest Bernie Madoff developments and the lessons to be learned

The New York Attorney General just announced a settlement with Hedge Fund Manager Ezra Merkin, by which Merkin will pay 410 million dollars to victims of Bernie Madoff’s Ponzi scheme.  Merkin was reportedly managing his clients’ investments by merely turning the money over to Madoff to invest and being paid reportedly approximately 35 million dollars a year for doing nothing more than taking his clients’ money and giving it to Madoff without proper investigation or research.

TIPS

The lessons to be learned by the Bernie Madoff Ponzi scheme are many including, never invest in anything that you do not completely understand, always investigate anyone who will be dealing with your money, avoid becoming a victim of affinity fraud by excessively trusting someone merely because they belong to the same social, ethnic or religious group as you and as illustrated strongly in the Madoff scandal, never have your investment advisor also be the person who holds your money.  Bernie Madoff was both the investor and the custodian of the assets.  If you work with an investment advisor, always have an independent custodian hold the investments so that you get independent statements that verify your investments.