The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Investors duped by Madoff broke basic investing rule

12/30/2008

The media is full of stories about Bernard Madoff, who allegedly lost somewhere between $17-50 BILLION by cheating his investors with a “Ponzi Scheme.” It is a story so similar to the WexTrust issue locally.

While I feel sorry for the individual investors, some of whom were destroyed, they did forget the most basic rule of investing, i.e., ALWAYS have an independent, third party custodian of the client’s assets, who will send statements directly to the investors.

If my mother asked me to manage her money, my first question to her would be “Who is the custodian?”

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