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Wait for the sobbing to begin about how the SPIC should bail them out or if that fails so should the US Treasury. These clowns were invested in a hedge fund. Hedge funds are created to minimize the oversight that is afforded mutual funds and brokerage houses. Assume that risk and take your chances I say. I hope they don’t see one penny from the USG or the peon investors who are left to deal with the common trading houses because they don’t have the sophistication, nor resources, to be in these investment pools.......... my view is that hedge funds, like blind pools, do NOT fall under the mantle of SPIC coverage because oversight of their operations was limited and the dupes knew that.

As the bard of Avon wrote: “tis better to be thought a hapless victim of a Ponzi scheme than to admit to tax evasion.”

Mr Madoff ran his scam through a spinoff----separate from his main firm----Bernard L. Madoff Investment Securities. The much larger main company operated broker-dealer accounts - trading securities for investors - while the spinoff was a hedge fund.

EXCERPT Madoff was single-handedly managing billions of dollars in offices he kept separate from the rest of his firm........The only oversight was conducted in a Rockland County accounting office only slightly larger than a cubicle. The firm's main office was in NYC.

Madoff made his fortune embracing the latest and best technology, BUT he forbade investors to get online access to their accounts, insisting instead on paper printouts....

For well over a decade, competitors and experts said they found Madoff's track record suspicious. He seemed immune to any volatility in the market and, no matter what was happening in the economy at large, managed to finish each month with almost identical profits. . Madoff dismissed attacks as envy and said critics simply did not understand the complexities of his strategies.

Aksia LLC was hired to investigate Madoff several years ago, said principal Jake Walthour. The probe only increased the concerns about the fund. Madoff's returns were "abnormally smooth" from month to month, and it seemed impossible to replicate his investment strategy or verify his track record.

Madoff claimed to be moving as much as $13 billion in and out of the market every month, but "no one on the street could verify it or even see his footprints," Walthour said. "That organization was incredibly secretive." When they staked out the tiny accounting firm no one had ever heard of, investigators concluded something was amiss. "We decided there are several scenarios here, one of which is, this could be a Ponzi scheme," Walthour said.

Those who have invested in the fund have told investigators that withdrawing cash from it was an arduous process that involved faxes and inexplicable delays. That's because in a Ponzi scheme, money from new investors is used to pay those seeking to withdraw their money.

SOURCE Bloomberg and NY Post wire reports

http://www.nypost.com/seven/12132008/news/regionalnews/alarm_bells_in_1999_ignored_143971.htm

Everything Madoff did is suspect and cannot be rationalized against existing measures---he did not give a fig about laws, rules and regulations.