Bernie Madoff – Madoff Securities
He said it was 'virtually impossible to violate the rules.' Then he became the world's most notorious Ponzi schemer.
Bernie Madoff ran the largest Ponzi scheme in history, defrauding thousands of investors out of billions of dollars, until it all came crashing down with the 2008 financial crisis.
Regulators never caught him. He confessed his crimes to his sons and was arrested on Dec, 11, 2008, only after they turned him into authorities.
His firm, Bernard L. Madoff Investment Securities LLC, operated out of the iconic “Lipstick Building,” in Midtown Manhattan. His scheme was in large part a classic affinity fraud targeting fellow Jews.
Many of Madoff’s victims begged to be in his fund upon hearing of his purported success through word of mouth. He often turned prospective investors down at first blush, acting as if it were a huge favor to allow new victims into his fraud.
Victims included several large Jewish organizations, including the Elie Wiesel Foundation and Steven Spielberg’s Wunderkinder Foundation.
Madoff’s Ponzi scheme was estimated to be a $65 billion fraud when it first imploded. But that figure was wildly inflated with made-up investment gains that Madoff investors believed they were getting.
In December 2024, the Justice Department announced it had returned $4.3 billion in recovered funds to 41,000 investors. The department said these were mostly small investors who’d put less than $500,000 into the fund, and that they had been made about 94% whole.
Nobody knew how Madoff could possibly achieve the returns he claimed he was delivering to his investors. And nobody thoroughly checked because he had undue respect as the former chairman of NASDAQ.
Related reading: 15 Tales Of Lost Ponzi Riches (Business Blunders)
In May 2001, Barron’s published a profile on Madoff that was more cloying than skeptical, and it didn’t get the attention its headline demanded: “Don’t Ask, Don’t Tell: Bernie Madoff is so secretive he even asks his investors to keep mum.”
“It’s a proprietary strategy,” he told Barron’s. “I can’t go into it in great detail.”
Madoff also suckered regulators into cozy relationships – so cozy that a U.S. Securities and Exchange Commission attorney married his niece, Shana Madoff.
Shana’s father, Peter Madoff served as chief compliance officer at the family business, and Shana worked there, too, as a compliance officer and attorney.
Instead of cracking the case, SEC lawyer Eric Swanson fell head over heels for Shana. And while Madoff was still at the top of his game, several SEC officials attended the wedding on Sept. 29, 2007.
The marriage was symbolic of the incompetence and dysfunction of a financial regulator that let Madoff’s Ponzi scheme run wild for decades. By some accounts, he’d been robbing his investors since the late 1970s.
Buckling under the pressure of maintaining a massive web of lies in a stock market collapse, Madoff finally came clean. But for a time, people believed, or at least tolerated, every drop of nonsense that spilled from his mouth.
In 2007, Madoff spoke at conference, “The Future of the Stock Market,” arguing that securities regulations protected investors against the very kinds of schemes he was so brashly perpetrating at that very moment.
“It does not mean there are not abuses, for sure,” he said, “but by and large in today’s regulatory environment, it’s virtually impossible to violate the rules.”
This is how gullible people are in the presence of perceived Wall Street royalty: Days after Madoff’s arrest, Jay Berkman, a New Jersey business consultant, began impersonating Madoff on a blog, attracting readers who believed hilarious ramblings that no criminal suspect awaiting trial would ever actually say.
“I’m Bernard Madoff. Trust Me,” he began. “What? You think that just because I’m in jail, I shouldn’t be blogging?”
Berkman said he was astonished at how many readers didn’t notice it was a gag.
“Greed is always going to supersede caution,” he said. “As long as there’s human nature, and as long as there’s someone that’s clever, it’s going to repeat itself time and time again.”
Madoff pled guilty in March 2009 to 11 felonies. During his plea hearing he said:
“I am painfully aware that I have deeply hurt many, many people.”
“When I began my Ponzi scheme I believed it would end shortly and I would be able to extricate myself and my clients from the scheme.”
“As the years went by, I realized that my arrest and this day would inevitably come.”
He received 150 years. His brother Peter received 12 years. His son, Mark, hanged himself in 2010. His son Andrew died of lymphoma in 2014.
Bernie died in prison in 2021 at age 82.
Robert De Niro played Madoff in the May 2017 HBO film, The Wizard of Lies, based on the best-selling book by New York Times reporter Diana Henriques.
A less handsome actor might have played him more convincingly – like Danny DeVito, who played the Penguin in the 1992 film, “Batman Returns.”
“You gotta admit,” the Penguin chirped. “I played this stinking city like a harp from hell.”
To add to PT Barnum's quote..."There's a sucker, and a charlatan, born every minute." Thanks for the trip down memory lane Al.