Original French version at rue89.com.

Does the name “Donald Crowhurst” ring a bell? He was one of the contenders in the Golden Globe Race a non-stop, single-handed, round-the-world yacht race held in 1968–1969. While he was ahead and therefore a potential victor, his radio signals stopped abruptly. His craft was later located but it was empty. His log-book was found, revealing that at no point had Crowhurst attempted to leave Southern Atlantic waters : he had all along communicated the fictitious positions of his alleged progress while actually waiting for the other contenders to complete their circumnavigation. He apparently would have contented himself with ending last in the race. But circumstances prevented this from happening : the hardship of the race made it such that he found himself as sole potential winner. He then drifted erratically in the mid-Atlantic for a while, his log-book betraying the way his mind was failing, developing pathetically a theory of the human fate that was sparing him his abominable dilemma : a winner through deceit or a cheater unmasked. His theorizing must have failed at convincing him as he took away his own life.

What reminded me of Crowhurst is of course the current Bernard Madoff-Affair. My first impression had been that of a modern-day Machiavelli : a man convinced that a Ponzi scheme amounts to the ideal business plan and developing a strategy based on that concept. However the information that has recently become available about the detailed statements he was sending his clients makes me think now of something of an entirely different nature : a human tragedy à la Crowhurst. These statements – some mentioning dozens of operations over a single month period – display indeed the very “split-strike conversion strategy” that he claimed he was implementing for the benefit of the participants in his fund. In that strategy, “collars” – being a particular montage of options, are associated with a dynamic stock portfolio, allowing indeed to make regular gains as long as stocks rise constantly and in a quiet manner. A strategy impossible to implement however at the billions of dollars’ scale where Madoff was actually managing his fund.

That he had to turn to deceit derives no doubt from the fact that a plan that may have worked to perfection for his early clients rapidly reached a scale where the stock volume required was too high for the market to absorb without considerable slippage. Then, instead of turning down new applicants he must have begun to pretend, until that is he switched to a pure Ponzi scheme, claiming that his method was still the one he had used at inception but remunerating in fact his early clients with the fresh money brought in by newcomers.

Should my surmise be correct, Madoff’s story would be that of a man who initially sees himself as a giant as his complex plan, worth of a genius – and that the statements sent to his clients persisted at displaying, appears to succeed but who – when he finds out that his scheme is bound by size, can’t reconcile himself with this fact, due to oversized pride, due to hubris. To maintain the fiction he must have at first allowed himself some minor infringements to his principles – of the sort that Michael Ocrant seems to have astutely guessed when he interviewed Madoff back in 2001 [1], to finally succumb. At that point he started cheating and ceased to be a giant in his own eye to become a dwarf instead. Then, many years later, faced with financial headwinds, and in the likeness of Crime et Punishment‘s hero Raskolnikov, he cannot take it any longer and confesses his evil.

Let’s not forget indeed that Madoff was not found out: he confessed to his sons, and they in turn alerted the law. Just as with Crowhurst, justice didn’t catch up with him but his own conscience. The human drama here is not so much then that of those who once believed in Madoff but the grotesque manner in which he was led to believe in himself.

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[1] Michael Ocrant, Madoff tops charts ; skeptics ask how, MAR/Hedge (RIP), No. 89 May 2001