Investors can bet big on almost anything on a new prediction market.
Kalshi allows five-figure bets on the Grammys, the next Covid wave, and future SEC commissioners. Worst-case scenario
On Election Day 2020, two young entrepreneurs received a call from the CFTC chairman. Luana Lopes Lara and Tarek Mansour spent 18 months trying to start a new type of financial exchange. Instead of betting on stock prices or commodity futures, people could trade instruments tied to real-world events, such as legislation, the weather, or the Oscar winner.
Heath Tarbert, a Trump appointee, shouted "Congratulations." "You're competing with 1840s-era markets. I'm sure you'll become a powerhouse too."
Companies had tried to introduce similar event markets in the US for years, but Tarbert's agency, the CFTC, said no, arguing they were gambling and prone to cheating. Now the agency has reversed course, approving two 24-year-olds who will have first-mover advantage in what could become a huge new asset class. Kalshi Inc. raised $30 million from venture capitalists within weeks of Tarbert's call, his representative says. Mansour, 26, believes this will be bigger than crypto.
Anyone who's read The Wisdom of Crowds knows prediction markets' potential. Well-designed markets can help draw out knowledge from disparate groups, and research shows that when money is at stake, people make better predictions. Lopes Lara calls it a "bullshit tax." That's why Google, Microsoft, and even the US Department of Defense use prediction markets internally to guide decisions, and why university-linked political betting sites like PredictIt sometimes outperform polls.
Regulators feared Wall Street-scale trading would encourage investors to manipulate reality. If the stakes are high enough, traders could pressure congressional staffers to stall a bill or bet on whether Kanye West's new album will drop this week. When Lopes Lara and Mansour pitched the CFTC, senior regulators raised these issues. Politically appointed commissioners overruled their concerns, and one later joined Kalshi's board.
Will Kanye’s new album come out next week? Yes or no?
Kalshi's victory was due more to lobbying and legal wrangling than to Silicon Valley-style innovation. Lopes Lara and Mansour didn't invent anything; they changed a well-established concept's governance. The result could usher in a new era of market-based enlightenment or push Wall Street's destructive tendencies into the real world.
If Kalshi's founders lacked experience to bolster their CFTC application, they had comical youth success. Lopes Lara studied ballet at the Brazilian Bolshoi before coming to the US. Mansour won France's math Olympiad. They bonded over their work ethic in an MIT computer science class.
Lopes Lara had the idea for Kalshi while interning at a New York hedge fund. When the traders around her weren't working, she noticed they were betting on the news: Would Apple hit a trillion dollars? Kylie Jenner? "It was anything," she says.
Are mortgage rates going up? Yes or no?
Mansour saw the business potential when Lopes Lara suggested it. He interned at Goldman Sachs Group Inc., helping investors prepare for the UK leaving the EU. Goldman sold clients complex stock-and-derivative combinations. As he discussed it with Lopes Lara, they agreed that investors should hedge their risk by betting on Brexit itself rather than an imperfect proxy.
Lopes Lara and Mansour hypothesized how a marketplace might work. They settled on a "event contract," a binary-outcome instrument like "Will inflation hit 5% by the end of the month?" The contract would settle at $1 (if the event happened) or zero (if it didn't), but its price would fluctuate based on market sentiment. After a good debate, a politician's election odds may rise from 50 to 55. Kalshi would charge a commission on every trade and sell data to traders, political campaigns, businesses, and others.
In October 2018, five months after graduation, the pair flew to California to compete in a hackathon for wannabe tech founders organized by the Silicon Valley incubator Y Combinator. They built a website in a day and a night and presented it to entrepreneurs the next day. Their prototype barely worked, but they won a three-month mentorship program and $150,000. Michael Seibel, managing director of Y Combinator, said of their idea, "I had to take a chance!"
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Seibel's skepticism was rooted in America's historical wariness of gambling. Roulette, poker, and other online casino games are largely illegal, and sports betting was only legal in a few states until May 2018. Kalshi as a risk-hedging platform rather than a bookmaker seemed like a good idea, but convincing the CFTC wouldn't be easy. In 2012, the CFTC said trading on politics had no "economic purpose" and was "contrary to the public interest."
Lopes Lara and Mansour cold-called 60 Googled lawyers during their time at Y Combinator. Everyone advised quitting. Mansour recalls the pain. Jeff Bandman, a former CFTC official, helped them navigate the agency and its characters.
When they weren’t busy trying to recruit lawyers, Lopes Lara and Mansour were meeting early-stage investors. Alfred Lin of Sequoia Capital Operations LLC backed Airbnb, DoorDash, and Uber Technologies. Lin told the founders their idea could capitalize on retail trading and challenge how the financial world manages risk. "Come back with regulatory approval," he said.
In the US, even small bets on most events were once illegal. Under the Commodity Exchange Act, the CFTC can stop exchanges from listing contracts relating to "terrorism, assassination, war" and "gaming" if they are "contrary to the public interest," which was often the case.
Will subway ridership return to normal? Yes or no?
