Bernie Madoff

Mug shot of Madoff in 2009

Bernard "Bernie" Lawrence Madoff (b. 29 April 1938 in Brooklyn, New York City; d. 14 April 2021 in Butner, North Carolina) was a Jewish former market maker, investment advisor, financier, fraudster, and convicted felon, who was serving a federal prison sentence for offenses related to a massive Ponzi scheme. He was the former non-executive chairman of the NASDAQ stock market, the confessed operator of the largest Ponzi scheme in world history, and the largest financial fraud in U.S. history. On June 29, 2009, Madoff was sentenced to 150 years in prison, the maximum allowed.

Prosecutors estimated the fraud to be worth $64.8 billion based on the amounts in the accounts of Madoff's 4,800 clients as of November 30, 2008. This included fabricated gains. The Securities Investor Protection Corporation (SIPC) trustee estimated actual losses to investors of $18 billion. One notable defrauded investor was the claimed Holocaust witness Elie Wiesel. Madoff claimed that he acted alone, but various relatives and associates have been suspected and sometimes sentenced for associated crimes.

Life

Madoff was born in New York City to a Jewish family. He was married to Ruth Madoff and had two sons, Mark and Andrew. Madoff had several homes in New York State. Two of them were on Long Island in Roslyn and Montauk respectively and the third one, his primary residence on Manhattan's Upper East Side. He also owned homes in Palm Beach, Florida and in France. His 55-foot fishing boat was named "Bull," and he was a member of the Palm Beach Country Club.

Madoff started his firm in 1960 with an initial investment of $5,000 that he said was earned from working as a lifeguard and installing sprinklers. He was active in the National Association of Securities Dealers (NASD), a self-regulatory organization for the U.S. securities industry. His firm was one of the five most active firms in the development of the NASDAQ, and he served as its chairman of the board of directors, and on its board of governors. Madoff's firm was known for "paying for order flow," in other words paying a broker to execute a customer's order through Madoff. A reporter for CNN asked him about this in May 2000. He replied:

"If your girlfriend goes to buy stockings at a supermarket, the racks that display those stockings are usually paid for by the company that manufactured the stockings. Order flow is an issue that attracted a lot of attention but is grossly overrated."

Academics have questioned the ethics of these payments, and compared them to "kickbacks". Paying for order flow is a common practice and has been recognized by the SEC. Madoff had argued that these payments did not alter the price that the customer received. He brought several relatives into his business. His brother, Peter, was a senior managing director. Both of Madoff’s sons, Mark and Andrew, joined the team after finishing their education. Charles Weiner, a son of Mr. Madoff’s sister, also joined the firm, and Peter Madoff’s daughter, Shana, took a job with the company as a lawyer.

His sons Mark and Andrew were allegedly unaware of the imminent insolvency of Madoff Investment Securities. According to the authorities, the sons confronted their father, asking him how the firm could pay bonuses if it could not pay investors, prompting Madoff's admission that he was "finished," after which they reported him to the authorities. The FBI investigation shows no signs of implicating family members of fraud.

Madoff served as the Chairman of the Board of Directors of the Sy Syms School of Business at Yeshiva University, as well as Treasurer of its Board of Trustees. He resigned his position at Yeshiva University after his arrest. Madoff also served on the Board of New York City Center and was a member of New York City's Cultural Institutions Group (CIG). He also did charity work for the Gift of Life Bone Marrow Foundation, and ran a $19 million private foundation that donated money to hospitals and theaters.

Madoff was arrested by the FBI on 11 December 2008 on criminal charges of securities fraud, after he allegedly said that his business was "a giant ponzi scheme." The alleged behavior involves an asset management unit of his firm, rather than the better known market making unit. The criminal complaint alleges that investors lost $50 billion because of the scheme. He was charged with a single count of securities fraud. Madoff was released on the same day of his arrest after posting $10 million bail. He faces up to 20 years in prison and a fine of $5 million if convicted. According to the SEC, Madoff confessed to an FBI agent that there was “no innocent explanation” for his behavior, and that he "paid investors with money that wasn't there". His attorney stated that he "will fight to get through this unfortunate set of events."

The case is U.S. v. Madoff, 08-MAG-02735, U.S. District Court for the Southern District of New York (Manhattan). The Securities and Exchange Commission filed a separate civil suit against Madoff on December 11, 2008. Separately, individual investors have filed civil suits against Madoff. The two firms leading the suits, Milberg LLP (suit led by partner Brad Friedman), and Seeger Weiss LLP (suit led by partner Stephen Weiss) announced on 12 December 2008 that the two firms have been retained by dozens of individual investors.

Victims

According to The Wall Street Journal the investors with the largest potential losses include:

• Investor, Potential loss
• Fairfield Greenwich Advisors, $7.50 billion
• Tremont Capital Management, $3.30 billion
• Banco Santander, $2.87 billion
• Bank Medici, $2.10 billion
• Ascot Partners, $1.80 billion
• Access International Advisors, $1.40 billion
• Fortis, $1.35 billion
• Union Bancaire Privee, $1.00 billion
• HSBC, $1.00 billion

Other investors, with potential losses between $100 million and $1 billion include Natixis SA, Carl Shapiro, Royal Bank of Scotland Group PLC, BNP Paribas, BBVA, Man Group PLC, Reichmuth & Co., Nomura Holdings, Maxam Capital Management, EIM SA, and AXA SA. Twenty-three investors with potential losses of $1 million to $100 million were also listed.

Death

Madoff died of hypertension, atherosclerotic cardiovascular disease, and chronic kidney disease at the age of 82 in Federal Medical Center, Butner, a federal prison for inmates with special health needs near Butner, North Carolina, on 14 April 2021. He was cremated in Durham, North Carolina. His cremation was contrary to traditional Jewish custom and his ashes went unclaimed by his family.