Every morning, the petite blonde strolls from her nondescript apartment to Upper Crust Bagel Company on Sound Beach Avenue, the main street in this picturesque Old Greenwich, New England village of 6,600 people.
Almost everyone who lives here knows that Ruth Madoff is in exile, and they mostly leave her alone.
They know in general outline the story of her downfall - how her privileged world shattered in December 2008 after her husband Bernie confessed to the largest Ponzi scheme in history. The fraud was estimated at $18 billion, for which he is serving a 150-year sentence in prison.
Ruth, in turn, lost everything: money, social status, husband and two sons. Eldest son Mark committed suicide in 2010, and Andrew died of cancer in 2014.
Ruth turns 76 this week, two days before the release of HBO's Master of Lies, a dramatic retelling of the fall of the Madoff family. Starring Robert De Niro and Michelle Pfeiffer.
Although Ruth lives an hour's train ride from Manhattan, it's a far cry from the world Ruth once belonged to, living in an Upper East Side apartment and vacationing in a mansion in Palm Beach and Montauk.
After her husband's trial, Ruth was forced to give up her luxurious residence. In addition, her friends from high society were no longer happy to see her. Donald Trump, who denounced Bernie as a “disgusting scoundrel with no principles,” refused to rent Ruth an apartment in any of his Manhattan buildings while the woman desperately tried to find a place to live.
Before trial in 2009, her husband Bernie struck a deal with prosecutors in exchange for giving up most of their assets: valuable mansions, jewelry, cars and $80 million in art. Ruth was allowed to take $2.5 million.
She then lived briefly in an exclusive condo in Boca Raton, Florida, and moved to Old Greenwich in 2012 to be closer to her three grandchildren who live nearby. For two years, she lived at 57 Thomas Ave., in a historic home built in 1905 owned by her son Andrew and his ex-wife Deborah West, according to public records.
"She was a very good neighbor, that's all I can say," said Mike Worden, who lived across the street from Madoff's house.
Two months after son Andrew died of a rare form of lymphoma, Ruth moved out of his home. The house was sold two years later and was recently demolished to make way for a new building.
Ruth moved into a townhouse in a condominium complex The Gables, where he lives now. A one-bedroom unit is listed as renting for $3,100 per month.
It was here that Pfeiffer, who played Ruth in the movie Master of Lies, sat in the kitchen chatting with Ruth. “She sat in the kitchen and studied it,” the source said.
“I don't think it's appropriate to say that Ruth is collaborating with the film. Michelle just spent some time talking to Ruth. I don't think they spent much time on the script. They just met,” Levinson told the publication Page Six.
Neighbors say that Ruth is constantly walking.
She walks every morning to buy a bun from a certain bakery, but avoids other bakeries in the city. She is uncommunicative due to the fact that many people lost their money because of Bernie.
Now her new friends are a group of women who attend church and don't wear their hair or nails, said a neighbor who saw Ruth.
"If they didn't live in Old Greenwich, you'd think these ladies were homeless," she said Post. — Ruth spends a lot of time with them. She always wears the same jeans."
Last Christmas, a friend helped Ruth sell church crafts at a local market, another neighbor said. “It was a spectacle to watch Ruth Madoff pull out crafts from under her desk and get paid for it,” he added.
Other neighbors saw her on her morning walk at a nearby beach on Long Island. She walked up and down the main street of the city, stopped at Anna Banana's store, a store that sells children's clothing, and also visited a beauty salon.
“Why can’t she just live in peace?” asked the woman, who left the salon to prevent the photographer from taking pictures. “She has the right to privacy.”
The salon's friendly attitude stands in stark contrast to the Pierre Michel salon in Manhattan, where Ruth has been going to for more than 10 years for treatments.
The owners of Pierre Michel banned Ruth from the salon after Bernie's arrest in 2008, and she remains an unwelcome guest to this day.
“Unfortunately, many of Pierre Michel’s clients have been victims of Bernie Madoff,” a salon spokesperson told the publication. The Post.
Instead of the $400 she paid for hair coloring at Pierre Michel, she now pays $175 or more at Old Greenwich.
Although Ruth was not charged with crimes, the family was shunned, mainly because many of the elite had invested in Bernie's project and lost their savings. Holocaust survivor Elie Wiesel, who died last year, called Bernie a "scoundrel" and said his charity lost $15.2 million to Madoff and he lost all his savings.