In 1988, as academic interest in the field grew, the agency allowed the University of Iowa to set up a prediction market for research purposes, as long as it didn't make a profit or advertise and limited bets to $500. PredictIt, the biggest and best-known political betting platform in the US, also got an exemption thanks to an association with Victoria University of Wellington in New Zealand. Today, it's a sprawling marketplace with its own subculture and lingo. PredictIt users call it "Rules Cuck Panther" when they lose on a technicality. Major news outlets cite PredictIt's odds on Discord and the Star Spangled Gamblers podcast.
CFTC limits PredictIt bets to $850. To keep traders happy, PredictIt will often run multiple variations of the same question, listing separate contracts for two dozen Democratic primary candidates, for example. A trader could have more than $10,000 riding on a single outcome. Some of the site's traders are current or former campaign staffers who can answer questions like "How many tweets will Donald Trump post from Nov. 20 to 27?" and "When will Anthony Scaramucci's role as White House communications director end?"
According to PredictIt co-founder John Phillips, politicians help explain the site's accuracy. "Prediction markets work well and are accurate because they attract people with superior information," he said in a 2016 podcast. “In the financial stock market, it’s called inside information.”
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Trading on nonpublic information is illegal outside of academia, which presented a dilemma for Lopes Lara and Mansour. Kalshi's forecasts needed to be accurate. Kalshi must eliminate insider trading as a regulated entity. Lopes Lara and Mansour wanted to build a high-stakes PredictIt without the anarchy or blurred legal lines—a "New York Stock Exchange for Events." First, they had to convince regulators event trading was safe.
When Lopes Lara and Mansour approached the CFTC in the spring of 2019, some officials in the Division of Market Oversight were skeptical, according to interviews with people involved in the process. For all Kalshi's talk of revolutionizing finance, this was just a turbocharged version of something that had been rejected before.
The DMO couldn't see the big picture. The staff review was supposed to ensure Kalshi could complete a checklist, "23 Core Principles of a Designated Contract Market," which included keeping good records and having enough money. The five commissioners decide. With Trump as president, three of them were ideologically pro-market.
Lopes Lara, Mansour, and their lawyer Bandman, an ex-CFTC official, answered the DMO's questions while lobbying the commissioners on Zoom about the potential of event markets to mitigate risks and make better decisions. Before each meeting, they would write a script and memorize it word for word.
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Several prediction markets that hadn't sought regulatory approval bolstered Kalshi's case. Polymarket let customers bet hundreds of thousands of dollars anonymously using cryptocurrencies, making it hard to track. Augur, which facilitates private wagers between parties using blockchain, couldn't regulate bets and hadn't stopped users from betting on assassinations. Kalshi, by comparison, argued it was doing everything right. (The CFTC fined Polymarket $1.4 million for operating an unlicensed exchange in January 2022. Polymarket says it's now compliant and excited to pioneer smart contract-based financial solutions with regulators.
Kalshi was approved unanimously despite some DMO members' concerns about event contracts' riskiness. "Once they check all the boxes, they're in," says a CFTC insider.
Three months after CFTC approval, Kalshi announced funding from Sequoia, Charles Schwab, and Henry Kravis. Sequoia's Lin, who joined the board, said Tarek, Luana, and team created a new way to invest and engage with the world.
The CFTC hadn't asked what markets the exchange planned to run since. After approval, Lopes Lara and Mansour had the momentum. Kalshi's March list of 30 proposed contracts caused chaos at the DMO. The division handles exchanges that create two or three new markets a year. Kalshi’s business model called for new ones practically every day.
Uncontroversial proposals included weather and GDP questions. Others, on the initial list and later, were concerning. DMO officials feared Covid-19 contracts amounted to gambling on human suffering, which is why war and terrorism markets are banned. (Similar logic doomed ex-admiral John Poindexter's Policy Analysis Market, a Bush-era plan to uncover intelligence by having security analysts bet on Middle East events.) Regulators didn't see how predicting the Grammy winners was different from betting on the Patriots to win the Super Bowl. Who, other than John Legend, would need to hedge the best R&B album winner?
Event contracts raised new questions for the DMO's product review team. Regulators could block gaming contracts that weren't in the public interest under the Commodity Exchange Act, but no one had defined gaming. It was unclear whether the CFTC had a right or an obligation to consider whether a contract was in the public interest. How was it to determine public interest? Another person familiar with the CFTC review says, "It was a mess." The agency didn't comment.
CFTC staff feared some event contracts could be cheated. Kalshi wanted to run a bee-endangerment market. The DMO pushed back, saying it saw two problems symptomatic of the asset class: traders could press government officials for information, and officials could delay adding the insects to the list to cash in.
The idea that traders might manipulate prediction markets wasn't paranoid. In 2013, academics David Rothschild and Rajiv Sethi found that an unidentified party lost $7 million buying Mitt Romney contracts on Intrade, a now-defunct, unlicensed Irish platform, in the runup to the 2012 election. The authors speculated that the trader, whom they dubbed the “Romney Whale,” may have been looking to boost morale and keep donations coming in.
