Very interesting topic!
I am normally in total agreement. I think it's disgusting that people would want to own the mundane, personal possessions of terrible people. It's strikes me as some sort of odd fixation with them. However, Bernie Madoff didn't own this Maglite, or at least it doesn't appear that way. It was likely special ordered by his firm and given away as a promotional item. I kind of see that as a part of history, something that was meant to be distributed. I probably won't bid on it not because I disagree with it but because it's not something I'm really interested in.
I have several 9/11 items and my great uncle was in Berlin during the fall of Berlin and brought some very interesting stuff over to the US after the war. Both are very dark but important parts of history so I don't see any harm in owning and displaying them. I collect a lot of things form positive parts of history too, I'm mainly just a hoarder I guess.
As an aside, did anyone see the Pawn Stars episode where someone came in trying to sell Bernie Madoff's Rolex? Rick didn't buy it and it wasn't a very desirable model anyway.