Bernie Madoff was an American financier and the mind behind running the largest Ponzi Scheme in history, duping over $64.8 billion from the investors.
Madoff was the founding chairman of Bernard L. Madoff Investment Securities LLC which was a penny stock brokerage. At the age of 22, he founded the Broker-dealer with $5000 that he had earned working as a lifeguard on the beach and installing a sprinkler system for people.
Soon his family members and close friends were persuaded to invest in his investment firm. Carl J. Shapiro, the founder of Kay Windsor Inc. was one of the early investors who invested $100,000.
He used computerized innovative technologies to make stock trading faster and more reliable. This attracted more clients and soon his business grew to become one of the go-to firms for small investors. Within twenty years of its establishment, the company was making $100 million per year. He was also appointed as the chairman of NASDAQ in 1990.
Bernie Madoff Scam
For over many years, Bernie was running his business collecting money from people promising them to provide a high rate of returns. But there was no such technique or scheme. He would collect money from new clients to pay the former ones.
He would promise the investors an annual return of 12% which was modest enough to attract the clients and get away with the risk of doubts.
He affirmed that his firm uses the Collar Option Strategy that minimizes the high chances of losses but in reality, he would simply deposit the fund in a bank.
In 1999, Harry Markopolos started to investigate the activities of the Madoff firm. He was quick to find that it was a scam by using quantitative financial analysis. He reported the case to the Securities and Exchange Commission (SEC) in 2000 but it was ignored.
In 2005, Markopolos again wrote a letter to the SEC saying that “Madoff Securities is the world’s largest Ponzi Scheme.” In 2008, when he failed to redeem $7 billion from the account he used to invest in, it was proved that Madoff was a fraud.
In 2009, Bernie Madoff lost investors $60 billion. He was sentenced to 150 years in prison.
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Fraud Charges & Stock Security Scandal
Bernie had employed several of his family members in his firm. His younger brother Peter Madoff was the senior managing director of the firm. His sons Mark and Andrew and Peter’s daughter Shana Madoff was the compliance and rules officer.
Madoff Investment Firm had defrauded over $65 billion from thousands of investors in more than 136 countries. The firm had deceived the SEC with false statements and filings. For this Bernie was charged with securities fraud, wire fraud, mail fraud, money laundering, perjury, and theft from an employee benefit plan. He was banned from the securities exchange for life.
When it was proved that the asset management was a huge scandal, Bernie Madoff was arrested on a charge of security scandal and was forced to lose $170 billion. He was sentenced to 150 years of the prison where he died due to natural causes on April 14, 2021.
Bernie Madoff Early Life & Plotting Of Fraud
Bernie was born on 29 April 1938 in Queens, a city in New York. He was born in a Jewish family to Sylvia and Ralph Madoff.
Since his early days, he struggled with his academics. He graduated with a Bachelor of Arts in Political Science degree from Hofstra University. He dated Ruth Alpem who worked at a stock market in Manhattan.
Bernie’s father was a businessman who ran a sporting goods store. His business failed when there was a shortage of steel during the war. Seeing his family go through financial difficulties, he determined to build a big business for himself. He thought that his legitimate business would give him and his family the life they have always wanted.