Marketplace Scratch Pad

Maybe some Madoff investors weren’t duped

Scott Jagow May 18, 2009

US prosecutors are digging into an obvious question in the Bernie Madoff case — how could none of his victims ever figure out what was happening? The Wall Street Journal says at least eight people are being investigated for what they knew and when.

So far, no one’s been charged. From the Journal:

(Jeffry) Picower and (Stanley) Chais already have been accused of seeking fictitious gains in civil lawsuits brought against them by Irving Picard (an attorney in the bankrutpcy liquidation of Madoff’s firm.) As part of his effort to recover assets for Mr. Madoff’s victims, Mr. Picard alleged that Picower and Chais sought — and then received — better returns than thousands of other Madoff investors.

In some cases, their returns reached 300% or 950% a year, Mr. Picard has alleged…

Picower and Chais have denied the claims, either directly or through their lawyers.

Should be interesting to see what the government turns up.

Meanwhile, Madoff mania continues. A company called Cellufun has created a mobile game called Made Off. The object is to attract “investments” from online friends and create your own Ponzi scheme. How fun!? But you can only get return rates of 5% to 20%. And you don’t win actual money, just “Cellupoints” that can be used in Cellufun’s virtual world. From CNN Money:

(Cellufun CEO Neil) Edwards said the game is meant to poke fun at Madoff, but not his burned investors. Edwards said he is sympathetic to their situation, having lost money in the markets himself, though not to Madoff. He said he is considering adding a donation link to the Cellufun site for victims.

Edwards said the game is meant to be educational.

“There is a lot of misconception and confusion on what happened,” he said. “People don’t really understand a Ponzi scheme.”

Edwards said that his nine-year-old daughter plays the game and she recently told him, “Dad, I’ve learned that this can’t go on forever.”

I think she’d make a fine candidate for head of the SEC.

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