who’s getting the benefit; it’s who’s
paying the price,” says Henning, noting that
Madoff’s market- making customers expected the firm to obtain
the best price available when buying or selling stocks. Instead, their
interests were apparently subordinated to those of Madoff’s
While front-running is illegal, it didn’t horrify
“They were convinced that the risk was only that the
Securities and Exchange Commission would do something about breaches of
the Chinese wall in the Madoff organization,” Wolfer says. In
the worst case, he says, “what could be expected was that at
a certain point the SEC could say stop.”
Wolfer, who says he doesn’t speak for his former employer,
now manages a fund of funds at Geneva-based Banque SCS Alliance, which
invested in another Madoff feeder fund, Fairfield Sentry Ltd. He says
he handled the risk that Madoff might be front- running by sharing this
suspicion with clients who put money into the fund.
“With every year passing, the worries were a little bit
less,” Wolfer says.
Other money managers made similar winks and nods about
Madoff’s advantage, according to people who were pitched the
In other words, we do not care if we are doing business with a crook,
just as long as the crook is making money for us.
Note: to clarify the point, for those that did not follow the story:
Madoff was not front running. He was
running an old-fashioned Ponzi scheme. Evidently, however,
many people thought he was making profits by front running.
Who knows, perhaps he started that rumor himself.
It gave a seemingly plausible explanation for his profits.
But even those who thought his profits were ill-gotten, were
happy to share the (illusory) wealth.
So we go and bomb other countries back to the stone age. Who
cares, so long as our country stays wealthy? Until we see
that the wealth is an illusion.