CREATED LARGEST PONZI SCHEME IN HISTORY
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 on Wednesday in a federal prison hospital in Butner, N.C. He was 82.
The Federal Bureau of Prisons confirmed the death at the Federal Medical Center, part of the Butner Federal Correctional Complex.
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.
Madoff ’s enormous fraud began among friends, relatives and country club acquaintances, but ultimately grew to encompass major charities like Hadassah, universities like Tufts 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 the mortgage market in mid-2007 and reached a clifresh max 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 By December 2008, more than $12 billion had been withdrawn and little cash was coming in to cover redemptions.
Faced with ruin, Madoff confessed to his two sons that his supposedly profitable 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 and were scattered from Palm Beach, Fla., to the Persian Gulf. The paper losses totaled $64.8 billion.
More than money was lost. At least two people, in
despair over their losses, killed themselves. 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 oldest son, Mark, died by suicide in his Manhattan apartment early on the morning of 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, but he was not accused of knowingly participating in the Ponzi scheme.
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 workingclass 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 on Long Island 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 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 computerized trading.
Madoff’s market leadership and his firm’s willingness to challenge Wall Street traditions made him a trusted adviser as federal regulators struggled to modernize the nation’s marketplace without jeopardizing its international stature. By age 70, he had become an influential spokesman for the traders who were the hidden gears of the marketplace.
But it later became clear that he had started engaging in questionable practices soon after he arrived on Wall Street.
By the early 1960s, he had started accepting money raised for him by his fatherin-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 moneymanagement 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 they 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.
Before being sentenced on June 29, 2009, in a Manhattan federal courtroom packed with spectators and victims, he read from a statement he had prepared with his defense 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.