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Bernie Madoff, the Michael Jordan of fraud
How one of the most esteemed investors, beyond any suspicion, created the biggest Ponzi scheme in world history
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How one of the most esteemed investors, beyond any suspicion, created the biggest Ponzi scheme in world history
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1/ Madoff got his start installing sprinklers and working as a lifeguard.
He used the money he earned to start a firm trading penny stocks in the over-the-counter (OTC) market.
He used the money he earned to start a firm trading penny stocks in the over-the-counter (OTC) market.
2/ In order to compete with the bigger firms trading in larger volumes, his firm started to develop a trading software, which could transmit price quotes and perform electronic trades.
3/ It was later adopted by the market creating NASDAQ, the first electronic stock exchange, with Madoff serving as its chairman in 1990, 1991, and 1993.
In the 1980s, Madoff's firm was processing 10-15% of the stock market flows earning more than $100 million per year.
In the 1980s, Madoff's firm was processing 10-15% of the stock market flows earning more than $100 million per year.
4/ During all these years Madoff had cultivated relationships with all the big figures in the market as well as regulatory agencies, being a prominent and respected member in many of them.
5/ He was well-respected and considered a pioneer of the modern stock market exchanges, earning millions that could provide him and his family a luxurious lifestyle.
However, for reasons even unknown to him, he decided to create the biggest Ponzi scheme of all time.
However, for reasons even unknown to him, he decided to create the biggest Ponzi scheme of all time.
6/ Using his connections and close relationships with wealthy businessmen, he attracted investors to his wealth management firm promising extraordinarily high returns.
His lifestyle and successful image tricked customers into thinking that he was a credible investor.
His lifestyle and successful image tricked customers into thinking that he was a credible investor.
7/ But when investors handed him their money, he simply deposited it into his bank account at Chase Manhattan Bank.
He used it to pay returns to previous investors, providing them with falsified statements and fake trades to justify the profits he had promised.
He used it to pay returns to previous investors, providing them with falsified statements and fake trades to justify the profits he had promised.
8/ Madoff created an illusion of exclusivity, often turning down investors, declining to advertise his fund, and even discouraging withdrawals forbidding investors to invest again in the future.
9/ In 1999, Harry Markopolos, a financial analyst, informed the SEC of Madoff's suspicious activities and fake trades.
Markopolos observed that securities that Madoff claimed to be buying did not exist and that Madoff had to be a fraud.
Markopolos observed that securities that Madoff claimed to be buying did not exist and that Madoff had to be a fraud.
10/ None of the major Wall Street firms traded with Madoff's company, believing his numbers to be fake and his operations and claims illegitimate.
Madoff managed to evade all suspicions despite being investigated numerous times by the SEC that found nothing illegitimate.
Madoff managed to evade all suspicions despite being investigated numerous times by the SEC that found nothing illegitimate.
11/ The house of cards collapsed in 2008 after the financial crisis.
Many investors tried to cash out of their supposedly profitable investments to cover their losses from other investments.
Many investors tried to cash out of their supposedly profitable investments to cover their losses from other investments.
12/ The capital Madoff had left in his account was around $200 million, nowhere close to the requested withdrawals.
Madoff had to finally admit his fraudulent scheme to his family at the end of 2008, with his sons deciding to turn him in, and one of them committing suicide.
Madoff had to finally admit his fraudulent scheme to his family at the end of 2008, with his sons deciding to turn him in, and one of them committing suicide.
13/He was arrested and sentenced to 150 years in prison.
Madoff admitted he started his Ponzi scheme in the 1990s.
However, some of his former employees claimed the scam started in the 1970s.
Madoff admitted he started his Ponzi scheme in the 1990s.
However, some of his former employees claimed the scam started in the 1970s.
14/ The size of the fraud came to a staggering $65 billion, with the invested capital ranging between $10-20 billion.
Among the victims were many pension funds, big banks like HSBC, and Hollywood celebrities like Steven Spielberg, Kevin Bacon, and Larry King.
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Among the victims were many pension funds, big banks like HSBC, and Hollywood celebrities like Steven Spielberg, Kevin Bacon, and Larry King.
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