Madoff Warning Signs.

Apparently, there were many red flags that might have tipped people off to Bernie Madoff's fraud. Yet despite eight SEC investigations in the last sixteen years, he was not caught.

I wonder how many other large hedge funds or investment advisers have some of these:

  1. A huge business audited by a tiny accounting firm.

  2. The same firm acting as adviser, manager, custodian, and clearing agent.

  3. No fees charged for managing money (only for trading).

  4. Consistent 10%-20% returns every year.

  5. Over 90% profitable quarters.

  6. Large political donations. Note that while most big donors are not crooks, almost all big frauds are big donors: Enron, Worldcom, Fannie Mae, Madoff.

I haven't seen hedge fund historical information online, but I wonder how many existing hedge funds have been profitable every year and almost every quarter.

Are any of these returns remarkably consistent as well? Inquiring minds want to know.

UPDATE: BTW, I do some of my trading through a Fidelity brokerage account, and I remember seeing that they did some of their trading of my orders through Madoff Investments, particularly, if I recall correctly, on after-market orders. A few months ago I got a couple of ridiculously bad fills on market-on-close orders (during normal trading hours) on some very heavily traded securities -- off by perhaps $1.75, when the bid-ask spread at close and immediately before close was 1 cent. I wonder whether these bad fills were Madoff ones (Fidelity's online records don't show this information for more than a day or so after the original trade report).