782. Sterling treated its millions of dollars in BLMIS investments as the fourth arm of its business. In addition to Sterling’s long-term investments with Madoff, the Sterling partners regularly put excess cash into BLMIS and moved money in and out on a short-term basis, often using BLMIS withdrawals to fund business operations. Implicit in this use of BLMIS for short-term cash management was the assumption that Madoff would consistently generate positive, non-volatile, and essentially risk-free returns. Typically, such an assumption can only be made for FDIC-insured savings and checking accounts—not for investment accounts purportedly invested in volatile securities and options.
783. Rather than follow a traditional cash management strategy, the Sterling Partners relied on BLMIS accounts as a primary source of liquidity — even though the funds in these BLMIS accounts were purportedly invested in inherently volatile and risky securities and options.
From Picard complaint posted at the WSJ site ... The crux of the matter is the issue of liquidity and short-term withdrawals. If you understand how Ponzi schemes work, the ring leader NEVER lets you take money out of the account other than the timed payments. If Bernie gave the Wilpons this special privelage, it was one he NEVER gave his other clients and it heavily ties the Wilpons to Madoff in the running of their day to day business. In a typical Ponzi scheme, the only one who has full time access to the money, is the guy running the scam ... 2011 is gonna be a long season ...
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