Top 10 Facts About Bernie Madoff’s Historic Ponzi Scheme: A $65 Million Scam!
Described as toxic by his family members, Bernie Madoff made off with billions of dollars from the victims of his vast, decades-long Ponzi scheme. With his arrest in December of 2008, Madoff would destroy the fortunes of thousands of investors, as well as the lives of everyone around him. Although Madoff quickly pleaded guilty to the crimes and entered federal prison shortly after his arrest, his willingness to do time wouldn’t gain him any fans.The way a Ponzi scheme works is fairly straightforward. The scheme feeds on new investors whose funds are used to pay imaginary returns to old investors. One of the ways the schemes make money is by promising large and consistent returns. Madoff’s investment firm was founded decades ago in 1960, but it would eventually turn corrupt in the late 1980s. Despite several investigations by the Securities and Exchange Commission (SEC), the authorities had no idea about the Ponzi scheme’s existence until Madoff’s sons came forward and told the FBI about the fraud.Here are 10 interesting facts about Bernard Madoff, master fraudster and king of the Ponzi scheme.
10. Madoff had a Heart Attack After Serving Five Years in Prison
At the age of 75 and after having spent five years in prison, Bernard Madoff suffered a heart attack and was brought to Duke University Medical Center for treatment. According to a report by CNBC, Madoff was also suffering from stage-four kidney disease, but he wasn’t on dialysis at the time of his hospitalization. Failure to seek treatment for advanced kidney disease would likely mean an eventual death sentence. After recovering from the heart attack, Madoff was brought back to prison at the Butner Federal Correctional Complex to return to serving his 150-year prison sentence.
Since most of his victims haven’t seen financial restitution, some have complained at Madoff’s rather luxurious prison in North Carolina, which Madoff had described as looking like a college campus rather than an actual prison. Prisoners were given everything they needed for a comfortable existence, and daily activities included watching television and listening to the radio. Unfortunately, investors connected with Madoff haven’t fared as well, and many people related to Madoff have faced prison or medical problems in the years since the story broke.
His son, Mark, committed suicide just two years after Madoff’s arrest, and his brother, Peter, was sentenced to 10 years in prison for his role in the massive Ponzi scheme. Bernie’s other son, Andrew, died from a recurrence of cancer that he said was brought on by the shame of his father’s actions. Bernie’s wife of more than 50 years cut off contact with him. In the years since Madoff’s prison sentence began, he went from looking like a fairly healthy man to a thinner, gaunt version of his former self which could be the result of guilt or his medical problems.
9. The S.E.C. Investigated Madoff’s Firm Eight Times in 15 Years
When the public finally found out about Bernard Madoff’s massive Ponzi scheme, it came as a shock to the countless victims of his fraud who, collectively, lost billions of dollars. However, the revelation wasn’t that surprising to the Securities and Exchange Commission (SEC) who, according to a story in the Wall Street Journal, investigated Madoff’s business several times in the years leading up to his arrest. Over the course of a decade and a half, the SEC investigated Madoff at least eight times.
Other regulatory bodies that took an interest in Madoff’s dealings included the Financial Industry Regulatory Authority, which is a group run by the financial industry that’s meant to act as a watchdog group. During its investigations, the SEC described Madoff’s firm as “unusual” and the Financial Industry Regulatory Authority found that some pieces of the business had no customer activity. Regulators from the SEC even interviewed Bernie a few times, but they never found evidence of anything that warranted further investigation. Many have wondered how these groups could miss a Ponzi scheme of such an incredible size.
Concerned as to how Madoff was able to operate his scheme for so long without anyone finding out, Congress decided to hold hearings to figure out why nobody uncovered the fraud. Some industry pundits suggested the SEC was ill-equipped to deal with massive fraud investigations like the one required to figure out the scope and details of the Madoff scheme. Interestingly, Madoff was connected to an investigation way back in 1992 when the SEC filed a suit against a Florida investment firm for the crime of selling $440 million in unregistered securities. Could the SEC have stopped Madoff’s Ponzi scheme if they’d investigated Madoff with more vigor in the 90s?
