No, not the Nicholas
Taleb book – Madoff’s investors and the SEC.
From Ashby
Jones, two computer programmers for Madoff’s former operation were arrested
and charged Friday with creating computer programs that helped Madoff hide his fraud
from regulators (complaint here).
From the SEC
complaint against the two programmers:
51. Defendants knew that all of this data was, for all
intents and purposes, randomly generated and assigned to purported trades by
programs they created.
. . .
52. Defendants' extensive use of random selection arose from
two related facts. First, there were no real trades from which to draw actual
data. Second, Madoff and DiPascali were concerned that investor representatives
and/or regulators would closely examine the data and notice implausible
correlations (e.g. all fake trades with a certain counterparty were for a
certain share volume, or were executed at uniform time intervals), which could
lead to greater scrutiny. In fact, when Madoff, DiPascali, or Defendants
reviewed the programs' results and found suspicious correlations and patterns,
Defendants would have to make further revisions to the programs.
Paul
Kedrosky has said since December that “Bernie Madoff’s results, far from
being pulled from his hat, showed every sign of having been generated by a
randomizing algorithm.” From his original
post:
The current party line is that this was an unsophisticated
scam, something that would have been easy to spot, if not from the overly
regular returns then from a fraud analysis of the numbers themselves. To that
way of thinking, Bernie wasn't a very sophisticated crook.
[Kedrosky then provides his arguments and evidence against
this theory, based on an analysis of Madoff's monthly returns from December of
1990 to May of 2005, as contained in a Fairfield Sentry performance data
document]
Taking it one step further, it almost certainly means
Madoff's numbers would have been generated algorithmically. He didn't pluck
them from air at the end of each month. That is, I think, interesting in that
it shows that this (alleged) con was at least somewhat more sophisticated than
some of the noisier critics out there have been saying.
Having now been backed up
by the SEC complaint, Kedrosky
concludes: “I’m so clever.” Judging
from the SEC complaint, it seems that he is.