Something stinks about the Madoff story - how did he make all that money disappear?

In the following article, some strange option trades are displayed but I do not believe that that cuts down to the bone of the story. Something strange is still not discovered. He seems to have received $30 bil. at least and it's real hard as a pro to loose that kind of amount. Or he did that deliberately knowing someone else would be on the other side of the trade. We have not heard the real story and I am sure much more amazing things will be coming out of the DARK, SECRET CORNER ONCE THEY DIG DEEPER. The sheer amount is unbelievable but that he lost it all is almost not possible basically, but since he claims he did that for a longer time the Ponzi scheme, it is not related to the last months market downturn as well. Something does not make any sense and I am sure more people or entities are involved.

Excerpt from WSJ:

Madoff Ran Vast Options Game

By TOM LAURICELLA, AARON LUCCHETTI and AMIR EFRATI

A federal judge ordered the U.S. operations of Bernard L. Madoff Investment Securities LLC to be liquidated, as fresh details emerged of trading discrepancies that offer clues as to how the New York broker may have run the epic scam alleged by authorities.

Investigators are also focusing on how Mr. Madoff raised money and what role his wife may have played in that process, people familiar with the matter said.

The judge appointed a trustee to take control of whatever assets are left at the firm at the request of the Securities Investor Protection Corp., a nonprofit created by Congress and funded by the securities industry. The SIPC will attempt to return to clients as much as possible of the more than $17 billion the firm reported it held at the start of this year.

Last week, Mr. Madoff told two senior employees at the firm that almost all the firm's money was gone and investor losses totaled at least about $50 billion, according to a criminal complaint filed by federal prosecutors. People familiar with the matter said those employees are Mr. Madoff's sons, Mark and Andrew. The sons told the Federal Bureau of Investigation that Mr. Madoff described his firm's investment-advisory arm as a "giant Ponzi scheme."

On Wall Street, traders started picking apart Mr. Madoff's investing strategy based on client statements -- which they said raised red flags that should have been obvious to the banks and investment firms that promoted Mr. Madoff. Several concluded that while Mr. Madoff's stated strategy was valid, it would have been impossible to execute with the amount of money he was managing.

Mr. Madoff told clients he was using a fairly common options-trading strategy to generate modest but steady returns for more than two decades. The strategy involved buying stocks, while also trading options -- which grant the right, but not the obligation, to buy or sell securities at pre-established prices in the future -- in a way designed to limit losses on the shares.

People who analyzed client statements said Mr. Madoff's firm couldn't have bought and sold the options he claimed because those totals would have outstripped total trading volume those days.

'Seemed Implausible'

Some investment advisers steered clear of Madoff funds, in part because of discrepancies like these. "It seemed implausible that the S&P-100 options market that Madoff purported to trade could handle the size" of Madoff's estimated $13 billion in assets, wrote James Vos and Jake Walthour of advisory firm Aksia LLC last week in an explanation of why they didn't recommend funds that invested with Madoff to clients.

Other traders said that while the strategy, when properly used, does limit volatility, it generally wouldn't produce gains in a declining stock market. Account statements from Mr. Madoff's firm show small, steady gains each month, regardless of the market's direction.

Bernard Madoff

Individual investors were tallying their losses. Carl Shapiro, a 95-year-old apparel entrepreneur and investor, had $545 million with Mr. Madoff -- creating what could become the largest personal loss yet in the scandal. Carey O'Donnell, a spokeswoman for the family, confirmed that Mr. Shapiro's charitable foundation, the Carl & Ruth Shapiro Family Foundation, invested $145 million with Madoff.

Mr. Shapiro and his family had an additional $400 million or more invested with Mr. Madoff, she confirmed. It is unclear what portion of Mr. Shapiro's wealth that represents although people close to the family say it could be half or more.

Mr. Shapiro, a widely respected philanthropist, was one of Mr. Madoff's earliest and largest investors. Several investors in Palm Beach and Boston say they invested with Mr. Madoff in part because of Mr. Shapiro's association.

In a statement yesterday, Mr. Shapiro said that "at no time did I ever formally introduce individuals as potential investors with Mr. Madoff." Mr. Shapiro said he had been friends with Mr. Madoff for more than 50 years, and "any decisions I or my family foundation made to invest with him were based on his apparent business acumen, sense of integrity and commitment to sound investing principles."

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• See a sortable chart of investors and what they stand to lose.