The couple's sons refused to talk to their mother after their father's arrest. They claimed they were never part of the scheme, but questioned why she continued to support her husband, living with him in their Manhattan penthouse for 3 months while he was under house arrest between 2008 and 2009.
Ruth Alpern met Bernie Madoff when she was 16 and they were studying at high school in Queens. Both she and Bernie grew up in the Jewish neighborhood of Laurelton. They married in November 1959, when she was 18.
Ruth, who was married to Bernie for nearly 60 years, worked as an accountant for him when he set up his investment business in 1960. But she claimed she didn't know her husband was running a pyramid scheme.
After the husband was accused of massive fraud, the couple attempted suicide on the night of January 1, 2009.
“I don’t know whose idea it was, but we decided to kill ourselves because everything that was happening was so terrible,” Ruth Madoff said in an interview with the program 60 Minutes channel CBS.
Ruth had been visiting her husband in federal prison in North Carolina, but had to stop after son Andrew gave her an ultimatum: If she wanted to hang out with Andrew and see her two granddaughters, she would have to forget about visiting Bernie in prison.
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Former Chairman of the Board of Directors of the Nasdaq Stock Exchange
American financier, founder of Madoff Investment Securities. Former Chairman of the Board of Directors of the Nasdaq Stock Exchange. In December 2008, he was arrested on suspicion of embezzlement of $50 billion - it turned out that Madoff Investment Securities had been operating as a financial pyramid for many decades. In March 2009, he confessed to fraud and in June of the same year was sentenced to 150 years in prison.
Bernard "Bernie" Lawrence Madoff was born on April 29, 1938 in New York City into a Jewish family. Madoff graduated from the prestigious Far Rockaway High School in 1956, where he was not an outstanding student and enjoyed swimming. In 1960, he graduated with a bachelor's degree in political science from Hofstra College (later Hofstra University) in New York. During his studies, he worked as a lifeguard on the beach and as an installer of garden irrigation systems and managed to save up 5 thousand dollars. With this money in 1960, he founded his company Madoff Investment Securities. Ten years later, he recruited his brother, Peter, and subsequently his nephew Roger, niece Shana, and both of his sons, Mark and Andrew, into the business. The press reported that before work began on stock market Madoff served as a second lieutenant at Fort Bragg in North Carolina.
Madoff took part in the creation of the American stock exchange Nasdaq, which was engaged in buying and selling securities for the benefit of investors (opened in 1971). Madoff Investment Securities was one of the 25 largest participants in trading on this exchange, its creator was called a pillar of Wall Street and a pioneer of electronic trading on the exchange: he was one of the first in New York to completely computerize the document flow of his company. Madoff served on the Nasdaq board of directors and was its chairman in the early 1990s. In addition, Madoff was the head of the board of directors of the hedge fund Madoff Securities International, founded in 1983, whose headquarters were located in London. Also in 1985, he was one of the founders and a member of the board of directors of the International Securities Clearing corporation, which was engaged in financial clearing and non-cash payments between companies and states.
Madoff was famous for his charitable activities: Since the death of his nephew Roger from leukemia in 2006, he has regularly donated to cancer and diabetes research. Together with his wife, he founded the Madoff Family Foundation, which donated millions of dollars to theaters, museums, educational institutions and Jewish charities, , , . In addition, Madoff was treasurer of the board of trustees of Yeshiva University's business school, and a member of the board of trustees of Hofstra University. In addition, Madoff made donations to the election campaigns of American politicians, mainly members of the Democratic Party: among them Senator Charles Schumer and Congressman Edward Markey.
Madoff Investment Securities was considered one of the most reliable and profitable investment funds in the United States: it brought investors consistently high profits - about 12-13 percent per annum. Many investors were convinced that Madoff's firm was successful due to access to insider information. Madoff personally talked with all his future clients, inviting them to prestigious country clubs, and refused to invest in his fund for many. His clients included numerous hedge funds, banks, charities, and individuals, mostly celebrities. In total, Madoff Investment Securities had $17 billion at its disposal in 2008. The influx of new clients was not hampered by the concerns of some experts, who pointed to the zero volatility of the Madoff company, its lack of open financial statements, and the fundamental impossibility of providing stable profits by legal means. Madoff Investment Securities has never disclosed its financial statements American Securities and Exchange Commission (SEC), converting all of its funds into cash by the end of the reporting period. In addition, unlike other similar funds, Madoff's firm did not provide clients with online access to their checking accounts, limiting itself to mailings. However, inspections by the SEC and auditors did not reveal significant violations in the company’s activities.
