Bernard Madoff, once a renowned and respected stockbroker and investment advisor on a national scale, was eventually exposed for managing a multi-billion-dollar operation as a complex and extensive Ponzi scheme. He is currently serving a 150-year prison sentence for his crimes.
Born on April 29, 1938, in Queens, New York, Madoff earned a bachelor’s degree in Political Science from Hofstra University in 1960. He then combined his own $5,000 with a $50,000 loan from his in-laws to establish Bernard L. Madoff Investment Securities, LLC with his wife, Ruth.
With assistance from his retired CPA father-in-law, Madoff’s company successfully attracted wealthy and famous investors, building an impressive client roster that included notable figures such as Steven Spielberg, Kyra Sedgwick, and Kevin Bacon. His reputation for consistently delivering annual returns of ten percent or more spread through word of mouth. By the late 1980s, Bernard L. Madoff Investment Securities was handling over five percent of the daily trading volume on the New York Stock Exchange (NYSE).
Not all of Madoff’s successes were illusory; he was innovative in adapting his business to new technologies, making his firm one of the first to use computerized trading. Consequently, his company played a significant role in the rise of the NASDAQ (National Association of Securities Dealers Automated Quotations) stock market exchange, with Madoff serving as NASDAQ Chairman for three separate one-year terms.
Madoff often involved his family in the business. His younger brother Peter joined the company in 1970 as the Chief Compliance Officer, and later, his two sons, Mark and Andrew, began working as traders. Shana, Peter’s daughter, worked as a rules compliance lawyer in the trading division, and Peter’s son Roger also worked for the firm until his death in 2006.
However, despite the apparent success and satisfaction among clients and colleagues, Madoff had been concealing a dark secret for over three decades. On December 10, 2008, Madoff informed his two sons about his intention to distribute a few million dollars in company bonuses earlier than planned. When pressed about the source of these funds, he confessed to running a massive Ponzi scheme within a branch of his company. The sons immediately reported this to federal authorities, leading to Madoff’s arrest on December 11, 2008, on charges of securities fraud.
Madoff admitted to federal investigators that his firm had lost approximately $50 billion of investors’ money in recent years. On March 12, 2009, he pleaded guilty to 11 different felony charges, including investment adviser fraud, securities fraud, wire fraud, mail fraud, perjury, false statements, three counts of money laundering, theft from an employee benefit plan, and making false filings with the U.S. Securities and Exchange Commission (SEC).
Over decades, he had moved around $170 billion through his main accounts, but at the time of his arrest, the firm’s statements showed only $65 billion in accounts, most of which had been lost in the markets. The judge sentenced the 71-year-old Madoff to a 150-year prison term without the possibility of parole.
