Tag: Bernard Madoff

Bernard Madoff (born April 29, 1938) was an American former market maker, investment adviser, and financier who was convicted by US authorities of being the criminal mastermind behind the largest Ponzi fraud scheme in history. Madoff died in federal prison on April 14, 2021, at the age of 82. He was the non-executive chairman of the NASDAQ stock market and the confessed operator of the largest Ponzi scheme in the history of the world and the largest financial fraud in the history of the United States. Prosecutors estimated the Madoff fraud to be worth $64.8 billion based on the amounts in the accounts of Madoff's 4,800 clients as of November 30, 2008. Before being a stockbroker, Madoff had started working as a part-time employee during his school vacations, he sold water pumps for residential gardens, he also worked as a lifeguard on New York's beaches on Long Island while he was studying law and with what he saved he was able to start your own investment firm. Madoff founded a penny stock brokerage in 1960 that eventually became Bernard L. Madoff Investment Securities. He served as president until his arrest on December 11, 2008. Madoff's firm was one of the top market-making firms on Wall Street, circumventing "specialty" firms by directly executing orders from over-the-counter retail agents. At the firm, he hired his brother Peter Madoff as senior managing director and chief compliance officer, Peter's daughter, Shana Madoff, as firm director, compliance officer, and attorney, and his now-deceased sons Andrew and Mark. Peter was sentenced to 10 years in prison and Mark committed suicide by hanging himself exactly two years after his father's arrest. Andrew died of lymphoma on September 3, 2014. scam confession On December 10, 2008, Madoff's sons told authorities that their father had confessed to them that his company's asset management unit was a massive Ponzi scheme, citing him as "a big lie." The next day, FBI agents arrested Madoff and charged him with one count of securities fraud. The US Securities and Exchange Commission (SEC) had previously conducted multiple investigations into their business practices but had failed to uncover the massive fraud. On March 12, 2009, Madoff pleaded guilty to 11 federal felonies and admitted to turning his wealth management business into a massive Ponzi scheme. The Madoff investment scandal defrauded thousands of investors out billions of dollars. Madoff said he started the Ponzi scheme in the early 1990s, but federal investigators believe the fraud began in the mid-1980s and may have started as early as the 1970s. Those in charge of recovering the lost money believe that the investment operation may never have been legitimate. The amount missing from client accounts was nearly $65 billion, including fabricated profits. The attorney for the Securities Investor Protection Corporation (SIPC) estimated real losses for investors at US$18 billion. Judgment On June 29, 2009, Madoff was sentenced to 150 years in prison, the maximum allowed, at his age, effectively a life sentence. In February 2020, his lawyer requested compassionate release from prison because he was suffering from chronic kidney failure, a terminal illness, and had less than 18 months to live. Bernard Madoff was hospitalized for this condition in December 2019. Bernard Madoff Youth Bernard Madoff was born on April 29, 1938, in Queens, New York, to Jewish parents Ralph Madoff, a plumber and stockbroker, and Sylvia Muntner. Madoff's grandparents were immigrants from Poland, Romania, and Austria. He was the second of three children; His siblings are Sondra Weiner and Peter Madoff. Education of Bernard Madoff Madoff graduated from Far Rockaway High School in 1956. He attended the University of Alabama for a year, where he became a Sigma Alpha Mu fraternity brother, then transferred and graduated from Hofstra University in 1960 with a bachelor's degree in political science. Bernard Madoff briefly attended Brooklyn Law School, but soon founded the Wall Street firm Bernard L. Madoff Investment Securities LLC and continued to work for his own company. Race At the time of his arrest on December 11, 2008, Madoff was the chairman of Bernard L. Madoff Investment Securities LLC. The firm started in 1960 as a penny stock trade with $5,000 ($43,000 today) that Madoff earned working as a lifeguard and sprinkler fitter. He also obtained a $50,000 loan from his father-in-law which he also used to set up the company. His business grew with the help of his father-in-law, accountant Saul Alpern, who referred him to his circle of friends and their families. The company initially made markets (quoted bid and ask prices) through the National Quotation Bureau's Pink Sheets. To compete with companies that were members of the New York Stock Exchange on the floor of the stock exchange, his company began using innovative computer technology to broadcast its listings. After a trial, the technology the company helped develop became the NASDAQ. After 41 years as a sole proprietorship, The Madoff Firm was incorporated in 2001 as a limited liability company with Madoff as the sole shareholder. Bernard L. Madoff Investment Securities LLC. it functioned as a supplier to the tertiary stock