Madoff’s $50B: Where did it go?

NEW YORK (AP) — It has become the biggest mystery to emerge from the $50 billion Bernard Madoff scandal: Where did all the money go?

Federal investigators are likely to take months trying to answer that question as they dig through the disgraced investor’s records and attempt to unravel what may be the biggest financial fraud in history.

But several theories are being discussed among financial experts and at Wall Street watercoolers, Palm Beach Country clubs and the offices of university accounting professors.

Madoff, 70, a former Nasdaq stock market chairman, has become one of the most vilified people in America since news broke Dec. 11 that he allegedly had been running a giant Ponzi scheme, paying returns to certain investors out of the principal received from others.

So far, investors have said that they have lost more than $30 billion, according to an Associated Press calculation.

Here are some possible scenarios:

TRADED AWAY: What’s unclear at this point of the investigation is when the scheme began, but reports have indicated that it had been going on for decades. In the criminal complaint against Madoff, he told investigators that he “had personally traded and lost money for institutional clients, and that it was all his fault.”

That suggests he may have blown investors’ money through a failed trading strategy, and at some point felt compelled to cover up the mistakes.

LOST IN THE FINANCIAL MELTDOWN: Madoff’s scheme was partly undone by this year’s crisis in the stock and credit markets. The Dow has lost nearly 36 percent since the start of this year, and the credit market has largely been frozen.

In the complaint, Madoff said that investors were seeking approximately $7 billion in redemptions. Madoff boasted of producing returns of about 10 percent for years, so individual investors who were getting battered in other parts of their portfolio might have taken some of those purported Madoff profits off the table

WENT TOWARD THE LIFESTYLE: Madoff could have spent some of the money on his lifestyle, which included multiple homes and yachts and memberships at some of the nation’s most prestigious country clubs.

His three U.S. homes — a Manhattan penthouse, a beachfront mansion in the Hamptons and a home in Palm Beach, Fla. — together have an estimated market value of more than $30 million, according to real estate experts.

The white-glove co-op in Manhattan where he lives requires residents to have at least $100 million in liquid assets so that they can cover any expenses even if their business goes bust or the market is hit with declines, said Faith Hope Consolo, chairwoman of the real estate firm Prudential Douglas Elliman’s retail leasing sales division.

WENT INTO INVESTORS’ POCKETS: While many of investors lost everything, some of them must have received payouts from Madoff over the years. Given that this was a Ponzi scheme, Madoff had to keep up his credibility by allowing people to tap their cash when they wanted.