Bernie Madoff: The Brain Behind US$65 Billion Ponzi Scheme

Representative Image. © Richelle538 | Megapixl.com

American investor Bernie Madoff, the mastermind behind one of the biggest financial frauds in world history, has passed away at the age of 82.

Madoff breathed his last at the Federal Medical Centre, in Butner, North Carolina. Reports suggest that Madoff, who was expected to turn 83 on 29 April 2021, died of natural causes in the prison.

What got him in?

Madoff’s fall from grace began during the depths of the 2008 global financial crisis, which sent shockwaves across the financial markets. However, by then, he had perpetrated a fraud of US$65 billion on thousands of gullible customers across the globe.

He was arrested on 11 December 2008 for conning about 40,000 people in 125 countries. While the investigators maintain that the fraud started in 1970, Madoff, while pleading guilty in 2009, had stated that the fraud started in 1990.

The victims of his financial fraud included who’s who of the world – director Steven Spielberg and actor Kevin Bacon are just part of the large list.

Also read: Kalkine’s definition on Due Diligence

The investigators said that instead of using split-strike conversion strategy as he claimed, Madoff deposited investors’ funds in a bank account. He would then pay off new customers with funds obtained from earlier customers — a classic ponzi scheme. To cover up his act, he used to provide the clients of Bernard L. Madoff Investment Securities, with falsified account statements. Investigators believed that his so-called returns were pure fiction.

However, he couldn’t continue with his ponzi scheme in 2008, when markets crashed on the back of the sub-prime cases. His firm, like many others on Wall Street, witnessed huge redemption pressure. But being a ponzi schemer, he could not service those redemptions. He confided in his sons – Mark Madoff and Andrew Madoff – who turned him in.

The court charged him with 150 years in prison. With this, curtains came down on one of the most celebrated asset managers on Wall Street, a man who had carefully curated his image. What is more, he was also the Chairman of NASDAQ in 1990.

In 2020, he sought a release on compassionate grounds due to his kidney illness, only for courts to turn it down four months later.

Over the years, the court has ordered US$14 billion of an about US$17.5 billion that investors parked into his business. At the time when he was busted, his falsified accounts claimed that these investments were valued at US$65 billion.

Interesting watch: What is a Ponzi Scheme?


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