Bernard Madoff, the one-time Wall Street titan who orchestrated one of the largest frauds in history, has died in prison aged 82.
Madoff, known as Bernie, was a former chairman of the Nasdaq stock exchange, and was regarded for years as an investment sage. But unbeknown to his thousands of victims, he was running a Ponzi scheme that wiped out at least $17.5bn in savings.
Imposing a 150-year sentence in 2009, judge Denny Chin called Madoff’s crimes “extraordinarily evil”. His criminal behavior devastated the lives of his victims, leading to suicides, bankruptcies and home losses.
“We thought he was God; we trusted everything in his hands,” Elie Wiesel, the late Holocaust survivor and Nobel laureate, said in the same year. Madoff’s scam cost Wiesel’s foundation $15.2m. Wiesel described him as “one of the greatest scoundrels, thieves, liars, criminals”.
Madoff died at the Federal Medical Center, a prison for inmates with health needs, in Butner, North Carolina, apparently from natural causes. Last year his lawyers filed court papers to try to get him released from prison during the pandemic, saying he had end-stage renal disease and other chronic medical conditions. The request was denied.
In 2008, Madoff pleaded guilty to orchestrating a massive Ponzi scheme, in which instead of investing cash, he paid off older investors with funds from new investors. A court-appointed trustee recovered more than $13bn of an estimated $17.5bn that investors put into Madoff‘s business.
The recovered sum fell far short of the sums Madoff told duped clients he was managing. At the time of his arrest, fake account statements were telling clients they had holdings worth $60bn.
The global financial crisis of 2008 prompted the scheme to unravel, leaving thousands of victims bereft of their savings and Madoff as an avatar for the failure of regulators and financial corruption.
In December 2008, as investors worried about the impending crisis started asked for their money back, Madoff called a family meeting at his Manhattan apartment, and confessed to his sons that the family business they both worked in was based on “one big lie”.
After the meeting, a lawyer for the family contacted regulators, who alerted federal prosecutors and the Federal Bureau of Investigation. Madoff was in a bathrobe when two FBI agents arrived at his door unannounced on a December morning.
He invited them in, and then confessed after being asked “if there’s an innocent explanation”, a criminal complaint said.
Madoff responded: “There is no innocent explanation.”
As well as Wiesel, investors in Madoff’s company included the actors Kevin Bacon, Kyra Sedgwick and John Malkovich, and the Hollywood director Steven Spielberg.
Madoff pleaded guilty in March 2009 to securities fraud and other charges, saying he was “deeply sorry and ashamed”. After spending several months under house arrest at his $7m penthouse apartment, he was led off to jail in handcuffs, to scattered applause from angry investors in the courtroom.
“He stole from the rich. He stole from the poor. He stole from the in between. He had no values,” former investor Tom Fitzmaurice told the judge at the sentencing. “He cheated his victims out of their money so he and his wife … could live a life of luxury beyond belief.”
The Madoff family took a severe financial hit: a judge issued a $171bn forfeiture order in June 2009, stripping Madoff of all his personal property, including real estate, investments, and $80m in assets his wife, Ruth, had claimed were hers. The order left her with $2.5m.
But it also took a toll in more personal terms. In December 2010, Madoff’s eldest son, Mark, was found hanged in his New York apartment on the second anniversary of the billionaire investment manager’s arrest for what was then described the biggest swindle in Wall Street history.
His brother, Peter, who helped run the business, was sentenced to 10 years in prison in 2012, despite claims he was in the dark about his brother’s misdeeds. Another son, Andrew, died from cancer at age 48. Madoff’s wife, Ruth, survives him.
Bernie Madoff was born in 1938 in a lower-middle-class neighborhood in the New York borough of Queens. He began his Wall Street career in 1960 alongside his brother Peter with a few thousand dollars saved from working as a lifeguard and installing sprinklers.
“They were two struggling kids from Queens. They worked hard,” said Thomas Morling, who worked closely with the Madoff brothers in the mid-1980s.
In the 1980s Bernard L Madoff Investment Securities occupied three floors of a midtown Manhattan high-rise. There, with his brother and later two sons, he ran a legitimate business as middlemen between the buyers and sellers of stock.
Madoff raised his profile by using the expertise to help launch Nasdaq, the first electronic stock exchange, and became so respected that he advised the Securities and Exchange Commission on the system.
But what the SEC never found out was that behind the scenes, in a separate office kept under lock and key, Madoff was secretly spinning a web of phantom wealth by using cash from new investors to pay returns to old ones.
Authorities later said that over the years, at least $13bn was invested with the company, which used an old IBM computer to crank out monthly statements showing steady double-digit returns, even during market downturns.
But in truth no securities were ever bought or sold. Frank DiPascali, the company’s chief financial officer, said in a guilty plea in 2009 that the statements detailing trades were “all fake”.
Agencies contributed to this story