Following the onset of the global financial crisis in 2008, clients turned to Madoff to return their $7 billion investment. Then it turned out that all the years of its existence, Madoff Investment Securities worked on the model of a financial pyramid: money was paid to previous investors from proceeds from new investors. During the investigation, it turned out that the reports on the fund’s activities that were sent to investors also turned out to be fictitious, and presumably during the entire period of its operation, Madoff’s company did not make a single transaction at all on the stock exchange.
In December, Madoff told his two sons for the first time about how his business operated, estimating its combined losses at $50 billion. There is an assumption that the sons reported this to the FBI.
On December 11, Madoff was arrested on suspicion of embezzling $50 billion, but that same day, after questioning, he was released on $10 million bail without the right to leave New York City, and was later placed under house arrest. On December 12, investigators sealed the office of his company and seized its computers for analysis, and the activities of Cohmad Securities, which was searching for new clients for Madoff, were suspended. At the request of the SEC, legal proceedings were initiated against Madoff, and all of his accounts were frozen. The activities of the Madoff charitable foundation were also suspended. The SEC began an internal investigation into the reasons why Madoff was able to hide the nature of his activities from their auditors for so long.
When he was arrested, Madoff stated that “there was no reasonable explanation for his behavior” and that he “gave investors money that did not actually exist.” If Madoff is found guilty, he faces a fine of $5 million and 20 years in prison. The financial pyramid created by Madoff has been called the largest fraud in history.
After Madoff's arrest, news began to come in about who had invested their money in his financial pyramid. Many banks, insurance and charitable foundations reported possible losses. Thus, investments in Madoff Investment Securities of the hedge fund Fairfield Sentry Ltd amounted to $7.3 billion, Kingate Global Fund Ltd - 2.8 billion, Tremont Holdings Inc's Rye Investment Management - about 3 billion. Spanish banking group Banco Santander reported a possible loss of $3.1 billion. HSBC's deposit was valued at $1 billion, while Royal Bank of Scotland was worth $600 million. French bank BNP Paribas may have lost $460 million.
The Boston-based Robert I. Lappin Charitable Foundation, which organized trips for Jewish teenagers to Israel and invested all the money in Madoff's company, was forced to suspend its activities. It also became known that the Wunderkinder charitable foundation, owned by the famous director Steven Spielberg, trusted Madoff with money. South Korea, which entrusted Madoff with $63 million, also suffered losses.
In addition, the liquidation of the London firm Madoff Securities International was begun: although its chief executive Stephen Raven claimed that it had nothing to do with Madoff Investment Securities, its assets (about 100 million pounds sterling) were seized. .
In January 2009, the Spanish bank Banco Santander was the first to announce that it would pay its private investors 1.38 billion euros as compensation for losses from investments in Madoff's financial pyramid. This was done after clients accused the bank of negligence because their money was invested in Madoff Investment Securities without prior verification financial activities fund
In February 2009, Spanish law firm Cremades & Calvo-Sotelo said it estimated that 3 million people around the world had been directly or indirectly affected by the Madoff Foundation. Representatives of the company confirmed that the total amount of losses could be estimated at $50 billion. Lawyers from all over the world began to form an alliance to investigate the Madoff case. In addition, the family foundation of US Senator Frank Lautenberg sued Peter Madoff, accusing him of facilitating, or at least turning a blind eye to, his brother's financial fraud.
On February 20 of the same year, it became known that over the past 13 years Madoff had not invested the funds entrusted to him, and the total amount that could be returned to investors through the sale of Madoff Investment Securities assets was $950 million. In March, the valuation of Madoff Investment Securities' assets was already more than a billion dollars, but the estimate of the amount of losses from the fund's activities also increased and amounted to $65 billion.
Madoff appeared in court on March 13, 2009 and pleaded guilty to all 11 charges against him. On June 29 of the same year, the New York District Court found Madoff guilty on all charges and sentenced him to 150 years in prison. On July 13, Madoff was transferred to Butner Prison in North Carolina to serve his sentence. The press noted that this prison even had its own medical center.
On August 24, 2009, The New York Post, citing its sources, reported that Madoff was dying in prison from pancreatic cancer. According to the publication, in prison the financier engraves and paints fences.
In June 2010, The New York Post reported from one of Madoff's cellmates that the fraudulent financier hid $9 billion from his friends before his arrest. However, by the end of 2010, investors were able to return only $2.6 billion.
