I went looking for the context of that phrase. I couldn’t find the original document, only court filings that quote part of it, and always the same part. Michael Cembalest, Chief Investment Officer at J.P. Morgan’s Global Wealth division, wrote that “Oz-like signals…too difficult to ignore” were why he refused to do business with Madoff’s firm.
Among Cembalest’s “red flags,” according to Forbes, was that “his due diligence team was not allowed to meet Madoff and discuss his investment strategy.” And indeed, not meeting with visitors is a trait of the Wizard in both L. Frank Baum’s Wonderful Wizard of Oz and the MGM movie based on it.
However, it appears that Cembalest didn’t compose that metaphor until after Madoff’s fraud was revealed, according the court filing (PDF download). The quote came from a memo to investors assuring them, in a somewhat self-congratulatory way, that his division hadn’t done business with Madoff.
By then the Telegraph and other news media had begun to liken Madoff to the humbug Wizard. It seems to have become a standard trope: even a lawyer defending a Madoff employee used it in court this fall. Baum’s Wizard claimed to be a good man, just a poor wizard, and eventually he redeemed himself on both counts. We don’t seem to expect the same of Madoff.