Kalshi said manipulation and insider trading are risks for any market. It built a surveillance system and said it would hire a team to monitor it. "People trade on events all the time—they just use options and other instruments. This brings everything into the open, Mansour says. Kalshi didn't include election contracts, a red line for CFTC Democrats.
Lopes Lara and Mansour were ready to launch kalshi.com that summer, but the DMO blocked them. Product reviewers were frustrated by spending half their time on an exchange that represented a tiny portion of the derivatives market. Lopes Lara and Mansour pressed politically appointed commissioners during the impasse.
Tarbert, the chairman, had moved on, but Kalshi found a new supporter in Republican Brian Quintenz, a crypto-loving former hedge fund manager. He was unmoved by the DMO's concerns, arguing that speculation on Kalshi's proposed events was desirable and the agency had no legal standing to prevent it. He supported a failed bid to allow NFL futures earlier this year. Others on the commission were cautious but supportive. Given the law's ambiguity, they worried they'd be on shaky ground if Kalshi sued if they blocked a contract. Without a permanent chairman, the agency lacked leadership.
To block a contract, DMO staff needed a majority of commissioners' support, which they didn't have in all but a few cases. "We didn't have the votes," a reviewer says, paraphrasing Hamilton. By the second half of 2021, new contract requests were arriving almost daily at the DMO, and the demoralized and overrun division eventually accepted defeat and stopped fighting back. By the end of the year, three senior DMO officials had left the agency, making it easier for Kalshi to list its contracts unimpeded.
Today, Kalshi is growing. 32 employees work in a SoHo office with big windows and exposed brick. Quintenz, who left the CFTC 10 months after Kalshi was approved, is on its board. He joined because he was interested in the market's hedging and risk management opportunities.
Mid-May, the company's website had 75 markets, such as "Will Q4 GDP be negative?" Will NASA land on the moon by 2025? The exchange recently reached 2 million weekly contracts, a jump from where it started but still a small number compared to other futures exchanges. Early adopters are PredictIt and Polymarket fans. Bets on the site are currently capped at $25,000, but Kalshi hopes to increase that to $100,000 and beyond.
With the regulatory drawbridge down, Lopes Lara and Mansour must move quickly. Chicago's CME Group Inc. plans to offer index-linked event contracts. Kalshi will release a smartphone app to attract customers. After that, it hopes to partner with a big brokerage. Sequoia is a major investor in Robinhood Markets Inc. Robinhood users could have access to Kalshi so that after buying GameStop Corp. shares, they'd be prompted to bet on the Oscars or the next Fed commissioner.
Some, like Illinois Democrat Sean Casten, accuse Robinhood and its competitors of gamifying trading to encourage addiction, but Kalshi doesn't seem worried. Mansour says Kalshi's customers can't bet more than they've deposited, making debt difficult. Eventually, he may introduce leveraged bets.
Tension over event contracts recalls another CFTC episode. Brooksley Born proposed regulating the financial derivatives market in 1994. Alan Greenspan and others in the government opposed her, saying it would stifle innovation and push capital overseas. Unrestrained, derivatives grew into a trillion-dollar industry until 2008, when they sparked the financial crisis.
Today, with a midterm election looming, it seems reasonable to ask whether Kalshi plans to get involved. Elections have historically been the biggest draw in prediction markets, with 125 million shares traded on PredictIt for 2020. “We can’t discuss specifics,” Mansour says. “All I can say is, you know, we’re always working on expanding the universe of things that people can trade on.”
Any election contracts would need CFTC approval, which may be difficult with three Democratic commissioners. A Republican president would change the equation.
More on Economics & Investing
Ben Carlson
3 years ago
Bear market duration and how to invest during one
Bear markets don't last forever, but that's hard to remember. Jamie Cullen's illustration
A bear market is a 20% decline from peak to trough in stock prices.
The S&P 500 was down 24% from its January highs at its low point this year. Bear market.
The U.S. stock market has had 13 bear markets since WWII (including the current one). Previous 12 bear markets averaged –32.7% losses. From peak to trough, the stock market averaged 12 months. The average time from bottom to peak was 21 months.
In the past seven decades, a bear market roundtrip to breakeven has averaged less than three years.
Long-term averages can vary widely, as with all historical market data. Investors can learn from past market crashes.
Historical bear markets offer lessons.
Bear market duration
A bear market can cost investors money and time. Most of the pain comes from stock market declines, but bear markets can be long.
Here are the longest U.S. stock bear markets since World war 2:
Stock market crashes can make it difficult to break even. After the 2008 financial crisis, the stock market took 4.5 years to recover. After the dotcom bubble burst, it took seven years to break even.
The longer you're underwater in the market, the more suffering you'll experience, according to research. Suffering can lead to selling at the wrong time.
Bear markets require patience because stocks can take a long time to recover.
Stock crash recovery
Bear markets can end quickly. The Corona Crash in early 2020 is an example.
