Proper Living (1)
Once upon a time, back in the days when Nazi Germany was gassing people, there lived a man named Charles Ponzi. He wielded an astonishing investment technique that guaranteed consistent, sky-high returns. It worked by paying early investors with money from new ones. Of course, Ponzi wasn't the first to pull off the trick of robbing Peter to pay Paul. But his genius lay in modernizing and institutionalizing it. Everyone learned and used the scheme named after him—even decades later.
There's just one problem with this game of hot potato: anyone can understand it, but mastering it is incredibly tough. Even someone who's succeeded for decades can lose everything in a single slip-up. So it's no wonder we call the practitioners con artists.
A few months earlier, I was meeting with Ha Young-il to hash out the details.
"Madoff definitely took a loss this time. But he's still paying out to investors without a hitch."
"...If that's true, isn't this a Ponzi scheme?"
Exactly. The Madoff Fund is history's greatest Ponzi scam. Who is Bernard Madoff? A self-made fund manager who's the role model for countless investors, the pride of the Jewish community, the legendary figure who computerized the U.S. stock market, a market maker pumping massive liquidity into Nasdaq, and a former Nasdaq chairman. On paper, he sounds like an incredible investor. And he was competent enough, in his way. Impressive, right? Most Ponzi schemes don't last that long.
"I don't know how much of it is fraud—from where to where. He might've just covered a temporary capital shortfall this time. But one thing's for sure... at least 20% of it is fake."
I answered with a beaming smile. Claiming it was a scam from the start would be too shocking, so I went with "just some of it." For a normal con, that wouldn't fly... but Ponzi schemes are special. Promising 10% returns while only earning 5% is still fraud. Ha Young-il looked stunned, staring blankly into space at the revelation.
"... ."
Tap tap.
I patted his shoulder and continued. "Don't worry too much. We caught it early, didn't we? Ponzi schemes balloon in damage over time."
"That's... true, but how has a fund that's been around for over 20 years survived this long?"
"Well... aren't we doing something similar? We siphoned billions into Eastern Europe, and no one noticed."
"Come on, Alpha Fund is different. It's like reporting 30% gains as 50%... but we still grew clients' money handsomely, didn't we?"
Hmm, honest enough—that's fraud too, but victims would probably look the other way. Who else delivers 20% returns?
"Madoff's dodged the bullet thanks to his reputation. 'No way that guy would scam us—he's too famous!' That's the thinking."
Madoff's a "respected" Jew. After the financial crisis, trust in Jewish communities cracked, but Madoff was the cause. He vacuumed up funds from top Jewish names and blew them on his Ponzi. Blood's thicker than water, but not enough for a second bite.
He paused. "...Wait. Why are you telling me this?"
Ha Young-il snapped out of his shock, piecing it together.
"How I know? Or why I'm telling you?"
"No, you've surprised me with knowledge before... Why tell me?"
"Hmm... Obviously, we expose the scam? This apostle of justice won't forgive cheats undermining healthy capitalism."
"... ."
Tch. Why doesn't he buy it? I sighed at his wide-eyed stare.
"Sigh. Think about it. If a $50 billion scam blows up, what happens to regulations?"
"...They tighten?"
Snap.
"Bingo! We get hit too."
Originally, it'd unravel post-Lehman, but my meddling shifted history—it could pop much sooner. Madoff's fund wasn't smooth sailing; it barely survived crises before exploding in 2008. If investments dry up for some reason? Game over. A storm hits America, out of my control.
"Beyond risk management, there's a bonus: winning Jewish community trust."
The world has cartels beyond money—cultures and histories binding groups that share info and capital for synergy. Nations are the extreme.
"Jews... I see. Alpha Fund's Jewish capital ratio has been low."
"Clients figure sacrificing 10-20% returns is fine."
The Jewish network is tight. Cracking it ain't easy. Rationally, who'd pick lower returns? Yet they shun high-yield Alpha Fund for others. Insulting. Dare doubt me?
On Wall Street, hedge funds thrive on fundraising, not just returns. Connections.
"Got it. I'll recruit known Jews and spread the word. When do we time it?"
"Next year—end of 1993 to start, wrapping by 1994 maybe."
"...That late? Can't we expose now?"
Well, I'm no charity.
"It's a 20-year Ponzi. Rushing to save a year or two risks backlash. Take it slow."
Many challenged Madoff's fortress but fell to his network. Big fish need prep. I smiled faintly, laying the trap.
When the pool drains, you see who's swimming naked... It also means the water must drain first. And clothes come off?
"U.S. markets are still bull. Madoff's scam isn't easy to expose yet."
"...So you're saying make it a bear market?"
Si-hyun, back from Korea after ages, said something wild.
"What? I can't flip the market. Trends are unstoppable."
"Hmm... Understood."
"Hey, you don't believe me? Our Si-hyun's gotten cheeky."
She dodged my playful punch effortlessly, scooped me up, and dropped me on the bed.
What the—
'...Russia made her way stronger.'
Tch.
"But you must have a plan."
I sprawled on the bed, nodding. "Yup. Can't force a bear? Lure them into one. Markets aren't just bulls."
Europe's tanking lately. Barings Bank bust, pound and currencies crashing—who knows why. Alpha Fund crushed it anyway. Proud.
"Ponzi schemes hide portfolios, and Madoff might not invest in Europe."
"Right—that's the key."
I closed my eyes, pondering. How to trap Madoff...
'Oh, this'll be fun.'
Idea hit quick.
"Get Alpha-linked firms to invest in Madoff... then pull funds out. Tip SEC anonymously."
"Will SEC listen...?"
They will. History had warnings ignored. It's already suspicious.
"That's the setup. Investors expose it themselves. With our 'helpful' law firm pushing."
I grinned, listing famous lawyers from memory. Need discreet, greedy ones...
'Phew, good ones exist. Perfect for U.S. judicial ties too.'