Bernie Madoff, who orchestrated biggest known Ponzi scheme in history, dies at 82

Bernie Madoff, who orchestrated biggest known Ponzi scheme in history, dies at 82

Bernard “Bernie” Madoff, who was convicted of running the largest known Ponzi scheme in history, died Wednesday in federal prison where he was serving a 150-year sentence, the US Bureau of Prisons said. He was 82 years old.
Madoff suffered from chronic kidney disease and several other medical conditions.

He had been held in a federal prison in Butner, North Carolina, after being convicted in June 2009 of conceiving a fraud estimated at 64.8 billion US dollars.

Madoff’s thousands of victims included individuals, charities, pension funds and hedge funds.

Among those he betrayed were actors Kevin Bacon, Kyra Sedgwick and John Malkovich, baseball Hall of Fame pitcher Sandy Koufax and a charity associated with director Steven Spielberg.

Longtime Madoff customers, New York Mets owners struggled for years to build a good baseball team because of the losses they suffered.

“We thought he was God. We have placed everything in his hands, ”declared Nobel Peace Prize Laureate Elie Wiesel in 2009, whose foundation lost $ 15.2 million.

Some victims have lost everything. Many came from the Jewish community, where Madoff had been a major philanthropist.

Holes revealed by SEC fraud

Madoff’s crimes were disclosed to authorities in 2008 by his two sons, who were not part of the scheme.

The fraud exposed holes in the United States’ Securities and Exchange Commission (SEC), which through incompetence or negligence botched half a dozen reviews.

“There have been a couple of times I’ve met the SEC and thought, ‘They got me,’” Madoff told attorneys during an interview at the jail, according to ABC News.

Madoff had been the Nasdaq’s largest market maker, once serving as the non-executive chairman.

His brokerage firm was located in a midtown Manhattan tower known as the Lipstick Building. The employees there said they felt like part of Madoff’s family. They didn’t know he was directing his fraud to another floor. Only a few trusted did.

In a typical Ponzi scheme, new investor money is used to pay money owed to previous investors.

Madoff said her fraud began in the early 1990s, but prosecutors and many victims believe it started earlier.

Madoff arrives in Manhattan Federal Court in New York on March 12, 2009. He was convicted in June of that year. (Louis Lanzano / The Associated Press)

Investors were wowed by the steady double-digit annual gains Madoff appeared to be generating and which others found impossible to explain or replicate.

The money helped Madoff and his wife, Ruth, enjoy luxuries such as a Manhattan penthouse, a French villa, and expensive cars and yachts, with a combined net worth of around $ 825 million.

But no one of Madoff’s immediate family was in the Manhattan courtroom when U.S. District Judge Denny Chin sentenced him.

And no member of his family, friend or sympathizer has submitted letters attesting to his good character or his actions in favor of leniency.

“I believed when I started this problem, this crime, that I could get out of it, but it became impossible,” Madoff told the court. “As hard as I tried, the more I sank into a hole. “

Madoff also addressed the victims present, saying, “I’m sorry. I know it doesn’t help you. “

Customers deceived with false documents

Bernard Lawrence Madoff was born April 29, 1938 in New York’s Queens neighborhood and grew up there as the son of European immigrants who ran a brokerage out of their home.

Madoff graduated from Hofstra University in 1960 and briefly attended Brooklyn Law School before leaving.

That same year, he founded Bernard L. Madoff Investment Securities, using his US $ 500 in savings and office space borrowed from his stepfather, Madoff told New York magazine in 2011.

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Madoff started out small, selling penny stocks in the over-the-counter market. By the early 1970s, he had become one of the top five broker-dealers in the Nasdaq trading system.

Madoff advocated for more competition in the marketplace, at a time when the New York Stock Exchange still dominated trading and became an early force in e-commerce.

Market making served Madoff well in the 1980s and 1990s, when he and his rivals could profit from buying a stock for $ 5 and selling it for $ 5.125, for example.

Profitability declined once decimalization became the norm, but Madoff’s brokerage operation provided financial backing for his fraud.

Clients were told they would make money through a ‘split strike conversion strategy’, in which Madoff would buy a basket of large stocks to mirror the Standard & Poor’s 100 index and reduce risk by buying and selling. by selling options on this index.

Madoff seemed to be successful and the customers were happy. But it wasn’t real.

Prosecutors said Madoff and his staff sent their clients fake confirmations for trades he never executed and fake account statements to document gains he never made.

Madoff admitted that he sometimes tapped into his account at JPMorgan Chase to pay clients who wanted their money.

Mounted questions

Suspicion began to surface in the early 1990s, when Madoff’s name appeared in an SEC investigation into a now defunct Florida accounting firm, Avellino & Bienes.

More questions were raised as a whistleblower, financial analyst Harry Markopolos, began to pressure the SEC to arrest Madoff.

From 1992 to 2008, the SEC received six complaints raising “important red flags” about Madoff and whether he was trading something, but never took the most basic steps to figure out what he was doing. , his Inspector General David Kotz later said.

It all fell apart in the fall of 2008, as the global financial crisis hit and many investors demanded withdrawals.

In 2014, JPMorgan Chase & Co agreed to pay US $ 2.6 billion to the US government and Madoff victims to address allegations that the bank failed to notify authorities of its suspicion of Madoff fund fraud. . (Stan Honda / AFP / Getty Images)

Unable to meet $ 7 billion in buyback requests, Madoff confessed to sons Mark and Andrew that his investment advisory business was “a big lie.”

The sons surrendered to authorities and Madoff was arrested on December 11, 2008, a day after his company’s Christmas party. Three months later, he pleaded guilty to 11 counts, including fraud, money laundering and perjury.

Madoff initially argued that the fraud was his alone, but prosecutors ended up winning 15 convictions or guilty pleas.

These included a guilty plea from Madoff’s younger brother Peter, the company’s chief compliance officer, who was sentenced to 10 years in prison. The only trial ended with convictions and prison terms for five former Madoff employees.

Prosecutors received a major boost after winning cooperation from Frank DiPascali, Madoff’s longtime chief financial officer, who died in 2015 of lung cancer.

Ruth Madoff has not been charged. She said she believed her husband had betrayed her after nearly half a century of marriage. Many were skeptical of her claim that she knew nothing about the fraud.

Prosecutors have let Ruth Madoff keep $ 2.5 million.

Asked for a “compassionate release”

Within days of Madoff’s arrest, efforts began to try to get money back for people who invested with him or with third parties who sent their money to his business.

Much of that came from a $ 7.2 billion settlement with the estate of Jeffry Picower, a longtime Madoff investor from Florida.

The pain for Madoff’s family did not end with the Patriarch’s imprisonment.

Tormented by his father’s actions and lawsuits, Mark Madoff, the eldest son, committed suicide at the age of 46 on December 11, 2010, the second anniversary of his father’s arrest.

In September 2014, Andrew Madoff died of cancer at the age of 48.

As his health deteriorated, Madoff requested a “compassionate release” from prison.

Chin rejected the request in June 2020, agreeing with prosecutors that interviews in the prisons where Madoff downplayed his crimes showed that he “never fully accepted responsibility” for them.

In the New York magazine article, Madoff made it clear that he believes he has changed the way Wall Street works and that many victims might have lost more money in the markets if they had not heard of him.

But he said he would find no excuses for his fraud and had come to terms with his crimes and being an outcast.

“It is what it is,” he said.


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