Harry Markopolis first turned in Bernard Madoff to the S.E.C. in 1999. Later, in a scathing 2005 letter entitled "The World’s Largest Hedge Fund is a Fraud," he outlines no less than 28 red flags about the Operation and suggests two possible scenarios for Bernard Madoff’s fraud, the highly likely one being that it was a Ponzi Scheme. The documents are in tomorrow’s Wall Street Journal [subscription only] but I expect we’ll all see them soon enough [Madoff Misled SEC in ’06, Got Off]. Markopolos nailed the case all on his own, and turned it in repeatedly to the S.E.C. even though he stood to gain nothing by doing so. The S.E.C. either blew it off or just plain blew it!
And as for, "there’s no way the S.E.C. would have known to check the facts behind all of these third party hedge funds." Even after Harry told the S.E.C. about them so they did know, they didn’t check the facts.
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