Page 46 - Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

It was easy money. And, for prosecutors, it was an even easier case.

COBACOBA
Gupta and Rajaratnam both went to prison for insider trading, their careers
and reputations irrevocably ruined.

Now consider Bernie Madoff. His crime is well known. Madoff is the most
notorious Ponzi schemer since Charles Ponzi himself. Madoff swindled

investors for two decades before his crime was revealed—ironically just
weeks after Gupta’s endeavor.

What’s overlooked is that Madoff, like Gupta, was more than a fraudster.
Before the Ponzi scheme that made Madoff famous he was a wildly
successful and legitimate businessman.

Madoff was a market maker, a job that matches buyers and sellers of stocks.
He was very good at it. Here’s how The Wall Street Journal described
Madoff’s market-making firm in 1992:

He has built a highly profitable securities firm, Bernard L. Madoff
Investment Securities, which siphons a huge volume of stock trades away
from the Big Board. The $740 million average daily volume of trades

executed electronically by the Madoff firm off the exchange equals 9% of
the New York exchange’s. Mr. Madoff’s firm can execute trades so quickly
and cheaply that it actually pays other brokerage firms a penny a share to
execute their customers’ orders, profiting from the spread between bid and
ask prices that most stocks trade for.

This is not a journalist inaccurately describing a fraud yet to be uncovered;
Madoff’s market-making business was legitimate. A former staffer said the
market-making arm of Madoff’s business made between $25 million and

$50 million per year.

Bernie Madoff’s legitimate, non-fraudulent business was by any measure a
huge success. It made him hugely—and legitimately—wealthy.