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Remember what was said about Madoff when people started looking at his operation?

There were only two possible explanations for the firm's apparently never-losing trading: They were either front-running or cheating in some other fashion, or the entire thing was a gigantic ponzi scheme.

We later learned that #2 was the case.

But is there an example of #1 somewhere? Hmmmm....

Aug. 5 (Bloomberg) -- Goldman Sachs Group Inc. made more than $100 million in trading revenue on a record 46 separate days during the second quarter, or 71 percent of the time, breaking the previous high of 34 days in the prior three months.

Trading losses occurred on two days during the months of April, May and June, down from eight in the first quarter, the New York-based bank said today in a filing with the U.S. Securities and Exchange Commission. The company made at least $50 million on 58 of the 65 trading days during the quarter, or 89 percent of the time.

Just two days of losses in the entire quarter?

There are a lot of very good traders in the world, but nobody has that sort of record on any sort of consistent basis unless they've managed to rig the game.

You can be "the smartest guys in the room" but nearly-perfect records at the poker table are almost always an indication that someone has managed to figure out a way to peek at the other side's hole cards.

Oh, and they're gambling (or cheating?) with your money too - not their own:

Banks such as Goldman Sachs are benefiting from lower borrowing costs after the Federal Deposit Insurance Corp. in October started guaranteeing bank debt issues that mature within three years. Goldman Sachs said in today’s filing it had $25.1 billion of debt guaranteed by the FDIC under the agency’s Temporary Liquidity Guarantee Program. The bank sold about $30 billion of the FDIC-backed securities between November and March, according to company filings.

Is this an example of "heads we win, tails you lose, and we're peeking at your hole cards"?

Inquiring minds want to know.

Source: Goldman: Is Its Trading Performance Statistically Reasonable?