CTXF I Have To Do This As My Summer
CTXF I Have To Do This As My Summer
CTXF I Have To Do This As My Summer
In 2009, at age 71, Madoff pleaded guilty to 11 federal felony counts, including
securities fraud, wire fraud, mail fraud, perjury, and money laundering. The Ponzi
scheme became a potent symbol of the culture of greed and dishonesty that, to
critics, pervaded Wall Street in the run-up to the financial crisis. Madoff was
sentenced to 150 years in prison and ordered to forfeit $170 million in assets, but
no other prominent Wall Street figures faced legal ramifications in the wake of the
crisis.
Bernie Madoff was born in Queens, New York, on April 29, 1938, and began dating
his future wife, Ruth (née Alpern), when both were in their early teens. Speaking
by phone from prison, Madoff told journalist Steve Fishman that his father, who
had run a sporting goods store, went out of business due to steel shortages during
the Korean War: "You watch that happen and you see your father, who you idolize,
build a big business and then lose everything." Fishman says that Madoff was
determined to achieve the "lasting success" his father hadn't, "whatever it took,"
but Madoff's career had its ups and downs.
Key Takeaways
Bernie Madoff's Ponzi scheme, which likely ran for decades, defrauded
thousands of investors out of tens of billions of dollars.
In 2009 Madoff was sentenced to 150 years in prison and forced to forfeit
$170 billion.
As of December 2018, the Madoff Victims Fund had distributed more than
$2.7 billion to 37,011 victimized investors in the U.S. and around the world.
It is not certain exactly when Madoff's Ponzi scheme began. He testified in court
that it started in 1991, but his account manager, Frank DiPascali, who had been
working at the firm since 1975, said the fraud had been occurring "for as long as I
remember."
Even less clear is why Madoff carried out the scheme at all. "I had more than
enough money to support any of my lifestyle and my family's lifestyle. I didn't
need to do this for that," he told Fishman, adding, "I don't know why." The
legitimate wings of the business were extremely lucrative, and Madoff could have
earned the Wall Street elites' respect solely as a market maker and electronic
trading pioneer.
Madoff repeatedly suggested to Fishman that he was not entirely to blame for the
fraud. "I just allowed myself to be talked into something and that's my fault," he
said, without making it clear who talked him into it. "I thought I could extricate
myself after a period of time. I thought it would be a very short period of time, but
I just couldn't."
When clients wished to redeem their investments, Madoff funded the payouts
with new capital, which he attracted through a reputation for unbelievable returns
and grooming his victims by earning their trust. Madoff also cultivated an image of
exclusivity, often initially turning clients away. This model allowed roughly half of
Madoff's investors to cash out at a profit. These investors have been required to
pay into a victims' fund to compensate defrauded investors who lost money.
The SEC had been investigating Madoff and his securities firm on and off since
1999—a fact that frustrated many after he was finally prosecuted, since it was felt
that the biggest damage could have been prevented if the initial investigations
had been rigorous enough.
The bottom line, concluded Markopolos, was that "the investors that pony up the
money don't know that BM [Bernie Madoff] is managing their money."
Markopolos also learned Madoff was applying for huge loans from European
banks (seemingly unnecessary if Madoff's returns were as high as he said).
It was not until 2005—shortly after Madoff nearly went belly-up due to a wave of
redemptions—that the regulator asked Madoff for documentation on his trading
accounts. He made up a six-page list, the SEC drafted letters to two of the firms
listed but didn't send them, and that was that. "The lie was simply too large to fit
into the agency's limited imagination," writes Diana Henriques, author of the book
"The Wizard of Lies: Bernie Madoff and the Death of Trust," which documents the
episode.
Madoff has insisted he acted alone, though several of his colleagues were sent to
prison. His elder son Mark Madoff committed suicide exactly two years after his
father's fraud was exposed. Several of Madoff's investors also killed themselves.
Andy Madoff died of cancer in 2014.
Madoff was sentenced to 150 years in prison and forced to forfeit $170 billion in
2009. His three homes and yacht were auctioned off by the U.S. Marshals. He
resides at the Butner Federal Correctional Institution in North Carolina, where he
is prisoner No. 61727-054.
While Madoff pleaded guilty in 2009 and will spend the rest of his life in prison,
thousands of investors lost their life savings, and multiple tales detail the
harrowing sense of loss victims endured.
Investors victimized by Madoff have been helped by Irving Picard, a New York
lawyer overseeing the liquidation of Madoff's firm in bankruptcy court. Picard has
sued those who profited from the Ponzi scheme; by December 2018 he had
recovered $13.3 billion.
In addition, a Madoff Victim Fund (MVF) was created in 2013 to help compensate
those Madoff defrauded, but the Department of Justice didn't start paying out any
of the roughly $4 billion in the fund until late 2017. Richard Breeden, a former SEC
chairman who is overseeing the fund, noted that thousands of the claims were
from "indirect investors"—meaning people who put money into funds that
Madoff had invested in during his scheme.
Since they were not direct victims, Breeden and his team had to sift through
thousands and thousands of claims, only to reject many of them. Breeden said he
based most of his decisions on one simple rule: Did the person in question put
more money into Madoff's funds than they took out? Breeden estimated that the
number of "feeder" investors was north of 11,000 individuals.
In a November 2018 update for the Madoff Victim Fund, Breeden wrote, "We
have now paid over 27,300 victims an aggregate recovery of 56.65% of their
losses, with thousands more set to recover the same amount in the future." With
the completion of a third distribution of funds in December 2018, in excess of $2.7
billion had been distributed to 37,011 Madoff victims in the U.S. and around the
world. Breeden noted that the fund expected to make "at least one more
significant distribution in 2019" and hoped to resolve all open claims.