Book : Too Good to Be True: The Rise and Fall of Bernie Madoff

When Bernie Madoff’s $65 billion Ponzi scheme unraveled at the end of 2008, many in the industry wondered how he did it, how otherwise savvy investors were lured into it, and how regulators failed to stop it. These are the questions that Erin Arvedlund attempts to answer in her book “Too Good to Be True: The Rise and Fall of Bernie Madoff.”


The book explores Madoff’s background, interviewing classmates from his days at Far Rockaway High School in New York, who noted that Bernie was an average guy who they never dreamed would ascend to titan of Wall Street and chairman of the Nasdaq. She also discusses Madoff’s involvement in the early development of electronic trading, including the Nasdaq and the Cincinnati Stock Exchange, an all-electronic stock market that actually moved to Chicago through a membership deal with the Chicago Board Options Exchange (CBOE) in 1995.


The book goes on to explain how Madoff carried out his Ponzi scheme through his illegal advisory business with the help of the legal side of his business, a brokerage firm. Both businesses were on three floors of the same building. Arvedlund’s descriptions of how the activity on the broker-dealer business on the eighteenth and nineteenth floors differed from the advisory business on the seventeenth are fascinating. It’s amazing how Madoff was able to get away with mailing his investors tickets for trades supposedly made on their behalf that never actually happened. The book explains that instead of actually trading for the advisory business, he would take investors money, deposit it into a bank account, and send it back to earlier investors.

One of the more amusing accounts in the book is the story of Salomon Konig, a money manager who is essentially in exile in the United States after running a mini Ponzi scheme in Venezuela. Konig would ask any fund of hedge funds he considered doing business with if they had any money in Madoff, and if they did, he would not deal with them. As another of Arvedlund’s interviewees points out, “it takes a crook to smell another crook.”

“Too Good to Be True” is an informative account of how Madoff carried out his scheme, how he lured in his victims, how industry experts raised alerts about it, and, ultimately, how the investigations into it failed. Anyone who is interested in this Ponzi scheme to end all Ponzi schemes will find it a worthwhile read.