A remarkable feature of the Madoff fraud is the sophistication of its victims. How did so many financially astute people fall for a crude scam and an implausible narrative? Some have acknowledged that they were suspicious of Bernard Madoff’s easy, regular profits. Some thought his returns might have been based on front-running – using the information derived from his brokering business to benefit his asset management clients.

Sophisticated confidence tricksters have used a similar tactic for thousands of years. The fraudster hints at impropriety, but implies that the target will be the beneficiary rather than the victim. The suggestion – I will call it the “Madoff twist” – has two advantages. It provides a possible explanation of the source of promised gains. And it encourages the victims to keep quiet until – perhaps even after – the deception is exposed.