A Madoff bucket shop?

NY Times:

The clients who trusted Bernard L. Madoff still do not know exactly what he did with their money. But they know what he did not do with it: He did not buy any of those blue-chip stocks and Treasury bills listed on their account statements over the last 13 years.

The court-appointed trustee who is winding down Mr. Madoff’s business said on Friday that his team had searched records going back almost to 1993 and found no evidence that any securities were bought for investors during that time.

That pattern probably stretches back even further, according to the trustee, Irving Picard of the law firm of Baker Hostetler. But his team, operating in a crime scene “under the watchful eyes of the F.B.I.,” simply has not yet been able to dig back any further in the Madoff archives, he said.

His report, delivered at an emotional public meeting of creditors on Friday, demolishes the theory that Mr. Madoff was an honest man driven into fraud by the relentless market strain of recent years. And it raises the question of how all those fake statements and trade confirmations were generated in the absence of any genuine trading.

Mr. Picard said his team now has “a pretty good idea” of how that happened, but his lawyer, David J. Sheehan, said they could not disclose any of those details because of the continuing criminal investigation into whether others participated in the crime with Mr. Madoff.

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This is sounding like a classic bucket shop where "order tickets" are thrown into a bucket rather than filled in an open market. Then bogus paper work is presented to clients. I think one of the ways the scam got so big is that customers were rolling over the interest reducing the amount Madoff had to pay out. It was when they started asking for their money that he got into a situation he could no longer control.

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