market, bypassing specialized exchange firms by directly executing orders from retail brokers. At one point, Madoff Securities was the largest market maker on the NASDAQ, and in 2008 it was the sixth largest market maker on Wall Street. Madoff's firm also had an undisclosed investment management and advisory division that was the focus of the fraud investigation. Madoff was "the first prominent practitioner" of pay-per-order flow, in which a dealer pays a broker for the right to fill a customer's order. This has been called a "legal bribe". Some scholars have questioned the ethics of these payments. Madoff argued that these payments did not alter the price the customer received. Madoff viewed the payments as normal business practice: "If your girlfriend goes shopping for stockings at a supermarket, the racks displaying those stockings are usually paid for by the company that made the stockings." Order flow is a topic that has attracted a lot of attention, but it is highly overrated. Madoff was active in the National Association of Securities Dealers (NASD), a self-regulatory organization for the securities industry. He also served as chairman of its board of directors and was a member of its board of governors. Investment scandal In 1999, financial analyst Harry Markopolos reported to the SEC that he believed it was both legally and mathematically impossible to achieve the gains Madoff claimed. According to Markopolos, it took him four minutes to conclude that Madoff's numbers didn't add up, and another minute to suspect that they were probably fraudulent. After four hours of failed attempts to replicate Madoff's numbers, Markopolos believed he had mathematically proven Madoff to be a fraud. Wikipedia recounts that Markopolos was ignored by the SEC's Boston office in 2000 and 2001, as well as by Meaghan Cheung at the SEC's New York office in 2005 and 2007 when he presented more evidence. Markopolos has since written a book with Gaytri Kachroo (the leader of his legal team) titled No One Would Listen. The book details the frustrating efforts he and his legal team made over ten years to alert the government, industry, and the press to Madoff's fraud. Although Madoff's wealth management business eventually became a multi-million dollar operation, none of the major derivatives firms traded with him because they didn't believe his numbers were real. None of the major Wall Street firms invested with him, and several high-ranking executives at those firms suspected his dealings and claims were illegitimate. Still, this did not mean that Madoff could not attract large institutional investors, including prominent foundations and even several world-renowned banks. Others argued that it was inconceivable that the growing volume of Madoff's accounts could be competently and legitimately serviced by his documented accounting and auditing firm, a three-person firm with only one active accountant. The Central Bank of Ireland failed to detect Madoff's gigantic fraud when he began using Irish funds and Madoff's firm had to provide vast amounts of information, which would have been enough to allow Irish regulators to uncover the fraud long before it was discovered. late 2008 when he was finally arrested in New York. The financial crisis of 2008 was a definitive element that helped to dismantle the fraud since, amid the global economic recession, many investors began requesting their money, which was no longer available in Madoff's investment fund accounts. The Federal Bureau of Investigation report and federal prosecutors' complaint say that during the first week of December 2008, Madoff confided in a high-ranking employee, identified by Bloomberg News as one of his sons, that he was fighting to provide the usual returns to its investors. For years, Madoff simply deposited investors' money into his trading account at JPMorganChase and withdrew money from that account when they requested refunds. Bernard Madoff had raised enough money to make a yield payment on November 19. However, despite receiving cash infusions from several longtime investors, by the week after Thanksgiving it was apparent that there was not enough money to start fulfilling the remaining requests. His Chase account had more than $5.5 billion in mid-2008, but by the end of November, it had dropped to $234 million, not even a fraction of the outstanding refunds. On Dec. 3, he told his longtime assistant Frank DiPascali that he had overseen a fraudulent counseling business, and it was finally over. On December 9, he told his brother about the fraud. According to the sons, Madoff told Mark Madoff the next day, Dec. 9, that he planned to pay $173 million in bonds two months early. Madoff said that he " had recently made a profit through trading, and now was a good time to distribute it." Mark told Andrew Madoff, and the next morning they went to his father's office and asked how he could pay bonuses to his staff if they were having trouble paying clients. They then traveled to Madoff's apartment, where with Ruth Madoff nearby, Madoff told them that he was "done," that he had "absolutely nothing" left, and that his mutual fund was "just a big lie" and " basically, a giant Ponzi. " ”. According to their attorney, Madoff's children