This law actually led to Bernie Madoff being caught. I worked at a hedge fund at the time and we applied this to his returns and immediately knew it was a scam.
Many people got wise to Madoff before his scheme collapse - Notably Harry Markopolos. But Madoff was essentially never caught. Rather, his scheme ended the way most Ponzi schemes end - he no longer had enough money to pay withdrawal requests from the money that was coming in.
I’ve heard of this before, but part of me thinks also: How many people are getting away with fraud because they are utilizing Benfords law in order to make their data appear more normal? Or is there another attribute that can’t be accounted for when aiming for that?
I've read that they have multiple "tells" for catching fraudsters. There's almost 100 of them and not all of them are as known as Benford's Law. At that point, it's just easier to run a legit business.
Not to refute you but my understanding was that many people simply assumed something was wrong if only because of the consistency of returns he claimed were pretty much impossible.
IIRC at one point his numbers showed on a month to month basis losses only 4% of the time.
