By Chet Yarbrough
Ponzi Supernova—Madoff Speaks
Recorded by: Audible Original
Produced by: Steve Fishman
In “Ponzi Supernova”, Audible offers recorded interviews with Bernie Madoff and other perpetrators of the largest Ponzi scheme in history. Steve Fishman conducts several telephone interviews with Madoff while he serves a life sentence for fraud. Steve Fishman gets the telephone interviews after wheedling his way into Madoff’s confidence through a fellow prisoner. To round out Fishman’s story, he captures telephone conversations with several other crooks, investigators, and victims of Madoff’s crime.
Fishman shows how a sixty billion-dollar Ponzi scheme is created and how it escapes detection for over twenty years. Supplemented by audio books like “The Big Short”, and “No One Would Listen”, Fisher amplifies Madoff’s unconscionable crime with recordings of victims who lost their life savings. Fisher explores the perfidy of banks and investment companies that mindfully ignored Madoff’s impossible investment returns; all the while, being financially benefited from Madoff’s lies.
“Ponzi Supernova” reveals how Madoff created an empire of greed. Madoff comes off as an average intellect with a big ego, meager technological skill, and zero empathy. As a person, Madoff reminds one of a sociopath. He refuses to take responsibility for his crimes and exhibits no remorse for the grief and death of others effected by his crimes. Madoff manages to appeal to the greed of human beings and blames others for their greed. He manufactures investment data that hides the truth of his investment skill and his organizations’ portfolio. He takes investor’s money and uses new investor’s money to pay earlier investor’s returns. Few real trades support Madoff’s extraordinary portfolio performance.
“Ponzi Supernova” implies most of the investment firms that funneled investors into Madoff’s Ponzi scheme should have and could have exposed Madoff’s lies. However, they were paid a fee for their service. Rather than investigate Madoff’s investment methodology, most investment firms gathered fees and left investors to fend for themselves.
Fisher notes how one analyst is sidelined by his investment company because he asked too many questions. The questions would have exposed Madoff’s scheme. Fisher also interviews an independent analyst that tells a client not to invest in Madoff’s company because she saw too many red flags. For instance, Madoff would not provide examples of his past investments to show how he made such remarkably steady returns; even in a falling market. Madoff’s standard refrain was “trust me”.
Like stories in “The Big Short” and “No One Would Listen”, Fisher’s recordings show institutional incompetence by government regulators, and greed from the private sector.
The SEC interviews Madoff on numerous occasions. Often the SEC representative is young and inexperienced. When reports are requested, Madoff’s back-office team manufactures whatever information is requested. The reports have no basis in truth. The reports are manufactured to satisfy whatever question is asked. If the SEC had called to confirm whether the trades had really been made, they would have exposed Madoff for fraud. Rather than check specific trade transactions, the SEC settled for a simple report that said Madoff had a trade account.
Nearly eleven billion dollars of the sixty billion-dollar Ponzi scheme is recovered. However, the recovery is largely limited to American investors by what are called “claw backs”. The “claw back” is from investors who had taken their money out before Madoff’s collapse in 2008. Other countries had no “claw back” provisions which meant many non-Americans lost everything.
Madoff and a few of his employees went to jail, but many escaped with fines and admonishment. “Ponzi Supernova” clearly implies both the government and private sector were guilty for losses by many small investors. These investors relied on government regulation and private sector financial advice.
If there is a lesson in this story, it is that every person should closely monitor their own investments. Most, if not all, human beings are seduced by money, power, and/or prestige. It is every investor’s responsibility to know how their investment adviser is benefited by your investments in their recommendations. Better to make your own investment mistakes, rather than rely on others who have a financial interest in your trading decisions.