Madoff is married, his wife's name is Ruth. Together they entered influential Jewish circles in New York and Florida, and were members of several elite ski and golf clubs. At the end of July 2009, a lawsuit was filed against Ruth for $45 million: she was accused of obtaining funds illegally, as well as their subsequent expenditure, and demanded that this money be returned to defrauded investors. In December 2010, a collection company filed a lawsuit against Madoff's son, Mark, and a few days later, on December 12, he committed suicide.
Madoff owned apartments in Manhattan (worth $5 million), houses in Palm Beach (Florida) and in France. In the Bahamas he had his own yacht, "Bull".
Materials used
Chris McGreal. Madoff suicide: son was "upset" by lawsuits filed against his children. - The Guardian, 12.12.2010
Mary Thompson. Madoff Investors Divided Over Distribution of Recovered Money. - CNBC News, 09.12.2010
Dan Mangan. Madoff's hidden booty. - The New York Post, 21.06.2010
Rich Calder. Bernie "Dying" in Jail. - The New York Post, 24.08.2009
Aaron Smith. Ruth Madoff sued for $45 million. - CNN Money, 29.07.2009
Zachery Kouwe. Madoff Arrives at Federal Prison in North Carolina. - The New York Times, 15.07.2009
Brian Ross, Richard Esposito. Madoff En Route to New Prison; Leaves New York for Carolina. - ABC News, 13.07.2009
David Glovin, Patricia Hurtado, Thom Weidlich. Bernard Madoff Gets 150 Years in Jail for Epic Fraud. - Bloomberg, 29.06.2009
More Madoff assets found, U.S.-British probe linked. - Reuters, 24.03.2009
Walter Hamilton, Michael Muskal. Madoff pleads guilty to 11 felony counts. - The Los Angeles Times, 13.03.2009
James Queen
Bernard Madoff was sentenced to 150 years in prison for committing the most unprecedented fraud. The size of the losses - $65 billion - shocked the investment world, and 13.5 thousand clients lost all their life savings.
Madoff used the so-called Ponzi scheme (named after the Italian-American Charles Ponzi, a major fraudster of the early twentieth century): investors are promised high returns, but in fact, one person’s money simply goes to another. Now the man who was called a financial guru just a year ago has pleaded guilty to 11 charges and will die in prison.
Judge Denny Chin, reading the verdict, noted that this court decision is largely symbolic, it reflects the “duration and exorbitant scale of the scam,” this is fair retribution that will help in the prevention of such crimes.
At the same time, the judge expressed surprise that no one supported Madoff. According to him, the court did not receive a single letter in defense of the swindler, even from his wife Ruth and sons Andrew and Mark.
But the judge ignored both the request of lawyer Ira Sorkin to sentence the ex-financier to 12 years, and the preliminary conclusion of the US probation service, which recommended putting him in prison for 50 years.
“Madoff’s crimes are extremely serious, the deception is too significant,” explained Denny Chin, who believes that Madoff was unlikely to be completely frank with investigators. “It seems to me that he did not tell everything he knows.”
Several dozen victims of the scam were present in the courtroom and greeted the verdict with applause. Madoff, dressed in a gray suit, white shirt and black tie (as is typical for funerals), remained silent.
“I hope that he lives a long time and that the prison cell will be his coffin,” said Michael Schwartz, whose mentally disabled brother was left without money due to Madoff’s scams. Cheryl Weinstein, whose relatives personally knew the criminal, called him “a monster living among people.” And Miriam Zigman told how, left without money, she was forced to receive government food stamps and rummage through store trash cans.
The fraudster silently listened to the testimony of nine victims of his scams. Then he turned to his victims and said: “I live in agony, knowing what pain and suffering I caused. I have no excuse for my behavior. I do not ask for your forgiveness.”
In his last words, Madoff tried to divert suspicion from his wife and children. He said that they were not aware of his crimes, that he had been lying to them for decades. After the judge finished reading the 90-minute verdict, the fake investor's wife, Ruth Madoff, spoke for the first time in six months. She said that her husband’s actions caused her shame and indignation, and that two thoughts had been haunting her since December, when he repented of his crimes. "The first is the unimaginable number of people who have lost all their money and are psychologically broken. The second is the end of life with a man I knew for 50 years," she said. The US Department of Justice said the investigation into the scam was ongoing and promised that anyone who in any way assisted Madoff in committing his crimes would be punished. Bernard Madoff has 10 days to appeal.
