Digging for Madoff Evidence: 20 Million Documents in Queens

While Senators grilled SEC officials this week on how the regulator missed the warning signs of the Madoff fraud, the real action in the case was occurring in a Queens warehouse.According to an exclusive article in The Daily Beast.com, 20 million Madoff-related documents were discovered in a Queens warehouse, which could lead to evidence that Madoff didn't act alone. "No one could create that amount of paper without considerable help," stated the story.

In addition, the article titled,"Partners in Crime," citing unnamed key players in the multipronged investigation into the Madoff scheme, said that authorities now believe Ruth Madoff, Bernard's wife of nearly 50 years, played a larger role in the business than previously realized.

Contrary to reports that Madoff kept the investment advisory business separate from his regulated broker-dealer business, on a separate floor and on a separate computer system - and that no family members know about it -The Daily Beast is reporting that Ruth Madoff ran the books, and that the funds from the investment advisory business were commingled with Madoff's personal funds and with a market-making fund in which he, as the broker dealer, executed orders for customers. "It was Ruth Madoff who oversaw the books on all three of these accounts - and it was the commingling of money from them - contrary to regulations that require such accounts to be kept separate - that enabled the elaborate shell game," the articled reported.

While all of this is still hearsay, since no documents are offered as proof, the article quotes an unnamed person involved in the investigation questioning whether Madoff could keep this a secret from his wife. It also points out that Ruth Madoff has not hired her own attorney, speculating that this means she knows more about the fraud.

Meanwhile, investigators are looking into whether the customer statements that investors received were false and whether any trades were made at all. According to The Daily Beast, the Financial Industry Regulatory Authority (FINRA) has reported it has no record of Madoff's investment advisory firm placing any trades. (This leads one to question what Madoff's investment advisory staff was doing when FINRA audited the firm.)

Another revelation is that Madoff told authorities that the Ponzi scheme began more than 40 years ago. One anonymous law enforcement source in the story essentially blames the fraud on electronic trading. Since Madoff was a pioneer in electronic trading, there was no longer a physical paper trail, the source suggested. Instead of writing out orders on paper and sending runners to the stock exchange floor, at the push of a button, now a broker could confirm a trade, and electronically play a game of hide and seek. But since this article claims the fraud started 40 years ago, then there has to be some paper trail, since electronic affirmation and confirmation of trades didn't begin until 1998. Trades are confirmed through the Depository Trust and Clearing Corporation's Institutional Delivery (ID) System. So there must be some electronic trail of Madoff's trades- or at least the legitimate ones.One anonymous law enforcement source in the story essentially blames the fraud on electronic trading. Since Madoff was a pioneer in electronic trading, there was no longer a physical paper trail, the source suggested. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio