The more things change, the more they stay the same: If something sounds too good to be true, then it's not. -- A reminder courtesy of Bernie Madoff.

(See an article in The Wall Street Journal.)

This is big, so big, and I hate it for all who will lose millions. As we now have learned, the guru ran a giant Ponzi scheme, a type of fraud in which earlier investors are paid off with money raised from later victims -- until no money can be raised and the scheme collapses.
_______________

A late story appears in The New York Times, that notes the following:

The Securities and Exchange Commission, which investigated Mr. Madoff in 1992 but cleared him of wrongdoing, appears to have been completely surprised by the charges of fraud.

Investors may have been duped because Mr. Madoff sent detailed brokerage statements to investors whose money he managed, sometimes reporting hundreds of individual stock trades per month. Investors who asked for their money back could have it returned within days. And while typical Ponzi schemes promise very high returns, Mr. Madoff’s promised returns were relatively realistic — about 10 percent a year — though they were unrealistically steady.

[T]he S.E.C. had already investigated Mr. Madoff and two accountants who raised money for him in 1992, believing they might have found a Ponzi scheme. “We went into this thing just thinking it might be a huge catastrophe,” an S.E.C. official told The Wall Street Journal in December 1992.

Instead, Mr. Madoff turned out to have delivered the returns that the investment advisers had promised their clients. It is not clear whether the results of the 1992 inquiry discouraged the S.E.C. from examining Mr. Madoff again, even when new red flags surfaced.

According to an S.E.C. statement released on Friday night, the agency looked at Mr. Madoff’s operations twice in recent years — in 2005 and 2007. The 2005 review found only three technical violations of trading rules. The 2007 inquiry found nothing that prompted the regional enforcement staff to take further action by referring the matter to Washington, the statement said.