Bernard Madoff: stages of fall
Key events in the case of Bernard Madoff, who admitted that since the 1980s he participated in the construction of a financial pyramid, because of which thousands of investors suffered
2008
On December 10, Madoff allegedly told his
sons that his $50 billion investment business was "one big lie"
December 11 Arrested by FBI agents on suspicion
in securities fraud; released on $10 million bail
On December 15, a federal judge ordered the liquidation of his company's US operations.
On December 18, French hedge fund manager René-Thierry Magon de la Villehuche committed suicide due to losses he suffered as a result of Madoff's activities.
2009
On January 9, the court revoked the bail when it became known that Madoff had smuggled jewelry
and other valuables to family and friends, thereby violating the court order to freeze his assets
January 12 Placed under 24-hour house arrest
February 10 Signed an agreement with the Securities and Exchange Commission, pledging to never work in the financial industry again.
On February 20, the Liquidation Commission found no evidence of any investments made by his company over the past 13 years
March 3 Gave up rights to conduct investment business, corporate artwork and tickets to entertainment events
March 6 Did not agree with the court verdict
March 12 Pleaded guilty to 11 counts, including securities fraud and money laundering
March 16 Authorities seize $69 million in assets held in the name of his wife, Ruth Madoff; subsequently she was left $2.5 million
March 18 David Frayling, Madoff's accountant, was arrested. He was accused of fraud
June 16 In letters to the chief judge, more than 100 former clients talked about how Madoff's pyramid ruined their lives
June 29 Sentenced to 150 years in prison
Sources: The Wall Street Journal (USA), The London Times (UK), The Guardian (UK)
Under the rubble of the pyramid
Ksenia Leonova
The operating pattern of Bernard Madoff's company is well known to Russians, although the fate of his company differs from the fate of its domestic counterparts, because it existed on the market for half a century. Bernard Madoff, whom the Western press has already nicknamed “the fraudster of the century,” was one of the most respected financiers, and served as chairman of the board of directors of the NASDAQ stock exchange of high-tech companies in the 90s.
His firm, Bernard L. Madoff Investment Securities LLC, was one of the thirty largest on Wall Street. He founded it back in 1960. For a long time, Madoff provided services “for the elite” and consistently paid clients 8-12% per annum. As a result, his clients included not only private investors - big businessmen, but also charitable foundations, investment companies and dozens of banks from all over the world.
As the investigation has now established, only since 2005 Bernard L. Madoff began operating as a financial pyramid. Moreover, the scheme turned out to be not new.
According to lawyers, usually the organizers of such pyramids falsify statements and financial documents in order to show clients fictitious investments and profits from them. Clients, confident that the investments are being made for real, involve their own environment in the pyramid, citing personal experience. In fact, money coming from new ones was used to pay profits to old clients.
Despite its size, Bernard L. Madoff remained very much a family business. This is what ruined her. When clients simultaneously demanded the return of $7 billion at the height of the financial crisis, Bernard Madoff was unable to collect the money and admitted this to his sons who worked with him at the firm. It was on the basis of their testimony that the FBI opened a criminal case against Bernard Madoff. As a result, he was arrested on December 11, 2008. Mark and Andrew Madoff publicly stated that they knew nothing about their father’s machinations and, thanks to this, were only witnesses in the case.
In February of this year, a list of 13 thousand names and titles of legal entities affected by the pyramid was published. True, the prosecutor's office was only able to prove Madoff's guilt in relation to 1,341 victims. Their losses in total are estimated at more than $13 billion.
Nowadays, it is difficult to deceive businessmen, and even to drag ordinary people into any dubious deal. But several decades ago, financial pyramids were very successfully created, because of which millions of people suffered. Some lost only part of their savings, while others lost a fortune. A striking example of such a ruinous scheme is the Bernard Madoff scam. It affected not only American society, but also the largest foreign companies.
Biographical information
Probably many have heard that there was such a swindler Bernard Madoff. Who is this, where is he from and where did he study? He was born and raised in a Jewish family. At the end of the 50s of the last century, he graduated from school, after which he decided to get higher education at Hofstra College, which is located in New York. Upon completion of his studies, he received a bachelor's degree in politics. During his student years, Madoff wasted no time and worked part-time in several places. As a result, he collected an amount of five thousand dollars, which was used to create his own company called Madoff Investment Securities. Later, when the business was successful, the businessman invited his brother Peter to work together, and then two nephews and two of his sons.
What did Madoff do?
Bernard Madoff participated in the creation and operation of one of the American stock exchanges - NASDAQ. Its main task was the purchase and sale of shares and various securities, which was supposed to bring profit to investors.
