“NEW YORK – The list of investors who say they were duped in one of Wall Street‘s biggest Ponzi schemes is growing, snaring some of the world’s biggest banking institutions and hedge funds, the super rich and the famous, pensioners and charities.

The alleged victims who sunk cash into veteran Wall Street money manager Bernard Madoff’s investment pool include real estate magnate Mortimer Zuckerman, the foundation of Nobel laureate Elie Wiesel, and a charity of movie director Steven Spielberg, according to the Wall Street Journal.

Among the world’s biggest banking institutions, Britain’s HSBC Holdings PLC, Royal Bank of Scotland Group PLC and Man Group PLC, Spain’s Grupo Santander SA, France‘s BNP Paribas and Japan’s Nomura Holdings all reported that they had fallen victim to Madoff’s alleged $50 billion Ponzi scheme.

The 70-year-old Madoff (MAY-doff), well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested Thursday in what prosecutors say was a $50 billion scheme to defraud investors. Some investors claim they’ve been wiped out, while others are still likely to come forward….”

More at AP.

Comment:

I have been watching the unfolding of the Madoff story keenly. A fund manager in a European country confided in me recently that he feared his own extremely conservative fund might have unwittingly been exposed to Madoff’s fund. He thought he might have taken a big hit and being a conscientious guy was agonizing over how to repay his clients.

This is why I’ve avoided saying that any country’s banks are free of exposure (even India’s). No one knows for sure where a lot of the debt passed around the globe actually is – slicing and bundling risk separates it out.

Here are some pointers:

1. Be suspicious if you have had exceptionally high rates of interest. High returns usually mean risky investments.

2. Be suspicious if the product is marketed aggressively.

3. Be suspicious if the rate of return has been exceptionally stable, even if it isn’t very high. In the kind of volatile market we’ve had in the past few years, no one can be that good on a regular basis. (That’s what tipped me off about Goldman Sachs two years ago. I figured they couldn’t be doing all that well. Well, they weren’t.)
4. Be suspicious of alternative investments you don’t understand.

5. Be suspicious of traditional “safe” investments you do understand. Take a look at their fee structure. Many “safe” investments like mutual funds have horrendous fee structures that prevent you from making anything, after taxes.

6. Be suspicious of funds touted heavily by the mainstream financial press. They are in bed (some financially, some politically) with the financial establishment, or they are ignorant, or careless, or too much in awe of Wall Street, or overworked, or brainwashed, …..or all of the above.

7. Be suspicious of funds touted heavily by the alternative financial press. Just because they are right about the big crooks on Wall Street, it doesn’t mean they aren’t crooks too….who would be doing the same if they could get away with it.

8. Be suspicious of people who tell you they made huge killings on this or that and want to let you in on it. If they made that much money on it already, chances are there’s nothing left for you….

9. Be suspicious of very quick returns. Easy come, easy go. What goes up that fast can go down twice as fast.

10. Be suspicious of very slow returns. Locking up your investments forever guarantees that any mistake you make in picking the investment will last a life time.

Bottom line? BE SUSPICIOUS.