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Bernard Madoff, criminal financier, 1938-2021

When Bernard Madoff’s Ponzi scheme collapsed in December 2008, $65bn vanished overnight, devastating tens of thousands of small investors, charities and religious groups who continue to struggle to this day.

The former chair of the Nasdaq stock market’s confession that his fabled investment company was “one big lie” came at the depths of the financial crisis and riveted global attention. Amid an alphabet soup of opaque financial products that had crashed the world economy, people could understand this crime.

Madoff, who died this week aged 82 in a North Carolina prison, was so hated that he wore a bulletproof vest in court. His saga has sparked at least five on screen depictions, including portrayals by Robert De Niro and Richard Dreyfuss. “Underneath that facade, there truly is a beast. He has fed upon us,” Sheryl Weinstein, one of his victims, testified at his sentencing.

Though the scrappy broker turned Manhattan mogul was the chief villain, Wall Street and the financial capitals of Europe were tarnished, too. His apparent extraordinary run of steady, solid returns had raised red flags for years, but many hedge funds, banks and asset managers clamoured to profit from him rather than ask questions.

Born in 1938 in Queens, Madoff watched his father’s sporting goods business collapse and then dropped out of law school. Using money from lifeguarding and installing sprinklers, he started a tiny brokerage, Bernard L Madoff Investment Securities, in 1960 and built it into a powerhouse with the controversial tactic of paying traders to send their orders to him.

He always felt shut out from “the club” of the New York Stock Exchange and Wall Street’s elite “white shoe” firms. “They fought me every step of the way,” he said in a 2011 prison interview. Yet by the 1980s, his firm was processing up to 5 per cent of NYSE trading.

A side hustle managing people’s money quietly expanded as he tapped a growing network of investors ranging from the New York University endowment to Holocaust survivor Elie Wiesel to members of the Palm Beach country club.

Madoff’s 56-foot yacht “Bull” © Sebastien Nogier/Reuters
Madoff exits federal court in 2009 © Peter Foley/EPA/Shutterstock

Elegant and well-tailored, Madoff cultivated an air of exclusivity. His business occupied a Manhattan skyscraper, and he bought a penthouse and 56-foot yacht named “Bull”. He attributed his results to a mysterious “split strike” strategy.

Asset managers fell over themselves to send him client money, setting up special “feeder funds”. Few seemed concerned that the operation was audited by a two-man shop and refused to use an outside custodian to keep assets safe.

Most investment banks were more suspicious because their traders never seemed to encounter Madoff’s investment arm as a counterparty. But JPMorgan Chase acted as his banker. It later paid a record $2.6bn for failing to alert authorities to the suspicions that led it to pull out $250m of its own money.

Regulators did no better. Though the US Securities and Exchange Commission received six “substantive complaints” from 1992 onwards, its examiners were charmed by Madoff’s “plausible” explanations, a later investigation found.

By 2008, Madoff had taken in $17bn and sent investors false statements claiming that their holdings amounted to $65bn. The tower of lies crumbled when the financial crisis prompted big investors to pull out funds. Since he had been using new investors’ money to pay off old ones, Madoff was trapped. One December evening, he confessed to his family that the whole business was a scam. His sons turned him in to the authorities the next day.

He pleaded guilty in 2009. “I am responsible for a great deal of suffering and pain. I understand that,” he said as he was sentenced to the maximum 150 years. “I am sorry.”

One of Madoff’s sons later killed himself, the other died of cancer. His brother Peter spent nine years in prison, and his wife Ruth was stripped of their fortune. Last year, the original judge rejected Madoff’s request for compassionate release because he had kidney failure. “It was fully my intent that he live out the rest of his life in prison,” Denny Chin wrote.

The trustee charged with trying to recover money for the victims sprayed the financial world with legal claims against those who profited from their Madoff association. More than 30 targets have ponied up $14.4bn so far.

“The pain experienced by the victims of Mr Madoff’s fraud is not diminished by his death, nor is our work on behalf of his victims finished,” the trustee Irving Picard said this week.

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