Madoff Feeder Fund, Fairfield Greenwich Group, Misled Investors about Due Diligence
Fairfield Greenwich Group, a Connecticut based hedge fund and one of Madoff's largest investors, is being accused of misleading its investors about the due diligence performed on Madoff's hedge fund. This is according to Massachusetts Secretary of State, William Galvin.
According to Galvin, there was a “profound disparity between the due diligence that Fairfield represented to its investors that it would conduct with respect to Bernard L. Madoff Investment Securities [BMIS] and the due diligence it actually conducted . . . [We] attempted to discern how Fairfield possibly could not have discovered the fraud during their 18-year relationship [with Madoff]. The answer is that they were blinded by fees, did not engage in meaningful due diligence and turned a blind eye to any fact that would have burst their lucrative bubble.”
Fairfield Greenwich Group investors were told the firm was conducting daily monitoring of Madoff Securities, when in fact they were getting that data 3-5 days later. However, it is unclear how important real-time trade data would have been considering Madoff was not actually placing any trades at all and was in fact running a massive Ponzi Scheme.