told federal authorities about their father. Madoff intended to finish his operations for the rest of the week before his sons handed him over; he directed DiPascali to use the remaining money in his business account to withdraw funds from various family members and favorite friends of his. However, as soon as they left his father's apartment, Mark and Andrew immediately contacted an attorney, who in turn contacted federal prosecutors and the SEC. According to these testimonies, Mark Madoff had no knowledge of the fraud orchestrated by his father, despite having worked for years at the investment firm that carried it out. However, many of the subsequent investigations fell on him, and apparently, it was due to the continuous pressure and accusations against him that Mark ended up committing suicide in his New York apartment in 2010. Mark's body was found by his son and by stepfather on the same day of his death. On December 11, 2008, Bernard Madoff was arrested and charged with securities fraud. Madoff posted $10 million bail in December 2008 and remained under 24-hour surveillance and house arrest in his Upper East Side penthouse apartment until March 12, 2009, when Judge Denny Chin revoked his bail and sent him to the Center. Metropolitan Correctional. Judge Chin ruled that Madoff presented a flight risk due to his age, his wealth, and the possibility of spending the rest of his life in prison. Prosecutors filed two asset forfeiture pleadings that include lists of valuable real and personal property, as well as financial interests and entities owned or controlled by Madoff. Madoff's attorney, Ira Sorkin, filed an appeal that was opposed by prosecutors. On March 20, 2009, an appeals court denied Madoff's request to be released from jail and return home until his sentencing on June 29, 2009. On June 22, 2009, Sorkin hand-delivered a customary pre-sentencing letter to the judge requesting a 12-year sentence, due to Social Security Administration tables that his life is projected to be 13 years. On June 26, 2009, Chin ordered the forfeiture of $170 million in Madoff's assets. Prosecutors asked Chin to sentence Madoff to 150 years in prison. Bankruptcy supervisor Irving Picard said, "Mr. Madoff has not provided significant cooperation or assistance." In a deal with federal prosecutors, Madoff's wife, Ruth, agreed to forfeit her claim of $85 million in assets, keeping $2.5 million in cash. The order allowed the SEC and designated trustee, Irving Picard, to go after Ruth Madoff's funds. Massachusetts regulators also accused her of withdrawing $15 million from company-related accounts shortly before he confessed. In February 2009, Madoff settled with the SEC. It was later revealed that as part of the settlement, Madoff agreed to a lifetime ban from the securities industry. Picard sued Madoff's sons Mark and Andrew, Madoff's brother Peter and Peter's daughter Shana for negligence and breach of fiduciary duty for $198 million. The defendants had received more than $80 million in compensation since 2001. In 2011, Bernie Madoff's wife Ruth Madoff told the media that on New Year's Eve 2008 she and her husband had attempted suicide by overdosing on sleeping pills, however, the couple woke up the next day. Ruth recounted that they received many harassing calls from people saying “horrible things” to them. Months later she told her son Andrew of the suicide attempt. But despite having tried to commit suicide along with her husband, Ruth distanced herself from him sometime later and would later claim that the man who committed the fraud was no longer the same one she had married decades before. Then she Ruth she would change her residence from New York to Florida, where she tried to go unnoticed. How the Bernard Madoff fraud worked According to the SEC's indictment against Annette Bongiorno and Joann Crupi, two white-collar workers who worked for Bernard Madoff created false trading reports based on the returns (return) Madoff ordered for each client. For example, when Madoff determined a customer return, one of the back office workers would enter a false trade report with an earlier date and then enter a false closing trade in the amount required to produce the required profit, according to the accusation. Prosecutors allege that Bongiorno used a specially designed computer program to backtrack trading and manipulate account statements. He quotes her when he wrote to a manager in the early 1990s: "I need the ability to give the settlement date I want." In some cases, the returns were allegedly determined before the account was opened. Daily, DiPascali, Madoff's assistant, and his team were on the 17th floor of the Lipstick Building, where the scam was located (Madoff's brokerage was on the 19th floor, while the main entrance and conference room were on the second floor). 