🧠 Work in Harry Markopolis

[JFWooten4]

Madoff was a market market: the middleman between buyers and sellers of stocks. And, if you were dealing in over-the-counter stocks, eventually you had to do business with Madoff. It was soon after I started trading that I encountered massive violations taking place on an hourly basis. This was not true at Madoff specifically. In fact, I don’t remember a single incident in which its brokers were dishonest. But I had just learned all the regulations, and I saw them broken every day, every hour. And everybody knew about it. And nobody seemed to care. The regulations were quite clear: the sellers in a deal have 90 seconds to report a trade. By not reporting it, they were allowing the price to stay at levels different from those that would have resulted if the trading volume had been reported. Basically, it meant they were trading on inside information, which is a felony. It causes a lack of transparency that is necessary to maintain fair and orderly markets. This happened in my trades every day. It was an accepted way of doing business, though I couldn’t accept it. I would report it regularly to the district office of the National Association of Securities Dealers ("NASD") in Philadelphia. And they never did a thing about it.
My younger brother had similar experiences. At one point, he was hired by a respected brokerage firm in New Jersey to run its trading desk. On his first morning there, he walked into the office and discovered that the Bloomberg Terminals that supposedly had been ordered hadn't arrived. Then he found out that the traders didn't have their Series 7 licenses, meaning they weren't allowed to trade. And then he learned that the CEO had some Regulation 144 private-placement stock, which legally is not allowed to be sold. But the CEO had inside information that bad news was coming, and he wanted to sell the stock. My brother explained to the CEO, "you can't sell this stock—it's a felony." The CEO assured him he understood. My brother went out to lunch with a Bloomberg rep to try to get the terminals installed that he needed to start trading. By the time he returned to the office, the unlicensed traders had illegally sold the private-placement stock based on insider information.
My brother had walked into a perfect Wall Street storm. [strike]
He called me in a panic: "what do I do?" I said, "these are felonies." The first thing to do is write your resignation letter. The second thing you do is get copies of all the trade tickets. Get all the evidence you can on your way out the door. And the third thing you do is go home and type up everything and send it to the NASD. That’s exactly what he did. The NASD did absolutely nothing. These were clear felonies, and the NASD didn’t even respond to his complaint.

— Id. at No One Would Listen at N

ref n.138 in prev

[JFWooten4]

...If industry practitioners don't report suspected fraud, nor have any meaningful incentive to do so; and if government agencies don't have systems set up to take in, evaluate, and investigate whistleblower tips—then self-regulation can never work.

Need to keep this as a pivot to the Cede "support" system of the Wall Street cantillionaires. Obviously no Cede rehypothecation incentive..

Will probably leave this out since it too strongly implicates whistleblower provisions (which have greatly improved since then) rather than individual industry actions via self-interest.

[JFWooten4]

There's a moment here¹ where he ought to mention the 13x improvement in decentralized whistleblowing that was incorporated into the Senator Grassley amendments, so perhaps include that timestamp.² 💭

Footnotes

1. A YT clip would have more impact, potentially collaborate with Bob on the advocacy channel content. ↩

2. Need to parse into the testimony and supplement for references. ↩