A Brief History of the Bernie Madoff’s Ponzi Scheme
Right after the financial collapse in the United States last 2008, investors were stunned with 70-year-old financer Bernard “Bernie Madoff” whose hedge funds trapped a number of rich Americans with the promise of record dividends. This stockbroker ran the biggest Ponzi scheme over a period of 17 years.
Bernie’s Early Life
Bernard Lawrence Madoff was born in Queens, New York on April 29, 1938. His Jewish parents were Ralph Madoff, a plumber, and Sylvia Muntner, a housewife. They married in midst of the Great Depression in 1932 and later became involved in the world of finance.
Madoff already started deceiving investors way back in 1989 and his fraud was considered the biggest scam that earned a place in world history. He didn’t just cheat as much as $65 billion to investors, but there are 9,000 more claims filed against him.
What is Ponzi scheme?
This type of scheme is an investment scam that pays investors using the money invested by another investor. This gave the appearance of profits and earnings where there is actually none. The Ponzi scheme is named after Charles Ponzi who arranged a large operation to embezzle immigrants that are looking for investments.
There is no certain date when Madoff’s Ponzi scheme started, he began to testify in the court in 1991. According to his account manager Frank DiPascali, he is already defrauding people longer than he can recall. Madoff has been repeatedly telling journalist Steve Fishman that he was not just to blame for the fraud.
The “Big Four” accounting firms (Deloitte, PwC, EY and KPMG) were the first ones that attracted attention for Bernard L. Madoff Investment Securities LLC.’s long involvement with Stanley Chais, Carl Shapiro, Norm Levy and Jeffry Picower.
How did he do it?
Rich American families invested their money with private banks, wealth managers, and hedge funds. Right after a careful investigation, specialist fund managers were then chosen by professionals. Madoff was the best choice due to his good performance for more than ten years.
Madoff told people that he will invest their money and will fund the payouts with new capital if they wished to retrieve their ventures. His victims include a number of Jewish philanthropic organizations and even notable Hollywood producer Steven Spielberg.
Madoff was turned in by his two sons on December 11, 2008, after telling them about his scheme. They reported him to the Securities and Exchange Commission (SEC) and got arrested. He was forced to forfeit more than $170 billion and sentenced to 150 years in prison the following year.