The S&P 500 fell 34% in 23 trading sessions, the fastest bear market from a high in 90 years. The entire crash lasted one month. Stocks broke even six months after bottoming. Stocks rose 100% from those lows in 15 months.
Seven bear markets have lasted two years or less since 1945.
The 2020 recovery was an outlier, but four other bear markets have made investors whole within 18 months.
During a bear market, you don't know if it will end quickly or feel like death by a thousand cuts.
Recessions vs. bear markets
Many people believe the U.S. economy is in or heading for a recession.
I agree. Four-decade high inflation. Since 1945, inflation has exceeded 5% nine times. Each inflationary spike caused a recession. Only slowing economic demand seems to stop price spikes.
This could happen again. Stocks seem to be pricing in a recession.
Recessions almost always cause a bear market, but a bear market doesn't always equal a recession. In 1946, the stock market fell 27% without a recession in sight. Without an economic slowdown, the stock market fell 22% in 1966. Black Monday in 1987 was the most famous stock market crash without a recession. Stocks fell 30% in less than a week. Many believed the stock market signaled a depression. The crash caused no slowdown.
Economic cycles are hard to predict. Even Wall Street makes mistakes.
Bears vs. bulls
Bear markets for U.S. stocks always end. Every stock market crash in U.S. history has been followed by new all-time highs.
How should investors view the recession? Investing risk is subjective.
You don't have as long to wait out a bear market if you're retired or nearing retirement. Diversification and liquidity help investors with limited time or income. Cash and short-term bonds drag down long-term returns but can ensure short-term spending.
Young people with years or decades ahead of them should view this bear market as an opportunity. Stock market crashes are good for net savers in the future. They let you buy cheap stocks with high dividend yields.
You need discipline, patience, and planning to buy stocks when it doesn't feel right.
Bear markets aren't fun because no one likes seeing their portfolio fall. But stock market downturns are a feature, not a bug. If stocks never crashed, they wouldn't offer such great long-term returns.
Cody Collins
2 years ago
The direction of the economy is as follows.
What quarterly bank earnings reveal
Big banks know the economy best. Unless we’re talking about a housing crisis in 2007…
Banks are crucial to the U.S. economy. The Fed, communities, and investments exchange money.
An economy depends on money flow. Banks' views on the economy can affect their decision-making.
Most large banks released quarterly earnings and forward guidance last week. Others were pessimistic about the future.
What Makes Banks Confident
Bank of America's profit decreased 30% year-over-year, but they're optimistic about the economy. Comparatively, they're bullish.
Who banks serve affects what they see. Bank of America supports customers.
They think consumers' future is bright. They believe this for many reasons.
The average customer has decent credit, unless the system is flawed. Bank of America's new credit card and mortgage borrowers averaged 771. New-car loan and home equity borrower averages were 791 and 797.
2008's housing crisis affected people with scores below 620.
Bank of America and the economy benefit from a robust consumer. Major problems can be avoided if individuals maintain spending.
Reasons Other Banks Are Less Confident
Spending requires income. Many companies, mostly in the computer industry, have announced they will slow or freeze hiring. Layoffs are frequently an indication of poor times ahead.
BOA is positive, but investment banks are bearish.
Jamie Dimon, CEO of JPMorgan, outlined various difficulties our economy could confront.
But geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices are very likely to have negative consequences on the global economy sometime down the road.
That's more headwinds than tailwinds.
JPMorgan, which helps with mergers and IPOs, is less enthusiastic due to these concerns. Incoming headwinds signal drying liquidity, they say. Less business will be done.
Final Reflections
I don't think we're done. Yes, stocks are up 10% from a month ago. It's a long way from old highs.
I don't think the stock market is a strong economic indicator.
Many executives foresee a 2023 recession. According to the traditional definition, we may be in a recession when Q2 GDP statistics are released next week.
Regardless of criteria, I predict the economy will have a terrible year.
Weekly layoffs are announced. Inflation persists. Will prices return to 2020 levels if inflation cools? Perhaps. Still expensive energy. Ukraine's war has global repercussions.
I predict BOA's next quarter earnings won't be as bullish about the consumer's strength.
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Adam Hayes
3 years ago
Bernard Lawrence "Bernie" Madoff, the largest Ponzi scheme in history
Madoff who?
Bernie Madoff ran the largest Ponzi scheme in history, defrauding thousands of investors over at least 17 years, and possibly longer. He pioneered electronic trading and chaired Nasdaq in the 1990s. On April 14, 2021, he died while serving a 150-year sentence for money laundering, securities fraud, and other crimes.
Understanding Madoff
Madoff claimed to generate large, steady returns through a trading strategy called split-strike conversion, but he simply deposited client funds into a single bank account and paid out existing clients. He funded redemptions by attracting new investors and their capital, but the market crashed in late 2008. He confessed to his sons, who worked at his firm, on Dec. 10, 2008. Next day, they turned him in. The fund reported $64.8 billion in client assets.
