As startling as a $50 billion Ponzi scheme is, more staggering has to be the SEC's failure to catch the scheme years ago.
The latest from WSJ is that Harry Markopolos, who years ago worked for a rival firm, is a money manger and a fraud investigator, wrote to the SEC in 1999 about Madoff after researching Madoff's supposed stock-options strategy and was convinced the results likely weren't real.
"Madoff Securities is the world's largest Ponzi Scheme," Markopolos, wrote in his 1999 letter to the SEC, according to WSJ.
Markopolos didn't stop there. He pursued his accusations over the past nine years, dealing with both the New York and Boston bureaus of the SEC, according to documents he sent to the SEC and reviewed by WSJ.
A series of media stories also raised questions about Madoff's operations, including a piece entitled "Madoff Tops Charts: Sceptics Ask How" in the industry publication MAR/Hedge in May, 2001, and a subsequent story in Barron's.
How could the SEC have missed this with the media covering the story and a money manager/fraud investigator trying to get them to investigate for almost 10 years? As I wrote earlier, the SEC was clearly doing something else besides looking for bad guys. They were doing what they always do, respond to political pressures, re-announcing absurd rules to fight the financial crisis and launching absurd show trials against the likes of Mark Cuban.