Is it possible the financial media played a role in facilitating the alleged $50 billion Bernard Madoff Ponzi scheme ? An interesting theory by Jon Najarian, CNBC analyst and cofounder of optionMONSTER , contends that they very well may have unwittingly done just that. Madoff, he believes, used media publicity to lure investors to his scheme.
As Najarian explained on CNBC’s Dec. 22 “Fast Money,” Madoff got his reputation on Wall Street in the payment for order flow  business. That’s when a brokerage firm receives a payment as compensation for directing the order to the different parties that can execute the order at a lower cost.
“First of all you needed something that was very credible, because what he started off with was very credible,” Najarian said. “As we both know, Dylan, he was in the payment for order flow business before anybody else. That meant folks that he was buying on the bid and selling on the offer back when the spread on NASDAQ stocks was 50 cents wide.”
For years, Madoff was successful in the payment for order flow business. But, as Najarian and “Fast Money” host Dylan Ratigan pointed out, as stocks made the transition from fractions to decimals – the decimalization of the exchanges  – the payment for order flow business became less lucrative.
“So, this runs for years and years,” Najarian explained. “You stay quiet about it, you zip your lip, you make as much as you can and then when it runs out gas, Dylan … now the spigots are being turned off. And now perhaps you’re starting to feel the pinch. You know, the collar’s getting a little tight – so what do you do? You go to the press.”
According to Najarian it made sense for Madoff to start generating press to attract investors.
“What I did over the past week is that I was looking up articles for when was the first time Bernie started showing up in the press?” Najarian said. “And if I’m right and it was the late 80s – that’s when I’d say, just using my forensic hat, that’s when I’d say he was likely to have started this Ponzi.”
Najarian was correct about Madoff’s earliest appearances in the media, as the results from a Nexis search reveal. And he started showing up prominently in mainstream media around the time the payment for order flow practice started receiving regulatory scrutiny from lawmakers. Madoff was a defender of the practice and was cited in a May 16, 1993 Associated Press story, “Paying for Stock Orders: Bribery or Competitive Edge?”
Madoff then appeared in some prominent magazine articles. Ironically, he was featured in a 1999Forbes magazine article about the rise of the online trader and the prelude to the dot.com bubble. “The problem is, there is no buffer between the customer and his own tools of self-destruction,” Madoff said in the Jan. 25, 1999 issue of Forbes .
Madoff’s media appearances increased throughout the 1990s and into this decade. Najarian claimed that was an effort by Madoff to draw more attention to himself.
“Because then you can bring the suckers to you,” Najarian said. “In other words, if I go to the press – I’m not going to go to the press when I can still make 50-cent wide spreads, but as those margins get eroded and as everybody else gets into this business, which we both know they did – everybody on Wall Street was in the payment for order flow business, buying order flow from customers because they said I’m faster than them and I can trade on the bid/ask spread – if everybody gets into that business all of a sudden he can’t make enough money to pay the first investors.”
Nexis shows Madoff made three appearances in The Economists, twice each in Forbes and Fortune and once in BusinessWeek during the 1990s.
“So now he needs to go out and get additional investors,” Najarian explained. “You get press from Forbes, you get it from Barron’s, you get it from Fortune and all the rest, and they come to you. And now you can say, ‘Hey, I’m sort of full. Maybe I can take a little. That’s I say – I don’t know these for facts, but I say the writing is on the wall.”