In the nine and a half years since Ponzi scammer Bernie Madoff was exposed as having swindled unsuspecting investors out of approximately 17 billion dollars, Irving Picard, the court appointed trustee charged with recapturing funds from people who profited from Madoff’s scheme in order to return money to cheated investors has managed to get back more than 11 billion dollars, much of which has already been returned to the victims of the scam.  Now the Justice Department has announced that it expects to return more than 4 billion dollars to Madoff’s victims. The Justice Department obtained these funds by both seizing funds from early investors with Madoff who were paid with fictional profits and by settling claims the Justice Department made against J.P. Morgan Chase, Madoff’s bank, which the Justice Department was negligent in failing to recognize indications that Madoff was operating a scam.
In 2014  Bernie Madoff gave an interview in which he said that his victims were responsible for their losses.   He said that his investors were “sophisticated people” who should have known better.  “People asked me all the time, how did I do it.  And I refused to tell them, and they still invested.  Things have to make sense to you.  You should ask good questions.”  Although it is outrageous for Madoff to blame his victims for their plight, he is correct in his analysis. No one should ever invest in anything that they do not totally understand.  In Madoff’s situation, with 20/20 hindsight we can see that his investment strategy was impossible to achieve.  It is easy to say now, but investors should not have relied on him.  They should have tried to understand the strategy and if they could not understand it, which no one would have been able to do, they should not have invested.  In addition to Madoff’s advice, I would also warn you against ever investing with an investment adviser such as Madoff who both makes the investment decisions and also holds the investments.  These activities should be divided between an investment adviser who makes trades and a separate broker-dealer who actually holds the investments.  Had this elemental rule been followed by Madoff direct investors, they would have immediately known that there were no investments being held on their behalf.
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