Scam of the day – September 24, 2012 – Bernie Madoff update

Bernie Madoff, the foremost Ponzi schemer in history is now serving the third year of his 150 year sentence in a federal prison in North Carolina.  His victims, many of whom lost their entire life savings have continued to feel the pain of his criminal acts  However, quietly and often out of the news, Irving Picard, the trustee appointed to liquidate Bernard L. Madoff Investment Securities and to attempt to recover funds on behalf of the victims of Madoff has been having some success.  Recently, Picard sent partial reimbursement checks ranging from $1,784 to $526.9 million dollars and totalling 2.48 billion dollars to 1,230 former customers and victims of Madoff.  The average payout of this distribution was 2.02 million dollars.  This brings the total amount recovered from various sources including insurance and settlements to 3.63 billion dollars.  It is expected that 44% of the victims with valid claims will end up totally compensated for their losses, which is amazing for scam victims

TIPS

The best way to not be swindled is to not be taken in the first place.  Madoff’s scam epitomized two common scam dangers.  The first is affinity fraud.  People tend to trust people who are “like them” without questioning what is being proposed to them.  Someone “like us” would never steal from us is how the victims think.  The truth is that scam artists, the only criminals we call artist,s make it a point to play up whatever they have in common with their victims, such as race, religion or ethnicity to get their victims to trust them instead of doing the kind of due diligence you should do before getting involved in any investment.  The second scam danger prominent in Madoff’s Ponzi scheme was that people who invested in it did not understand how the investment worked.  You should never invest in anything that you do not fully understand.  No one understood what Madoff was doing because, frankly, if they did, they would understand that it couldn’t work.  You may miss out on some good investments by limiting your investments to things you understand, but you won’t be a victim of a scam.