Interestingly, Madoff's company was one of the 25 largest participants in trading operations on this exchange. In addition, he is rightfully considered a pioneer electronic trading. After all, the first person to transfer all document flow to electronic mode was Bernard Madoff. Who is he if not an innovator? After him, other companies gradually began to use computerization.
Career rise
In the 90s, the company of a successful businessman began to noticeably go up. At this time, he managed to take the post of chairman of the board of directors of the exchange, and also headed the board of directors (BoD) of the hedge fund Madoff Securities International, which was founded in 1983. Madoff's high positions do not end there - in 1985 he participated in the founding and was a member of the board of directors of International Securities Clearing. The latter was known for its financial clearing operations, settlements between firms and even countries on a non-cash basis.
Charitable activities
In addition to commerce, Bernard Madoff was involved in charity work. He took this path after one of his nephews died of leukemia in the early 2000s. Since then, Madoff has frequently donated large sums of money to medical research to combat cancer. Together with his legal wife, the businessman founded his own foundation, which allocated donations to various Jewish charitable events, events, educational institutions, theaters, etc.
Considerable sums were also invested in the election campaigns of some American politicians. So, for various reasons, Bernard Madoff financially supported representatives of the Democratic Party. In addition, he served as the treasury director for the Board of Trustees of Yeshiva University's business school.
World famous scam
In the early 2000s, the swindler Bernard Madoff, whose pyramid is considered the largest in history, became known to the whole world. Statistics show that there are up to three million affected people, and several hundred financial organizations. In total, damage was estimated at almost $65 billion.
How did it all begin? The Madoff Investment Securities fund was a safe and profitable investment, as its investors received decent and stable returns of about 13 percent per year. The fund's clients included both individuals and various organizations, banking institutions, corporations, etc. At that time, Madoff's company, according to experts, was considered one of the best market makers on the stock market, so no one had any suspicions.
The revelation came in 2008, when Madoff admitted to his sons that his investment fund was a huge lie. They told the authorities everything, and soon the founder of the scam was arrested. As it turned out, the investments entrusted to him had not been used for their intended purpose for the last thirteen years. And the police found out that the fund did not make transactions on the stock exchange at all, since there was no data about them anywhere. What also led to the collapse of the entire scheme was the request of large investors to return the invested funds in the amount of seven billion dollars, but there was no such money in the fund.
The businessman was accused of creating a financial pyramid in 2008, and the following year Bernard Madoff was sentenced by a court to 150 years in prison. The list of indictments included perjury, money laundering cash, fraud, etc.
Many believe that the businessman had accomplices, since he could not do such a thing alone.
Who is Bernie Madoff?
Bernard Lawrence "Bernie" Madoff is an American financier who executed the largest Ponzi scheme in history, defrauding thousands of investors out of tens of billions of dollars for at least 17 years and possibly longer. He was also a pioneer in electronic trading and the early chairman of Nasdaq 1990s.
More about Bernie Madoff
Despite purporting to create large, sustainable results, an investment strategy called "breakdown conversion" does exist (see Invest Like Madoff - Without the Jail Time). Madoff simply deposited client funds into a single bank account, which he used to pay clients who wanted to withdraw money. He financed the redemptions by bringing in new investors and capital, but was unable to maintain the fraud when the market tanked in late 2008. He confessed to his sons, who worked in his company, but, according to him, did not know about the scheme - December 10, 2008. The next day they returned him to the authorities. The fund's latest statements indicated it had $64. 8 billion in client assets.
In 2009, at age 71, Madoff pleaded guilty to 11 federal felonies, including securities fraud, wire fraud, mail fraud, perjury and money laundering. The Ponzi scheme has become a powerful symbol of the culture of greed and dishonesty that critics say permeated Wall Street in the run-up to the financial crisis. While Madoff was sentenced to 150 years and prison and ordered to forfeit $170 million in assets, no other prominent Wall Street figure faced legal consequences in the wake of the crisis.
Madoff has been the subject of numerous articles, books, films and an ABC biographical miniseries. (See Investopedia's Guide to Watching 'The Wizard of Lies,' HBO's 'Madoff.')
Bernie Madoff's early career
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 ran a sporting goods store, went out of business due to steel shortages during the Korean War: "You watch this happen, and you see your father, who you idolize, build a big business, and then lose everything."
Fishman says Madoff was determined to achieve the "lasting success" that his father did not have, "whatever it took," but Madoff's career had its ups and downs.
