Madoff Talks Insider-Trading, Dark Pools And Hedge Funds

Jan 2 2013 | 12:54pm ET

This Christmas, those who asked for nothing more than some wisdom from Ponzi scheme mastermind Bernie Madoff got quite the stocking-stuffer.

Madoff, who pleaded guilty to running a $65 billion fraud almost four years ago, sent a missive to CNBC from the cheerful precincts of the federal penitentiary in North Carolina that he'll call home for the next 146 years or so. Madoff didn't touch on his own crimes, but instead offered his thoughts on the latest scandals to hit Wall Street and on the growth of the hedge fund industry.

"A number of you have been asking my views on a couple of subjects that I am comfortable in going on the record, because they are not related to my case," Madoff, whose brother was sentenced to 10 years in prison last month, said.

"While I have always been an advocate of electronic trading due the efficiency the lower costs the bring o the markets, I am nit a fan of the lack of transparency the DARK POOLS create [sic throughout]," Madoff, whose scam featured no trading at all, wrote.

"Institutions have always attempted to guard this buy and sell information from exposure to the market for fear of being FRONT RUN," Madoff continues. While acknowledging their right to do so, "the more secret this information. The more valuable this information is to those that can obtain it [sic]. Therein lies the problem. It is naïve to think that there will be no leakage of this information."

Madoff also took the time to demolish the probably not-very-widely held opinion that insider-trading didn't happen until about five years ago. "It has been present in the market forever, but rarely been prosecuted."

Madoff concludes with a learned discussion of hedge funds.

"The other area of discussion involves the growth of hedge funds, particularly feeder funds. In spite of the early held belief. of which I was of this opinion, that the extra layer of costs related to commissions and profit sharing that went along with feeder funds [sic]."

"They have continued to grow. It has been this additional layer of costs that have created the need for more risk to be taken to earn worthwhile returns. This has created a minefield of regulatory problems involving the very reasons that the desire for a lack of transparency has grown."

The Santa Claus of Butner has spoken.


In Depth

'Smart Beta' Funds In Regulators' Sights, Hedgies May Be Next

Mar 26 2015 | 11:11am ET

Funds that mimic strategies used by active managers for a fraction of the cost could...

Lifestyle

Study: Both Marriage and Divorce Lead to Negative Hedge Fund Performance

Mar 25 2015 | 6:51pm ET

Trouble at home leads to trouble in the market for fund managers, according to researchers...

Guest Contributor

Concerned About Your HFT Exposure? Hedge It!

Mar 26 2015 | 1:06pm ET

High-frequency trading has been a persistent storyline for several years. The trading...

 

Sponsored Content

    Mar 9 2015 | 6:35am ET

    Kelly RodriquesKelly RodriquesAs more investors look to diversify, many are beginning to use retirement funds to invest in alternative assets such as private equity and real estate. Kelly Rodriques, CEO & President of PENSCO Trust Company, explains how companies can connect with those looking to use their retirement accounts in a different way. Read more…

Editor's Note