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Fraud Bounties or Fraud Blogs?

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Steven Dubner, writing at Freakonomics, points to an interesting interview with Laura Goodman

Laura Goodman claims to have spotted the Madoff fraud in 45 minutes.

Here is her reasoning.

"Bernie came back [because Goodman found out that Madoff wasn't trading options in Philadelphia] and told me that he was trading the options in Europe. Well, that didn't really make sense to me, because trading in Europe is usually much more expensive than trading in the United States, especially for American stocks. So I said to myself, I don't need this headache now. It basically took me 45 minutes to figure out something was wrong."

Maybe... but having a headache isn't the same as having enough evidence to warrant an SEC investigation.

Goodman goes on to recommend that the SEC pay fraud tipsters. I disagree. We need to see more blogging about suspected fraud, more charitable libel laws, and an more effective market for reputation. And no, the SEC doesn't need more investigators, more regulatory powers, or more money.

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Full post as published by Misleading Advertising Law on February 26, 2009 (boomark / email).