(You don't sound like you're in a mood to gloat, but what turned you off to Madoff?) The biggest red flag is that it's not possible to produce 1-1.5% month after month, it doesn't exist. Also, when you ask somebody how they're generating returns and they won't tell, that's another red flag. Hedge fund investors have tools to say there's something top secret about what they're doing, and that's utter non-sense. So we didn't buy it. (There are people who are saying abroad now this represents a massive failure of U.S. regulators. Is that the problem?) it is a failure of regulation. A firm of the size of Madoff's should not have escaped scrutiny. The other side of it is business was regulated. We now know the FCC didn't act on complaints, but they should've been scrutinized more. (Why wasn't there more scrutiny? Is there international checks and balances?) No. hedge funds operate offshore, in the cracks of the regulatory regime. This is another example of international free market philosophy failing and clearly we don't need government running everything, but there's got to be a middle ground. This is the major hedge fund fraud people have been warning about, and there will be others. (Could you envision Britain or Spain filling the regulatory void by imposing regulations of its own?) It's very possible. Banks in Europe have announced big losses and there could be a political backlash. (What effect would that have here?) It would put pressure on American regulators to catch up.