Madoff pleaded guilty to 11 federal felony counts, including securities fraud, wire fraud, mail fraud, perjury, and money laundering. Ponzi scheme became a symbol of Wall Street's greed and dishonesty before the financial crisis. Madoff was sentenced to 150 years in prison and ordered to forfeit $170 billion, but no other Wall Street figures faced legal ramifications.
Bernie Madoff's Brief Biography
Bernie Madoff was born in Queens, New York, on April 29, 1938. He began dating Ruth (née Alpern) when they were teenagers. Madoff told a journalist by phone from prison that his father's sporting goods store went bankrupt during the Korean War: "You watch your father, who you idolize, build a big business and then lose everything." Madoff was determined to achieve "lasting success" like his father "whatever it took," but his career had ups and downs.
Early Madoff investments
At 22, he started Bernard L. Madoff Investment Securities LLC. First, he traded penny stocks with $5,000 he earned installing sprinklers and as a lifeguard. Family and friends soon invested with him. Madoff's bets soured after the "Kennedy Slide" in 1962, and his father-in-law had to bail him out.
Madoff felt he wasn't part of the Wall Street in-crowd. "We weren't NYSE members," he told Fishman. "It's obvious." According to Madoff, he was a scrappy market maker. "I was happy to take the crumbs," he told Fishman, citing a client who wanted to sell eight bonds; a bigger firm would turn it down.
Recognition
Success came when he and his brother Peter built electronic trading capabilities, or "artificial intelligence," that attracted massive order flow and provided market insights. "I had all these major banks coming down, entertaining me," Madoff told Fishman. "It was mind-bending."
By the late 1980s, he and four other Wall Street mainstays processed half of the NYSE's order flow. Controversially, he paid for much of it, and by the late 1980s, Madoff was making in the vicinity of $100 million a year. He was Nasdaq chairman from 1990 to 1993.
Madoff's Ponzi scheme
It is not certain exactly when Madoff's Ponzi scheme began. He testified in court that it began in 1991, but his account manager, Frank DiPascali, had been at the firm since 1975.
Why Madoff did the scheme is unclear. "I had enough money to support my family's lifestyle. "I don't know why," he told Fishman." Madoff could have won Wall Street's respect as a market maker and electronic trading pioneer.
Madoff told Fishman he wasn't solely responsible for the fraud. "I let myself be talked into something, and that's my fault," he said, without saying who convinced him. "I thought I could escape eventually. I thought it'd be quick, but I couldn't."
Carl Shapiro, Jeffry Picower, Stanley Chais, and Norm Levy have been linked to Bernard L. Madoff Investment Securities LLC for years. Madoff's scheme made these men hundreds of millions of dollars in the 1960s and 1970s.
Madoff told Fishman, "Everyone was greedy, everyone wanted to go on." He says the Big Four and others who pumped client funds to him, outsourcing their asset management, must have suspected his returns or should have. "How can you make 15%-18% when everyone else is making less?" said Madoff.
How Madoff Got Away with It for So Long
Madoff's high returns made clients look the other way. He deposited their money in a Chase Manhattan Bank account, which merged to become JPMorgan Chase & Co. in 2000. The bank may have made $483 million from those deposits, so it didn't investigate.
When clients redeemed their investments, Madoff funded the payouts with new capital he attracted by promising unbelievable returns and earning his victims' trust. Madoff created an image of exclusivity by turning away clients. This model let half of Madoff's investors profit. These investors must pay into a victims' fund for defrauded investors.
Madoff wooed investors with his philanthropy. He defrauded nonprofits, including the Elie Wiesel Foundation for Peace and Hadassah. He approached congregants through his friendship with J. Ezra Merkin, a synagogue officer. Madoff allegedly stole $1 billion to $2 billion from his investors.
Investors believed Madoff for several reasons:
- His public portfolio seemed to be blue-chip stocks.
- His returns were high (10-20%) but consistent and not outlandish. In a 1992 interview with Madoff, the Wall Street Journal reported: "[Madoff] insists the returns were nothing special, given that the S&P 500-stock index returned 16.3% annually from 1982 to 1992. 'I'd be surprised if anyone thought matching the S&P over 10 years was remarkable,' he says.
- "He said he was using a split-strike collar strategy. A collar protects underlying shares by purchasing an out-of-the-money put option.
SEC inquiry
The Securities and Exchange Commission had been investigating Madoff and his securities firm since 1999, which frustrated many after he was prosecuted because they felt the biggest damage could have been prevented if the initial investigations had been rigorous enough.
Harry Markopolos was a whistleblower. In 1999, he figured Madoff must be lying in an afternoon. The SEC ignored his first Madoff complaint in 2000.
Markopolos wrote to the SEC in 2005: "The largest Ponzi scheme is Madoff Securities. This case has no SEC reward, so I'm turning it in because it's the right thing to do."
Many believed the SEC's initial investigations could have prevented Madoff's worst damage.
