The shamed Wall St mogul Bernard Madoff unwittingly predicted his own downfall last year when he told an audience of would-be investors that it was impossible to get away with fraud.

"It is impossible for a violation to go undetected, certainly not for a considerable period of time," said Mr Madoff, during a panel discussion at the Philoctetes Center for Multidisciplinary Thinking in New York.

"And when you consider the volumes of trade, the trillions of dollars of trading that goes on - our firm alone we trade in excess of $1 trillion a year and that's one firm - and you look at the infractions then they are relatively small, primarily because of all the regulation. "

Mr Madoff was arrested last Thursday at his Manhattan apartment after admitting to his sons that his $50 billion trading empire was nothing but a "giant Ponzi (pyramid selling) scheme".

His alleged fiddling of the figures, using the cash invested by new clients to pay dividends to existing investors, appears to stretch back years.

In October 2007, however, Mr Madoff claimed that trading was now so scrutinised by the regulators that cheating was impossible.

In video of the event, he can be seen blaming tighter regulation for driving the major investment firms into taking huge risks with their and their clients' money because there was no longer a living to be made from merely selling shares, as commissions had dropped from 75 cents to a mere 5 cents a share.

"Today the big money on Wall St is made by taking risks," said Mr Madoff, looking relaxed in a low-slung armchair.

"Firms were driven into that, including us, because you couldn't make money charging commissions, because the commission rates were lower and because of the regulatory infrastructure you had to have, dealing with clients.

"People said, well, I might as well risk my own capital and trade. And if you look at Goldman Sachs or any of the big investment banks the great majority of their income comes from risk-taking, providing liquidity to institutional investors and to individuals."

But despite the massive amounts of cash and privileged knowledge washing in and out of investment companies, frauds were negligible because so-called Chinese walls partitioning off different sections within each firm prevented abuses, Mr Madoff claimed.

"It doesn't mean that there are not abuses, for sure, but in today's regulatory environment its virtually impossible to violate rules. And this is something the public really doesn't understand, for if you read in the newspaper that someone has violated a rule you think that someone is always doing it.

"But it is impossible for a violation to go undetected, certainly not for a considerable period of time."

Mr Madoff is then seen explaining how his organisation did business, in a passage that begs questions of what Chinese walls Mr Madoff had set up within his own financial empire to enable him to carry out his years of alleged fraudulent or imaginary trading undetected.

The financier said that 99 per cent of the trades made by his company were automated, carried out not by traders on a noisy trading floor but by computers operating to complex financial algorithms.

Computer trades were quick and efficient, he said, and ruled out much of the need for regulation of the financial industry.

But computers could not do the job alone, he said. "My theory, even though we were the ones who started all the automated trading, is that I never wanted to go into the cockpit of a plane and find there was no pilot there.

"Behind every algorithm there's someone writing the algorithms. And in our firm, we have a group of traders who are watching the systems work and the results of the systems, to make sure that, from their sense of the trading, things look right.

"I always want to have the human factor involved in the process, because that makes it better, at least that has been our experience."

It is a statement that begs the question who really was watching the trades in Madoff Investment Securities, and how much they really knew of the whole company's business.

In the event it was not the regulator who found out Mr Madoff's schemes, it was Mr Madoff himself who confessed. His nemesis was the global financial crisis which forced investors to ask for $7 billion of investments to be returned to them - money that Mr Madoff no longer had.

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