The recent financial meltdown continues to turn over rocks to expose vermin. The Madoff Ponzi scheme is incredible to me. How could someone take $50 billion without anyone realizing it. It is hard for me to understand the mindset of people who perpetrate such schemes. I can someone who is stealing people's money socialize with them and act like their friend. It is also interesting, though not surprising that these guys are big contributors to the Democrats. I suspect that it may not reveal their political beliefs so much as the political beliefs of the wealthy people they were exploiting. These scams certainly cause one to wonder about the soundness of any investment. I think the current financial crisis illustrates that there are a lot of frauds in the financial business. The rising stock market over the years just shielded them from detection. We can't rely on the SEC, so how do we identify the crooks? The articles below came from the blog 'Blue Crab Boulevard."

The Independent reports that many victims of Bernard Madoff’s gigantic Ponzi scheme still do not know that they are now destitute. In fact, I have been a little surprised at how little coverage a $50 billion scam has been getting in the US media. The report may indicate why:

Some victims of Wall Street’s biggest fraud – planned and carried out over decades by one of its most respected figures – are as yet unaware that their entire savings have been wiped out, financial experts in New York said yesterday. Such is the extent of Bernard Madoff’s alleged $50bn (£34bn) swindle, and so convoluted its paper trail of derivatives, that this weekend there will be Americans under the impression they are rich who are oblivious that their wealth had been placed in Mr Madoff’s apparently criminal hands, and is therefore now lost.

Enough details of the fallout were emerging yesterday to begin to judge the mayhem this one-time chairman of Nasdaq, and Democratic Party and Jewish charity benefactor, has wreaked. Those likely to have lost everything include a Jewish charity that had its $7m assets lodged with Mr Madoff’s firm, and had to lay off its staff on Friday, and Manhattan and Florida socialites. Many, in the words of an investigator, are now “destitute”. Corporate losers include Nicola Horlick (pictured, inset), the British hedge-fund manager known as “Superwoman” for her hectic private and business lives, whose Bramdean Alternatives seems to have lost at least £10m; and, reportedly, the Japanese brokerage house Nomura.

Madoff was a very large - but not ridiculously large - donor to Democrats. You’ll have to search his name at the Federal Elections Commission to get the details - their links are not persistent - but Madoff contributed some $161,000 - almost exclusively to Democrats (one exception, some money to Al D’Amato). Charles Schumer got rather a lot. So did the Democratic Senatorial Campaign Committee. They got a lot of Madoff’s money.

Another Day, Another Scam Revealed
Yet another scam - this time one conducted by a well-known lawyer - is wreaking havoc. Marc Dreier has been arrested, accused of a financial fraud, this one has about $380 million going missing. The victims include hedge funds.

But people there gave little thought to Mr. Dreier’s odd visit until November, when the company’s founder, Sheldon H. Solow, received a disturbing call. The caller wanted to let Mr. Solow know that Mr. Dreier had offered him the chance to buy promissory notes that had been issued by the company, people associated with the firm said.

They were fake notes, and shortly thereafter, lawyers for Solow Realty — different lawyers — were in touch with federal authorities, reporting their suspicions that Mr. Dreier might be engaged in financial fraud.

Since that opening tip, federal authorities have been tracking what they describe as a brazen swindle of some of New York’s savviest investors by one of New York’s more accomplished lawyers. Mr. Dreier has been charged with multiple frauds in the United States and a related crime in Canada, and is being held without bail in Manhattan.

In court last week, prosecutors said their count so far put the money missing at $380 million, most of it lost by hedge funds and other investors who had bought promissory notes that were flat-out fictions.

And I decided to check the FEC again. Guess what? Dreier appears to have given money - not a huge amount - to the Democratic Senatorial Coordinating Committee as well as to Bill Richardson’s campaign.

This kind of corruption and fraud is what is causing additional major damage to an already weak economy. With the arrests of Dreier and Madoff one has to wonder how much of this iceberg of crookedness has been exposed yet. As to the so-called “sophisticated” investors and hedge funds who have been burned by scams like this, one has to wonder how sophisticated they actually were.