Markopolos found irregularities using a "Mosaic Method." Madoff's firm claimed to be profitable even when the S&P fell, which made no mathematical sense given what he was investing in. Markopolos said Madoff Securities' "undisclosed commissions" were the biggest red flag (1 percent of the total plus 20 percent of the profits).
Markopolos concluded that "investors don't know Bernie Madoff manages their money." Markopolos learned Madoff was applying for large loans from European banks (seemingly unnecessary if Madoff's returns were high).
The regulator asked Madoff for trading account documentation in 2005, after he nearly went bankrupt due to redemptions. The SEC drafted letters to two of the firms on his six-page list but didn't send them. Diana Henriques, author of "The Wizard of Lies: Bernie Madoff and the Death of Trust," documents the episode.
In 2008, the SEC was criticized for its slow response to Madoff's fraud.
Confession, sentencing of Bernie Madoff
Bernard L. Madoff Investment Securities LLC reported 5.6% year-to-date returns in November 2008; the S&P 500 fell 39%. As the selling continued, Madoff couldn't keep up with redemption requests, and on Dec. 10, he confessed to his sons Mark and Andy, who worked at his firm. "After I told them, they left, went to a lawyer, who told them to turn in their father, and I never saw them again. 2008-12-11: Bernie Madoff arrested.
Madoff insists he acted alone, but several of his colleagues were jailed. Mark Madoff died two years after his father's fraud was exposed. Madoff's investors committed suicide. Andy Madoff died of cancer in 2014.
2009 saw Madoff's 150-year prison sentence and $170 billion forfeiture. Marshals sold his three homes and yacht. Prisoner 61727-054 at Butner Federal Correctional Institution in North Carolina.
Madoff's lawyers requested early release on February 5, 2020, claiming he has a terminal kidney disease that may kill him in 18 months. Ten years have passed since Madoff's sentencing.
Bernie Madoff's Ponzi scheme aftermath
The paper trail of victims' claims shows Madoff's complexity and size. Documents show Madoff's scam began in the 1960s. His final account statements show $47 billion in "profit" from fake trades and shady accounting.
Thousands of investors lost their life savings, and multiple stories detail their harrowing loss.
Irving Picard, a New York lawyer overseeing Madoff's bankruptcy, has helped investors. By December 2018, Picard had recovered $13.3 billion from Ponzi scheme profiteers.
A Madoff Victim Fund (MVF) was created in 2013 to help compensate Madoff's victims, but the DOJ didn't start paying out the $4 billion until late 2017. Richard Breeden, a former SEC chair who oversees the fund, said thousands of claims were from "indirect investors"
Breeden and his team had to reject many claims because they weren't direct victims. Breeden said he based most of his decisions on one simple rule: Did the person invest more than they withdrew? Breeden estimated 11,000 "feeder" investors.
Breeden wrote in a November 2018 update for the Madoff Victim Fund, "We've paid over 27,300 victims 56.65% of their losses, with thousands more to come." In December 2018, 37,011 Madoff victims in the U.S. and around the world received over $2.7 billion. Breeden said the fund expected to make "at least one more significant distribution in 2019"
This post is a summary. Read full article here
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Abhimanyu Bhargava
3 years ago
VeeFriends Series 2: The Biggest NFT Opportunity Ever
VeeFriends is one NFT project I'm sure will last.
I believe in blockchain technology and JPEGs, aka NFTs. NFTs aren't JPEGs. It's not as it seems.
Gary Vaynerchuk is leading the pack with his new NFT project VeeFriends, I wrote a year ago. I was spot-on. It's the most innovative project I've seen.
Since its minting in May 2021, it has given its holders enormous value, most notably the first edition of VeeCon, a multi-day superconference featuring iconic and emerging leaders in NFTs and Popular Culture. First-of-its-kind NFT-ticketed Web3 conference to build friendships, share ideas, and learn together.
VeeFriends holders got free VeeCon NFT tickets. Attendees heard iconic keynote speeches, innovative talks, panels, and Q&A sessions.
It was a unique conference that most of us, including me, are looking forward to in 2023. The lineup was epic, and it allowed many to network in new ways. Really memorable learning. Here are a couple of gratitude posts from the attendees.
VeeFriends Series 2
This article explains VeeFriends if you're still confused.
GaryVee's hand-drawn doodles have evolved into wonderful characters. The characters' poses and backgrounds bring the VeeFriends IP to life.
Yes, this is the second edition of VeeFriends, and at current prices, it's one of the best NFT opportunities in years. If you have the funds and risk appetite to invest in NFTs, VeeFriends Series 2 is worth every penny. Even if you can't invest, learn from their journey.
1. Art Is the Start
Many critics say VeeFriends artwork is below average and not by GaryVee. Art is often the key to future success.
Let's look at one of the first Mickey Mouse drawings. No one would have guessed that this would become one of the most beloved animated short film characters. In Walt Before Mickey, Walt Disney's original mouse Mortimer was less refined.
First came a mouse...
These sketches evolved into Steamboat Willie, Disney's first animated short film.