8. Madoff’s was Sentenced to 150 Years in Jail
After defrauding thousands of people of billions of dollars, it’s probably not surprising that Bernie Madoff received a monster prison sentence of 150 years for his Ponzi scheme. The sentence was the longest that Judge Denny Chin could give Madoff. Judge Chin characterized Madoff’s scheme as “extraordinarily evil.” Interestingly, the sentence was three times the length of what the federal probation office had suggested was appropriate. 150 years was an incredible ten times as long as the defense team had requested. Apparently, the courtroom burst into applause after the verdict even though the prison sentence didn’t mean the people who were defrauded would see any of their money.
Before the sentencing, Madoff’s victims were allowed to address the court, and their stories illustrated how regular folks without a lot of money to set aside for investments had their finances destroyed by the Ponzi scheme. One woman said she lost her savings and that her daughter had to work two jobs while in college because the family lost what they’d put aside for her college education. Another victim described the pain of seeing his disabled brother lose the money he needed to survive.
One fascinating part of the sentencing was that no friends or acquaintances came forward to defend Bernie for his actions. His family and friends had the opportunity to submit letters to the court to demonstrate Madoff’s good character, but the judge revealed that no one had offered such letters to the court. Further, at the time of his sentencing, none of Madoff’s family members were in the courtroom. Unfortunately, the massive prison sentence was seen as largely symbolic because Madoff was already past 70 at the time of his sentencing and likely wouldn’t come close to serving the full 150 years before his death.
7. Steven Spielberg was One of Bernie Madoff’s Victims
In addition to the staggering amount of money stolen by Bernie Madoff and his firm, the company’s client list also read like the credits of a major Hollywood motion picture with the Ponzi scheme impacting a wide array of huge names. According to a 162-page document, Steven Spielberg was one of Madoff’s victims, as well as a host of other actors, producers, and directors living in Southern California. Other incredibly famous names on the list included actors Kevin Bacon and John Malkovich, as well as talk show host Larry King. Even famous baseball pitcher Sandy Koufax appeared on the list.
One interesting name that showed up on the list was Madoff’s own criminal defense attorney: Ira Lee Sorkin. While the lawyer maintained that he never invested in Madoff’s scheme even though his name was on the list, he said he couldn’t comment on the appearance of his parents’ names as victims of Madoff’s scheme. He told reporters they’d need to ask his parents for that information, but the comment was rather flippant since Sorkin’s parents were dead at the time of the interview.
In addition to the leagues of well-known and small-time investors who lost money in Madoff’s scheme, one of the most distressing parts of the saga was the appearance of several charities who lost significant assets. The Carl and Ruth Shapiro Family Foundation, which was started by a 95-year-old entrepreneur and philanthropist, lost a staggering $100 million. The Jewish Community Foundation of Los Angeles also lost a reported $18 million, and an organization named the Justice, Equality, Human Dignity and Tolerance Foundation said it would close its doors because the entirety of their funds were lost because of investments with Madoff’s company.
6. Bernie Madoff Started His Firm with $5,000 He Made from a Lifeguard Job
One of the most fascinating features of Madoff’s history is the way in which he began his company. Biography described Madoff as a self-made billionaire who started his company with just $5,000 that he made from working as a lifeguard. Madoff’s early life was a fairly classic American upbringing as the grandson of Polish, Romanian, and Austrian immigrants in the Queens borough of New York. Madoff was born as the country transitioned from the Great Depression to World War II, and his parents eventually became involved in finance after the war.
Apparently, Madoff’s mother was a broker-dealer in the 1960s and helped run the family’s finance business out of their home. This was the first time Madoff would see his family investigated by the SEC when the regulatory agency ordered the business to close because of a decade of unpaid taxes. Some say the full truth about the closure has never been revealed and that the company was an attempt by Bernie’s father to defraud investors. Even though Bernie would eventually create his own massive financial fraud, his youth wasn’t spent in the financial sector. He enjoyed swimming and worked as a lifeguard on Long Island.
When he went to college, Bernie majored in political science, and it was his wife, Ruth, who majored in finance and eventually started working in that industry. Bernie would enter the industry around the time he started going to law school when he and Ruth founded Bernard L. Madoff Investment Securities, LLC. With just $5,000 in an initial investment, Madoff would eventually grow his firm to handle five percent of all trading on the New York Stock Exchange.