In 1960, he founded his company, Bernard L. Madoff Investment Securities LLC, at the age of 22. Initially trading pennies stocks with US$5,000 (worth about $41,000 in 2017), he earned installation of sprinklers and workers as a lifeguard. He soon convinced family friends and others to invest in him. When the Kennedy Slide jumped 20% off the market in 1962, Madoff's bets turned sour and his father-in-law bailed him out.
Madoff had a chip on his shoulder and was a constant reminder that he was not part of the Wall Street crowd. "We were a small firm, we were not members of the New York Stock Exchange," he told Fishman. "It was very obvious."
According to Madoff, he began to make a name for himself as a scrappy market maker: "I was happy to take the crumbs," he told Fishman, presenting the example of a client who wanted to sell eight bonds; a big firm will flout this order, but Madoff would complete it.
Success came when he and his brother Peter began creating electronic trading capabilities - "artificial intelligence" in Madoff's words - which attracted a massive influx of orders and stimulated business by providing information on market activity." "I had all these major banks coming down, entertaining me," said Madoff Fishman. It was a head trip"
it and four other Wall Street mainstays handle half of the New York Stock Exchange's order flow. Arguably, he paid for much of it - and by the late 1980s Madoff was making about $100 million a year. He became chairman of Nasdaq in 1990, and also served in 1991 and 1993.
Bernie Madoff Ponzi Scheme
It's not entirely clear when Madoff's Ponzi scheme began. He testified in court that it began in 1991, but his account manager Frank Di Pascali, who had been with the firm since 1975, said the fraud had been going on "as long as I can remember."
It is even less clear why Madoff carried out this scheme at all: “I had more than enough money to support any lifestyle and that of my family. I didn't have to do it," he told Fishman, adding, "I don't know, I know why." The legal wings of the business were extremely profitable, and Madoff could earn the respect of the elites on Wall Street solely as a market maker and pioneer of electronic trading. .
Madoff repeatedly suggested to Fishman that he should not be entirely to blame for the fraud. “I just let myself talk into something, and it’s my fault,” he said, without making it clear who was talking to him. I thought I could get out after a while. I thought it would be a very short period of time, but I just couldn't."
The so-called "Big Four" drew attention to their long and profitable involvement in Bernard L. Madoff Investment Securities LLC. Madoff's relationships with Karl Shapiro, Jeffrey Pickover, Stanley Chai and Norma Levy date back to the 1960s and 1970s, and his scheme cost them hundreds of millions of dollars each.
"Everyone was greedy, everyone wanted to continue, and I just went with it," Madoff told Fishman. He pointed out that the Big Four and other - a number of feeder funds were siphoning client funds to him, some of them, in addition to outsourcing their management of client assets, must have been suspicious of what kind of returns he had generated, or at least should have had. “How.” can you make 15 percent or 18 percent when everyone is making less money?” Madoff asked.
These apparently super-high returns convince clients to look the other way. In fact, Madoff simply deposited his funds in an account at Chase Manhattan Bank, which merged to become JPMorgan Chase & Co. in 2000, and let him sit. One estimate is that the bank may have allocated as much as $483 million from these deposits. USA, so he was not inclined to request either.
When clients wanted to buy out their investments, Madoff financed the payouts with new capital, which he attracted through his reputation for incredible returns and courting his victims by earning trust. Madoff also cultivated an image of exclusivity, often alienating clients initially. This model allowed about half of Madoff's investors to cash out their profits. These investors had to pay into a victim fund to compensate the defrauded investors who lost money.
Madoff created a front of respectability and generosity, courting investors through his philanthropic work. He also defrauded a number of non-profit organizations, and some of them nearly destroyed their funds, including the Elie Wiesel Foundation for Peace and the global women's charity Hadassah.
He used his friendship with J. Ezra Merkin, an officer at Manhattan's Fifth Avenue Synagogue, to approach the congregation. According to various accounts, Madoff defrauded between $1 and $2 billion from his members.
Madoff's credibility to investors was related to a number of factors:
1. His core public portfolio appears to have stuck to solid investments in blue-chip stocks.
2. Its returns were high (10-20% per year), but consistent, not outlandish. As The Wall Street Journal reported in a now famous interview with Madoff from 1992: "[Madoff] insists that the returns are really nothing special, given that the Standard & Poor's 500 stock index had an average annual return of 16.3% between November 1982 and November 1992. "I'd be surprised if anyone thought the 10-year S&P match was anything remarkable," he says.