Fred Moore redesigned the character artwork into what we saw in cartoons as kids. Mickey Mouse's history is here.
Looking at how different cartoon characters have evolved and gained popularity over decades, I believe Series 2 characters like Self-Aware Hare, Kind Kudu, and Patient Pig can do the same.
GaryVee captures this journey on the blockchain and lets early supporters become part of history. Time will tell if it rivals Disney, Pokemon, or Star Wars. Gary has been vocal about this vision.
2. VeeFriends is Intellectual Property for the Coming Generations
Most of us grew up watching cartoons, playing with toys, cards, and video games. Our interactions with fictional characters and the stories we hear shape us.
GaryVee is slowly curating an experience for the next generation with animated videos, card games, merchandise, toys, and more.
VeeFriends UNO, a collaboration with Mattel Creations, features 17 VeeFriends characters.
VeeFriends and Zerocool recently released Trading Cards featuring all 268 Series 1 characters and 15 new ones. Another way to build VeeFriends' collectibles brand.
At Veecon, all the characters were collectible toys. Something will soon emerge.
Kids and adults alike enjoy the YouTube channel's animated shorts and VeeFriends Tunes. Here's a song by the holder's Optimistic Otter-loving daughter.
This VeeFriends story is only the beginning. I'm looking forward to animated short film series, coloring books, streetwear, candy, toys, physical collectibles, and other forms of VeeFriends IP.
3. Veefriends will always provide utilities
Smart contracts can be updated at any time and authenticated on a ledger.
VeeFriends Series 2 gives no promise of any utility whatsoever. GaryVee released no project roadmap. In the first few months after launch, many owners of specific characters or scenes received utilities.
Every benefit or perk you receive helps promote the VeeFriends brand.
Recent partnerships are listed below.
MaryRuth's Multivitamin Gummies
Productive Puffin holders from VeeFriends x Primitive
Pickleball Scene & Clown Holders Only
Pickleball & Competitive Clown Exclusive experience, anteater multivitamin gummies, and Puffin x Primitive merch
Considering the price of NFTs, it may not seem like much. It's just the beginning; you never know what the future holds. No other NFT project offers such diverse, ongoing benefits.
4. Garyvee's team is ready
Gary Vaynerchuk's team and record are undisputed. He's a serial entrepreneur and the Chairman & CEO of VaynerX, which includes VaynerMedia, VaynerCommerce, One37pm, and The Sasha Group.
Gary founded VaynerSports, Resy, and Empathy Wines. He's a Candy Digital Board Member, VCR Group Co-Founder, ArtOfficial Co-Founder, and VeeFriends Creator & CEO. Gary was recently named one of Fortune's Top 50 NFT Influencers.
Gary Vayenerchuk aka GaryVee
Gary documents his daily life as a CEO on social media, which has 34 million followers and 272 million monthly views. GaryVee Audio Experience is a top podcast. He's a five-time New York Times best-seller and sought-after speaker.
Gary can observe consumer behavior to predict trends. He understood these trends early and pioneered them.
1997 — Realized e-potential commerce's and started winelibrary.com. In five years, he grew his father's wine business from $3M to $60M.
2006 — Realized content marketing's potential and started Wine Library on YouTube. TV
2009 — Estimated social media's potential (Web2) and invested in Facebook, Twitter, and Tumblr.
2014: Ethereum and Bitcoin investments
2021 — Believed in NFTs and Web3 enough to launch VeeFriends
GaryVee isn't all of VeeFriends. Andy Krainak, Dave DeRosa, Adam Ripps, Tyler Dowdle, and others work tirelessly to make VeeFriends a success.
GaryVee has said he'll let other businesses fail but not VeeFriends. We're just beginning his 40-year vision.
I have more confidence than ever in a company with a strong foundation and team.
5. Humans die, but characters live forever
What if GaryVee dies or can't work?
A writer's books can immortalize them. As long as their books exist, their words are immortal. Socrates, Hemingway, Aristotle, Twain, Fitzgerald, and others have become immortal.
Everyone knows Vincent Van Gogh's The Starry Night.
We all love reading and watching Peter Parker, Thor, or Jessica Jones. Their behavior inspires us. Stan Lee's message and stories live on despite his death.
GaryVee represents VeeFriends. Creating characters to communicate ensures that the message reaches even those who don't listen.
Gary wants his values and messages to be omnipresent in 268 characters. Messengers die, but their messages live on.
Gary envisions VeeFriends creating timeless stories and experiences. Ten years from now, maybe every kid will sing Patient Pig.
6. I love the intent.
Gary planned to create Workplace Warriors three years ago when he began designing Patient Panda, Accountable Ant, and Empathy elephant. The project stalled. When NFTs came along, he knew.
Gary wanted to create characters with traits he values, such as accountability, empathy, patience, kindness, and self-awareness. He wants future generations to find these traits cool. He hopes one or more of his characters will become pop culture icons.
These emotional skills aren't taught in schools or colleges, but they're crucial for business and life success. I love that someone is teaching this at scale.
