Call me insensitive, but I have a hard time empathizing with the alleged “victims” of the Madoff investment ponzi scheme scandal.  This is not to say that I’m not disgusted by Madoff and the lack of SEC oversight that allowed his crimes to go on for so long.  I’m just tired of reading, listening and watching news coverage that refers to his client list as “victims”.  On the contrary, I classify this as a case of “They came, they gambled, and they lost“.  There was fraud, so I’ll support their rights to a day in court, and the right to sue Madoff, but nothing more.


Clusterstock provides a good summary of the Madoff victims client list here.  Let’s look at a few from Clusterstock’s list:

  • HSBC - has exposure of $1 billion.  But according to the HSBC website, “HSBC North America Holdings Inc. is one of the top 10 financial services organizations in the United States“.  That hardly qualifies them as a “victim”.  I can understand how government officials at the SEC were asleep at the wheel, but a private financial instituion of that caliber and size should have known better! And if they claim otherwise, then I would advise every HSBC customer in America to withdraw their funds and close their HSBC account immediately.
  • Other financial firms – Access International ($1.4 billion), Fortis Bank ($1.4 million), Fairfield Greenwich corp ($7.3 billion), and others.  Ditto my HSBC comments – should have known better, and if not, close up shop immediately because you don’t deserve to serve your customers!
  • Maxam Capital Management LLC – Sandra Manzke, Maxam’s founder, said she is wiped out and her “fund of hedge funds” will have to close as a result of the Madoff losses.  Are you F#*&$#@ing kidding me, Sandra??? You really have a hedge fund where you charge customers enormous fees for your investing and trading expertise, and then you simply take their money and dump it into a Madoff fund?!?!?!  And let me guess, you simply couldn’t be bothered to ask any questions as to why Madoff’s fund had consistent outsized returns and near zero volatility?!?!?!
  • Ira Roth family – $1 million in potential Madoff losses.   I’m a bit more sympathetic to them than HSBC, but on the other hand, if the case of Enron didn’t teach you the lesson on diversification, then I’m afraid nothing will! Well if Bernie doesn’t pay up, be thankful that the taxpayers are now on the hook for a portion of your losses.  That’s right, the Securities Investor Protection Corporation (SIPC), will likely compensate all Madoff victims gamblers clients for up to  $500,000 of their losses.
  • Richard Spring – this Boca Raton resident, *AND* former securities analyst claimed to lose 95% of his networth, or $11 million in the Madoff scandal, stating “That’s how much I believed in him”.  Let me guess Richard, you were a securities analyst for the SEC?!?!?!  To paraphrase my response to Sandra from above, Are you F#*&$#@ing kidding me, Richard???
  • Elie Wiesel’s Foundation For Humanity – Let me be frank, it’s a well known and reputable organization.  But I maintain my minimal sympathy view for them as well. Charitable organizations operate by taking in donations, and then putting those donations to good use.  When there is more cash on hand than they can efficiently put to use, then they need to temporarily safeguard that cash.  Instead, they chose to gamble that cash away on Madoff’s promise of “risk free *AND* outsized returns”.   According to a statement from their website, they lost $15.2 million from the Madoff scandal, representing “substantially all” of the foundations assets.  Hopefully they have learned their lesson, and will diversify their next horde of unused cash.  That next horde of cash may be the taxpayer funded $500,000 SIPC reimbursement.

Summary – Diversify, diversify, and diversify!  Diversify your investments, your investment classes, and most importantly your investment financial instituions!

Sorry for your losses…