Money manager Bernard Madoff had a trading strategy that was so awesomely complex that no one understood it. Well, it turns out that was a lie too.
Media reports say that the alleged mastermind of a $50 billion Ponzii scheme may have never traded any securities at all. The Financial Industry Regulatory Authority has no evidence of Madoff's investment fund executing trades through his brokerage operation, the
Associated Press said. Fidelity Investments, listed among many trades included in statements sent to customers, says Madoff is not a client, the AP said.
There are many lessons to be learned from the Madoff scandal.
First, don't invest in something you do not understand.
Many Madoff customers were either afraid or unwilling to ask what was going on with their accounts.
The Boston Globe, which broke this story, said the firm's "statements were often so complicated that investors had to call representatives of the firm for explanations."
People can understand if a money manager loses money by making some bad bets on the market. They may not like it much but they know that investments will lose their value. But Madoff never even tried to make money for his clients. He was only interested in lining his own pockets.
How Madoff could sleep nights knowing that he had swindled everyone from billionaires to charities to small union pension funds is beyond me.