Bernie Madoff, architect of largest Ponzi scheme in history, is dead at 82

Bernard L. Madoff, the one-time senior statesman of Wall Street who in 2008 became the human face of an era of financial misdeeds and missteps for running the largest and possibly most devastating Ponzi scheme in financial history, died Wednesday at the Federal Medical Center in Butner, North Carolina. He was 82.

>>Diana B HenriquesThe New York Times
Published : 14 April 2021, 06:13 PM
Updated : 14 April 2021, 06:13 PM

The Federal Bureau of Prisons confirmed the death. Madoff, who was serving a 150-year prison sentence, had asked for early release in February 2020, saying in a court filing that he had less than 18 months to live after entering the final stages of kidney disease and that he had been admitted to palliative care.

Madoff’s enormous fraud began among friends, relatives and country club acquaintances but ultimately grew to encompass major charities like Hadassah, universities like Brandeis and Yeshiva, institutional investors, and wealthy families in Europe, Latin America and Asia.

Buttressed by elaborate account statements and a deep reservoir of trust from his investors and regulators, Madoff steered his fraud scheme safely through recessions and crises. But the financial meltdown that began in mid-2007 and reached a climax with the failure of Lehman Bros. in September 2008 was his undoing.

Hedge funds and other institutional investors, pressured by demands from their own clients, began to take hundreds of millions of dollars from their Madoff accounts. By December 2008, more than $12 billion had been withdrawn and little fresh cash was coming in to cover redemptions.

Faced with ruin, Madoff confessed to his two sons that his money-management operation was actually “one big lie.” They reported his confession to law enforcement, and the next day, Dec. 11, 2008, he was arrested at his Manhattan penthouse.

The victims of his fraud, some of whom went overnight from comfortable wealth to frantic desperation, numbered in the thousands. The paper losses totaled $64.8 billion.

More than money was lost. At least two people, in despair over their losses, committed suicide. A major Madoff investor suffered a fatal heart attack after months of contentious litigation over his role in the scheme. Some investors lost their homes.

Madoff was not spared in these tragic aftershocks. His older son, Mark, committed suicide in his Manhattan apartment on Dec. 11, 2010, the second anniversary of his father’s arrest.

In June 2012, Bernard Madoff’s brother, Peter, a lawyer by training, pleaded guilty to federal tax and securities fraud charges related to his role as the chief compliance officer at his older brother’s firm. In December 2012, he forfeited all his personal property to the government to compensate his brother’s victims and was sentenced to a 10-year prison term. And on Sept. 3, 2014, Madoff’s younger son, Andrew, died of cancer at the age of 48.

Besides the human toll, professional reputations were destroyed. More than a dozen prominent hedge funds and money managers had to admit that they had forwarded their clients’ money to Madoff and lost it all.

And for the Securities and Exchange Commission, which unsuccessfully investigated more than a half-dozen credible tips about Madoff’s fraud scheme since at least 1992, it was the most humiliating failure in its 75-year history.

Bernard Lawrence Madoff was born in Brooklyn on April 29, 1938, to Ralph and Sylvia (Muntner) Madoff, both the children of working-class immigrants from Eastern Europe.

He grew up in Laurelton, at the southern edge of Queens. It was in Laurelton that he met and, in 1959 married, Ruth Alpern, whose father had a small but thriving accounting practice in Manhattan.

Before graduating from Hofstra University in 1960, he had already registered his own brokerage firm with the SEC, Bernard L. Madoff Investment Securities, which he founded partly with money saved from summer lifeguard duty and a lawn-sprinkler installation business he had run in school.

After an uninspired year in law school, he devoted himself full-time to the business of trading over-the-counter stocks.

After his brother, Peter, joined the Madoff firm in 1970, it began to build a reputation for harnessing cutting-edge computer technology. It was one of the early participants in the fledgling electronic market that ultimately became the modern Nasdaq and was involved as an investor in several other platforms for computerised trading.

By the early 1960s, he had started accepting money raised for him by his father-in-law, Saul Alpern, and two young accountants who worked in the Alpern firm. At some point, the two accountants began to sustain this flow of Madoff-bound cash through the issuance of notes that they failed to register with the SEC, as required by law. The commission shut down that hidden money-management business in 1992, after Madoff had received almost $500 million from the accountants’ clients, who believed he was investing it for them.

Regulators filed civil charges against the two accountants, forcing them to shut down their note-sale operation, but failed to follow the money beyond Madoff’s doorstep.

By then, hedge funds, pension plans and university endowments were entrusting hundreds of millions of dollars to Madoff — despite a business operation that was cloaked in secrecy and independent audits that were signed by a one-man firm in a suburban storefront office.

Financial scholars later theorised that Madoff’s Ponzi scheme lasted so long because it appealed more to his clients’ fear than to their greed: He promised them consistency in an increasingly volatile market, not eye-popping returns. And he always delivered.

Before being sentenced on June 29, 2009, he read from a statement he had prepared with his defence lawyer, Ira Lee Sorkin.

“I am responsible for a great deal of suffering and pain, I understand that,” he told the court. “I live in a tormented state now, knowing of all the pain and suffering that I have created. I have left a legacy of shame, as some of my victims have pointed out, to my family and my grandchildren.”

Madoff is survived by his wife, Ruth; his brother, Peter; his sister, Sondra M. Wiener; and several grandchildren.

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