Madoff: A Riot of Red Flags
24 Pages Posted: 2 Feb 2009 Last revised: 24 Jan 2012
Date Written: January 2009
For more than seventeen years, Bernard Madoff operated what was viewed as one of the most successful investment strategies in the world. This strategy ultimately collapsed in December 2008 in what financial experts are calling one of the most detrimental Ponzi schemes in history. Many large and otherwise sophisticated bankers, hedge funds, and funds of funds have been hit by his alleged fraud. In this paper, we review some of the red flags that any operational due diligence and quantitative analysis should have identified as a concern prior to investing. We highlight some of the salient operational features common to best-of-breed hedge funds, features that were clearly missing from Madoff's operations.
Keywords: hedge funds, fraud case, due diligence
JEL Classification: G11, G23, K22
Suggested Citation: Suggested Citation