3). He claimed to use a collar strategy, also known as a smashed conversion. A collar is a way of minimizing risk in which the underlying stock is protected by purchasing an out-of-the-money option.
Financial analyst Harry Markopolos wrote in a scathing 2005 letter to the Securities and Exchange Commission (SEC) that Madoff's stated strategy "cannot beat the recovery in U.S. Treasury accounts... If that isn't a regulatory hunch, I don't know what is."
Bernie Madoff Study
The SEC had been investigating Madoff and his securities firm since 1999, a fact that disappointed many after he was finally brought to trial because it was believed that most of the damage could have been prevented if the initial investigations had been rigorous enough.
Markopos was one of the earliest informants. In 1999, he counted the day Madoff had to go to bed. He filed his first SEC complaint against Madoff in 2000, but the regulator ignored him.
In his 2005 letter to the SEC, he wrote: “Madoff Securities is the world's largest Ponzi scheme. In this case, the SEC fee is not paid due to the fact that in this case, because it the right thing ».
Using what he called the "Mosaic Method", Markopolos noted a number of irregularities. The Madoff firm claimed to make money even when the S&P fell, which makes no mathematical sense based on what Madoff claimed he invested. The biggest red flag, according to Markopol, was that Madoff Securities was earning "undisclosed commissions" instead of the standard hedge fund fee (1% of total plus 20% of profits).
The point, Markopos concluded, was that "investors who are shorting money don't know that BM is managing their money." Markopos also learned that Madoff had applied for huge loans from European banks (seemingly unnecessary if Madoff's income was higher than he said).
It was only in 2005—shortly after Madoff was nearly pulled over by a wave of redemptions—that a regulator asked him to provide documentation of Madoff's trading accounts. He compiled a six-page list, the SEC prepared letters to two of the firms listed, but did not send them, and that was that. "The lie was simply too big to fit into the agency's limited imagination," writes Diana Henriques, author of "The Wizard of Lies: Bernie Madoff and the Death of Trust," which describes the episode.
In 2008, the SEC was taken out by the revelations of Madoff's fraud as well as irregularities by large banks in the mortgage-backed and collateralized debt obligation markets.
Bernie Madoff's Confession and Verdicts
In November 2008, Bernard L. Madoff Investment Securities LLC reported annual returns of up to 5.6%; The S&P 500 fell 39% over the same period. As the sale continued, Madoff became unable to keep up with a cascade of client buyout requests, and on December 10, according to an account he gave Fishman, Madoff confessed to his sons Mark and Andy, who worked at his father's firm." In the afternoon I told them everything, they left immediately, they went to the lawyer, the lawyer said you have to include your father, they went and did it and then I didn’t see them again.”
Madoff insisted he acted even though several of his colleagues were sent to prison. His eldest son, Mark Madoff, committed suicide exactly two years after his fraud was exposed. Some 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 houses and yacht were put up for auction by US Marshals. He resides at the Butner Federal Correctional Institution in North Carolina, where he is inmate #61727-054. (See also, Bernie Madoff Launches Prison Hot Chocolate Monopoly.)
Consequences of Bernie Madoff's Ponzi scheme
The paper trail of victim statements reveals Madoff's complexity and utter disloyalty to investors. According to the documents, Madoff's fraud spanned more than five decades, dating back to the 1960s. His final account statements, which included millions of pages of bogus trades and shady reporting, show the firm had $47 billion in “profits.”
While Madoff pleaded guilty in 2009 and received a 150-year prison sentence, thousands of investors lost their life savings and numerous stories detailing the anguished feelings of victims.
The Madoff Sacrifice Fund was created in 2012 to help compensate those defrauded by Madoff, but the Justice Department has yet to pay out any of the roughly $4 billion in the fund.
Richard Breeden, the former chairman of the SEC, which oversees the fund, noted that thousands of claims come from "indirect investors," meaning people who put money into funds that Madoff invested during his scheme.
Because they are not direct victims, Breeden and his team must sift through thousands upon thousands of claims, only to have many of them thrown out. Breeden said he bases most of his decisions on one simple rule: whether the person invested more money to Madoff's funds, what did they take out? Breeden estimates the number of “feeder” investors to be north of 11,000.
According to a letter written by Assistant Attorney General Stephen Boyd dated September 18, 2017, 65,000 claims have been filed by victims in 136 countries, and 35,000 of the 60,000 identified to date have been approved. Payments from the Madoff Victims Fund will reportedly begin by the end of 2017.
For more information, see "How to Avoid Dropping Loot on the Next Madoff Scam."
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