Posted by: tristar3research | February 2, 2009

Mark Cuban figures out Madoff’s “System”

Smart and controversial Dallas Maverick owner, Mark Cuban, has figured out how Bernie Madoff and his sons ripped off so many clients with so few people involved- he used the NASDAQ trading system he helped to specify many years earlier ! The WSJ reported, – “Across the hall was another room, where an old International Business Machines computer generated client statements, former employees say. Nearby was a small cluster of employees responsible for “stuffing envelopes” with client statements, according to a former employee. The IBM server operated independently from Madoff’s other computer systems but was supported by tech staffers who also did work for the stock-trading group, according to former employees.”

    Cuban reasoned,

So I started doing some searching on the electronic trading platform Bernie built.  They called it Primex. Its an electronic auction system for securities. According to media reports, it was the “brainchild of Bernie and Peter Madoff” So I searched some more and saw this Feb 16th , 2000  press release: The basics of which are “SST’s B4B FIX combines robust object-oriented architecture with push-based TCP/IP messaging to provide an extremely fast and stable platform for both FIX connectivity and message processing. B4B FIX can be combined with SST’s B4B OMS(TM) in a seamlessly integrated order management system that generically integrates with B4B FIX to facilitate the straight through electronic trading process and improve the operational and connectivity efficiencies of its users.

Except that the software firm SSTI was run by a Larry Gusto who was not exactly the ideal candidate to maintain the software, as Cuban notes:

The omissions of material facts (in California state filings)  include:
(1) SSTI had a long-standing legal dispute with programmers over the FIX software and a court would order an auction of the software;
(2) SSTI had a civil judgment against it relating to disputes over FIX software;
(3) Inc. was a suspended corporation, not in good standing with the California Secretary of State’s Office or the California Franchise Tax Board;
(4) Gusto had multiple tax liens filed against him; and
(5) Gusto and his companies were defendants in several civil lawsuits.
Things that make you go “Hmmm”…

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