A typical account statement provided to clients by Mr. Madoff's firm showed him buying shares of blue-chip companies such as Intel Corp., AT&T Inc. and IBM Corp. and also trading options on the Standard & Poor's 100-stock index, which tracks the very largest stocks. Then, at the end of each month, all of the stocks are sold, and the cash put into Treasury bills.

Holding Period

That was another red flag, because the options strategy he used, when practiced by others, typically held its investments for longer periods, says Millicent Holmes of Crowe Wealth Management, who had researched Mr. Madoff's firm as a possible investment but ultimately steered clear.

Experts say his investing strategy would be difficult to pull off on a large scale. The reason has to do with the "put" and "call" option trading central to the approach.

A "put" is a contract giving its holder the right to sell a stock at a certain price, while a "call" involves the right to buy at a certain price. Buying "puts" and selling "calls" are each a type of bet that prices will fall: Buying a "put" involves paying a small sum for an option that increases in value as a stock declines. Selling "calls," similarly, pays off if prices fall. In addition, the sale of the "call" contract itself brings in a bit of income.

In the so-called "split strike conversion" strategy used by Mr. Madoff, an investor tries to balance these maneuvers to generate predictable returns and minimize losses. The investor holds a portfolio of stocks, then sells "call" options on a stock index, and buys "puts" on the same index.

For example, a client statement reviewed by The Wall Street Journal for last month showed that on Nov. 12 Mr. Madoff moved $500,000 out of U.S. Treasury bills, as well as $1,460 out of a Fidelity Investments money-market account. That cash was invested in nearly three-dozen stocks, such as Exxon Mobil Corp., Proctor & Gamble Corp. and Microsoft Corp.

That same day, Madoff bought 11 "put" option contracts on the S&P 100 for $19,591 and sold 11 "call" option contracts on the S&P 100, which took in $17,369.

During this time, the stock market was in a steep decline. By Nov. 19, when the firm next did a trade, the S&P 500 fell nearly 10%. On Nov. 19, Mr. Madoff closed out those particular options trades, making $14,000 on the "call" and $21,000 on the "put" for a net $35,000 profit.

On the surface, this was a straightforward example of the strategy. However, the problem is that if Mr. Madoff replicated the trade firmwide, as he was thought to be doing, the trading wasn't showing up in the options market. On Nov. 11, if it took 11 contracts to hedge a half-million dollars, it would have taken 22,000 contracts to protect $1 billion. Mr. Madoff claimed to be managing $17 billion.

But on Nov. 11, only 393 of the "call" contracts the firm sold actually changed hands, according to the Chicago Board Options Exchange. And trading totaled 183 in the "put" options he bought. The so-called open interest in both those contracts -- the measure of contracts outstanding -- was just 4,639.

Madoff records from another client suggest a similar discrepancy in 2007. According to a copy of the client's statement reviewed by the Journal, Madoff bought 114 options contracts based on the S&P 100, while selling 114 others at a different price. The 114 "call" contracts Madoff entered into represented about 10% of the trading volume recorded that day for that contact at the Chicago Board Options Exchange. The 114 "put" contracts represented about 20% of the volume, meaning that if Madoff would have executed similar trades for five other clients, the firm would have made up the entire trading in the options contract that day.

Ronald Tee Johnson/Palm Beach Today

Entrepreneur Carl Shapiro, at Hebrew SeniorLife in Boston, had $545 million invested with Mr. Madoff.

Meanwhile, between Nov. 11 and Nov. 19, the S&P 100 lost nearly 10%. The statement reviewed by the Journal didn't provide a line updating the value of the stocks in the account, but if the stock portfolio behaved as designed and mirrored the move in the index, it would have been down roughly $50,000, more than erasing the $35,000 gain in the options position.

A lawyer for Mr. Madoff declined to comment on the options strategy.

Market Volume

Some investors who asked about the options trading were told the firm also bought and sold options off-exchange, or "over the counter," a person familiar with the matter said. Its unclear whether the over-the-counter market was big enough to support the volumes the firm was reporting.

The new court-appointed trustee for the U.S. arm of the Madoff firm, Irving Picard, will mail claim forms to customers of the firm, review their claims and determine how to satisfy them using a combination of firm assets and funds held by SIPC, the securities-industry nonprofit group helping to oversee the firm's liquidation.

SIPC is set up to provide as much as $500,000 per customer for claims of theft from a brokerage firm. With about $1.6 billion currently on hand, SIPC could satisfy claims of more than 3,000 customers, said its CEO, Stephen Harbeck.

It's not clear how many customers Mr. Madoff's firm had. The process could take months, Mr. Harbeck said. "We'll proceed as quickly as we can."