18), watched the S&P 100 close in price. They then picked the best-performing stocks and used them to create fake "baskets" of stocks as the basis for fake trading records, which Madoff claimed were generated from his alleged strategy of " split strike conversion', which was supposedly made by buying blue chip stock and options contracts on it. They frequently made their "trades" (actually dummy trades) at the monthly high or low of stock, resulting in the high "returns" they promoted to clients. Occasionally, trades held on weekends and federal holidays were slipped and dated, although this was never discovered. Over the years, Madoff has warned his investors not to talk about their relationship with him. This was because he was well aware of the finite limits that existed to a legitimate split strike conversion. He knew that if the amount he "managed" was known, investors would wonder if he could trade on the scale he claimed without the market reacting to his activity, or if there were enough options to cover his stock purchases. At least as early as 2001, Harry Markopolos discovered that for Madoff's strategy to be legitimate, he would have had to buy more options on the Chicago Board Options Exchange than existed. In addition, at least one hedge fund manager, Suzanne Murphy, revealed that she did not want to invest with Madoff because she did not believe there was enough volume to support his alleged trading. Madoff admitted during his March 2009 plea that the essence of his plan was to deposit client money into a Chase account, instead of investing it and generating consistent returns as clients had believed. When clients wanted their money, " I used the money in the Chase Manhattan bank account belonging to them or other clients to pay the requested funds ," he told the court. Notable victims of Bernard Madoff Madoff defrauded many well-known institutions and individuals who trusted him with their money due to his reputation as an experienced stockbroker. Having been president of Nasdaq made many feel confident that the investments they made with him were safe. A foundation of film director Steven Spielberg, HSBC bank, Santander Group, Royal Bank of Scotland, BBVA, BNP Paribas, Japanese broker Namura, Bank of Austria, Yeshiva Jewish University, Royal Dutch Shell, the for Humanity Elie Wiesel, French Bank Société Générale, Credit Agricole, Fortis Bank, Union Bancaire Privée, The South Korean Educators Pension Fund, Ruth and Carl J. Saphiro, Alicia Koplowitz, Kevin Bacon and Kyra Sedgwick, Norman Braman, the economist Henry Kaufman, among many others were victims of this stockbroker's fraud. The Big Question Was Madoff an evil person? Simplifying Madoff's actions as pure evil would be something that ignores the different facets of his actions. Without justifying his actions in any way, we must remember that the millionaire swindler was also involved in philanthropic activities and served on the board of directors of various non-profit institutions. The financier undertook philanthropic activities for the Bone Marrow Gift of Life Foundation and gave several donations through the Madoff Family Foundation, a $19 million foundation that he co-managed with his wife. The Madoff couple also donated money to hospitals and theaters, the foundation also contributed to many educational and cultural organizations. After Madoff's arrest, the foundation's assets were seized by a federal court. The end of the story Bernard Madoff in prison Madoff was transferred as an inmate to the Federal Correctional Complex, Butner in North Carolina, under FBP registration # 61727-054. On December 18, 2009, Madoff was transferred to Duke University Medical Center in Durham, North Carolina, and received treatment for various facial injuries. A former inmate later claimed that the injuries were received during an alleged altercation with another inmate, Other news reports described Madoff's injuries as more serious and include " facial fractures, broken ribs and a collapsed lung." The Federal Bureau of Prisons said Madoff signed an affidavit on Dec. 24, 2009, stating that he had not been assaulted and had been admitted to the hospital for high blood pressure. In his letter to his daughter-in-law, Madoff said he was being treated in prison like a "mafia kingpin." They call me Uncle Bernie or Mr. Madoff. I can't walk anywhere without someone shouting his regards and encouragement from him, to keep my spirits up. It's very sweet, how concerned everyone is about my well-being, including the staff It's much safer here than walking the streets of New York, " Madoff said. After an inmate slapped Madoff because he had changed the channel on the television, Madoff was reported to befriend Carmine Persico, head of the Colombo crime family since 1973, one of New York's Five American Mafia families. . Persico was believed to have bullied the intern who slapped Madoff across the face. In 2010, The New York Magazine newspaper had access to Madoff in his cell, from where the scammer had stated that he did not regret or feel the damage caused to his scammed: "Fuck my victims" he said. For the scammer, those who turned to him for a return on their money were "greedy" and "stupid". However, fooling people for 20 years was no easy task. “It was a nightmare for me,” said Madoff, who stated in the newspaper that he would have liked to have been caught “six or eight years ago” and that prison was a liberation for him. Madoff's death On Wednesday, April 14, the United States prison authorities confirmed the death of the financier in a federal prison in Butner, North Carolina, at the age of 82 and of natural causes. With information from Wikipedia.