Since his charge on insider trading, Mark Cuban has spoken out a number of times on the SEC, and how it could be improved. Today he offers his advice on the Madoff affair, and how he’d go about investigating it were he at the SEC or the FBI.
Im taking a flyer here, but if they were to put me on the case, the first people I would talk to are the software developers. Somewhere along the line there was a software program written or modified that allowed Madoff to enter the numbers he made up, who they were paying out cash to and would print the checks and statements. Its very unlikely that it was off the shelf software because it would be impossible for all the numbers to balance, or he would need to use suspense type of accounts that would raise red flags for even the smallest of accounting firms.
Cuban has talked about technology before with respect to Madoff, and how it could be used in this situation. Previously he suggested that if the SEC had moved faster on XBRL (machine-readable filings) then this might’ve been avoided. Maybe. Someone still has to program the fraud detection algorithm, and such a program would still have the same built-in biases as human investigators. Probably, had XBRL been around for the past few years, it would mainly be used to spot insider trading, since that’s what the humans at the SEC have focused on.
As for this idea, we think it’s possible. It’s also possible he did have full-time bookkeepers working for him, keeping the Ponzi running. Maybe the FBI or SEC should inquire with Avellino and Bienes, bookkeepers who became multi-millionaires over the last decade. Perhaps they know something.