In the end, intent matters.
Humans Are Collectors
Buy and collect things to communicate. Since the 1700s. Medieval people formed communities around hidden metals and stones. Many people still collect stamps and coins, and luxury and fashion are multi-trillion dollar industries. We're collectors.
The early 2020s NFTs will be remembered in the future. VeeFriends will define a cultural and technological shift in this era. VeeFriends Series 1 is the original hand-drawn art, but it's expensive. VeeFriends Series 2 is a once-in-a-lifetime opportunity at $1,000.
If you are new to NFTs, check out How to Buy a Non Fungible Token (NFT) For Beginners
This is a non-commercial article. Not financial or legal advice. Information isn't always accurate. Before making important financial decisions, consult a pro or do your own research.
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James White
3 years ago
Three Books That Can Change Your Life in a Day
I've summarized each.
Anne Lamott said books are important. Books help us understand ourselves and our behavior. They teach us about community, friendship, and death.
I read. One of my few life-changing habits. 100+ books a year improve my life. I'll list life-changing books you can read in a day. I hope you like them too.
Let's get started!
1) Seneca's Letters from a Stoic
One of my favorite philosophy books. Ryan Holiday, Naval Ravikant, and other prolific readers recommend it.
Seneca wrote 124 letters at the end of his life after working for Nero. Death, friendship, and virtue are discussed.
It's worth rereading. When I'm in trouble, I consult Seneca.
It's brief. The book could be read in one day. However, use it for guidance during difficult times.
My favorite book quotes:
Many men find that becoming wealthy only alters their problems rather than solving them.
You will never be poor if you live in harmony with nature; you will never be wealthy if you live according to what other people think.
We suffer more frequently in our imagination than in reality; there are more things that are likely to frighten us than to crush us.
2) Steven Pressfield's book The War of Art
I’ve read this book twice. I'll likely reread it before 2022 is over.
The War Of Art is the best productivity book. Steven offers procrastination-fighting tips.
Writers, musicians, and creative types will love The War of Art. Workplace procrastinators should also read this book.
My favorite book quotes:
The act of creation is what matters most in art. Other than sitting down and making an effort every day, nothing else matters.
Working creatively is not a selfish endeavor or an attempt by the actor to gain attention. It serves as a gift for all living things in the world. Don't steal your contribution from us. Give us everything you have.
Fear is healthy. Fear is a signal, just like self-doubt. Fear instructs us on what to do. The more terrified we are of a task or calling, the more certain we can be that we must complete it.
3) Darren Hardy's The Compound Effect
The Compound Effect offers practical tips to boost productivity by 10x.
The author believes each choice shapes your future. Pizza may seem harmless. However, daily use increases heart disease risk.
Positive outcomes too. Daily gym visits improve fitness. Reading an hour each night can help you learn. Writing 1,000 words per day would allow you to write a novel in under a year.
Your daily choices affect compound interest and your future. Thus, better habits can improve your life.
My favorite book quotes:
Until you alter a daily habit, you cannot change your life. The key to your success can be found in the actions you take each day.
The hundreds, thousands, or millions of little things are what distinguish the ordinary from the extraordinary; it is not the big things that add up in the end.
Don't worry about willpower. Time to use why-power. Only when you relate your decisions to your aspirations and dreams will they have any real meaning. The decisions that are in line with what you define as your purpose, your core self, and your highest values are the wisest and most inspiring ones. To avoid giving up too easily, you must want something and understand why you want it.
Sammy Abdullah
3 years ago
SaaS payback period data
It's ok and even desired to be unprofitable if you're gaining revenue at a reasonable cost and have 100%+ net dollar retention, meaning you never lose customers and expand them. To estimate the acceptable cost of new SaaS revenue, we compare new revenue to operating loss and payback period. If you pay back the customer acquisition cost in 1.5 years and never lose them (100%+ NDR), you're doing well.
To evaluate payback period, we compared new revenue to net operating loss for the last 73 SaaS companies to IPO since October 2017. (55 out of 73). Here's the data. 1/(new revenue/operating loss) equals payback period. New revenue/operating loss equals cost of new revenue.
Payback averages a year. 55 SaaS companies that weren't profitable at IPO got a 1-year payback. Outstanding. If you pay for a customer in a year and never lose them (100%+ NDR), you're establishing a valuable business. The average was 1.3 years, which is within the 1.5-year range.
New revenue costs $0.96 on average. These SaaS companies lost $0.96 every $1 of new revenue last year. Again, impressive. Average new revenue per operating loss was $1.59.
Loss-in-operations definition. Operating loss revenue COGS S&M R&D G&A (technical point: be sure to use the absolute value of operating loss). It's wrong to only consider S&M costs and ignore other business costs. Operating loss and new revenue are measured over one year to eliminate seasonality.
Operating losses are desirable if you never lose a customer and have a quick payback period, especially when SaaS enterprises are valued on ARR. The payback period should be under 1.5 years, the cost of new income < $1, and net dollar retention 100%.