Bernie Madoff
Bernard "Bernie" Madoff was a financier born on April 29, 1938, in Queens, New York, who became infamous for orchestrating one of the largest Ponzi schemes in history. He founded Bernard L. Madoff Investment and Securities LLC in 1960, initially gaining acclaim for his pioneering contributions to the technology behind the NASDAQ stock exchange. Madoff cultivated an image of trustworthiness, attracting wealthy clients, including celebrities and philanthropists, while secretly defrauding them of billions of dollars. The scheme, which began in the 1980s, collapsed in December 2008 when Madoff confessed to his sons, who subsequently reported him to authorities. He was arrested, pleaded guilty to multiple felony counts, and was sentenced to 150 years in prison. The fallout from his actions devastated thousands of investors, with significant financial and emotional repercussions. Madoff remained incarcerated until his death on April 14, 2021. His family life was deeply affected by his crimes, with tragic losses, including the suicides of his son Mark and the death of his other son Andrew.
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Subject Terms
Bernie Madoff
Stockbroker, hedge-fund investment manager, fraudster
- Born: April 29, 1938
- Place of Birth: Queens, New York
- Died: April 14, 2021
- Place of Death: Butner, North Carolina
Education: Hofstra University, Brooklyn Law School (did not graduate)
Significance: The founder of Bernard L. Madoff Investment and Securities LLC, Bernie Madoff swindled billions from investors in a Ponzi scheme from the 1980s until his arrest in 2008. Madoff pleaded guilty to eleven felony counts and was sentenced to 150 years in prison.
Background
Bernard "Bernie" Lawrence Madoff was born on April 29, 1938, in Queens, New York. His parents, Ralph and Sylvia Madoff, were Polish immigrants. Ralph first worked as a plumber and Sylvia as a homemaker. The couple married in 1932 during the Great Depression and like most Americans, faced financial devastation.
Ralph and Sylvia later became involved in finance and ran a broker-dealer operation called Gibraltar Securities out of their home. The company was not successful, however, and the Securities and Exchange Commission (SEC) closed it because the Madoffs failed to file required reports. The Madoffs earned a reputation for shady dealings.
Bernie Madoff attended Far Rockaway High School, where he met his future wife, Ruth Alpern. He was a member of the school’s swim team and worked as a lifeguard for the Silver Point Beach Club in Long Island.
Madoff graduated from high school in 1956 and for one year attended the University of Alabama, where he joined Sigma Alpha Mu, a Jewish fraternity. He transferred to Hofstra University, where he earned a degree in political science. After Hofstra, he attended the Brooklyn Law School (but did not graduate) while running his own sprinkler system business on the side. Madoff invested $5,000 that he had saved from installing sprinkler systems and working as a lifeguard and borrowed $50,000 from his in-laws to open an investment firm, Bernard L. Madoff Investment and Securities LLC in 1960. Madoff operated the business out of his father-in-law’s accounting office in Manhattan.
Life’s Work
Bernard L. Madoff Investment and Securities LLC at first specialized in "penny stocks," low-priced shares that traded over the counter (OTC). Madoff’s firm grew quickly and became a pioneer in computer information technology, which helped create the National Association of Securities Dealers Automated Quotation System (NASDAQ). Madoff recruited his family and friends to work for the company—his younger brother Peter became his chief compliance officer, and later Madoff’s sons Andrew and Mark became traders for the firm. Peter’s daughter, Shana, became a rules compliance attorney for Madoff.
Madoff sought to attract investors who were rich and famous. Charismatic and flashy, he fit in well among them. Madoff had a penthouse in Manhattan and a yacht docked near the French Riviera. His clients included movie director, producer, and writer Steven Spielberg; Ringo Starr, drummer for the Beatles; Frank Lautenberg, a senator from New Jersey; Fred Wilpon, the owner of the New York Mets baseball team; and actors John Malkovich and Kevin Bacon. He convinced thousands of investors to trust him with their life savings—$65 billion in all—promising them high profits in return.
Madoff’s involvement in the industry and his philanthropy made him seem trustworthy. He was on the board of the National Association of Securities Dealers and an advisor for the Securities and Exchange Commission on trading securities. He served on the boards of nonprofit organizations, including the JEHT Foundation and the Robert I. Lappin Charitable Foundation. He and his wife gave hundreds of thousands of dollars to political candidates and parties. When his son Andrew was diagnosed with lymphoma, Madoff donated $6 billion for research into a cure for the disease.
On December 10, 2008, Madoff informed his sons that he planned to give employees several million dollars in bonuses. When they pressed him to reveal where the money was coming from, he admitted that part of the firm was actually a Ponzi scheme that he had started in the 1980s. In this type of scheme, new investors’ money is used to pay profits to existing investors. This makes the firm look profitable, but actually, no profit is being made. Madoff also pocketed a large amount of the money paid to him by new investors. Ponzi schemes fail when new investors become harder to find and longtime investors ask for returns.
The next day, Madoff’s sons reported him to federal authorities, and he was arrested and charged with securities fraud. Madoff reportedly told authorities that he had lost $50 billion of his clients’ money. On March 12, 2009, the seventy-one-year-old Madoff pleaded guilty to eleven felony counts, including securities fraud, adviser fraud, and mail fraud. He was sentenced to 150 years in a medium-security prison in North Carolina. Having failed to obtain a compassionate release from the Bureau of Prisons in 2019, he submitted a court filing in February 2020 with a similar request and citing that he did not have much longer to live due to advanced kidney disease. Madoff died in prison on April 14, 2021. The following year, Madoff's sister and her husband were killed in an apparent murder-suicide.
Impact
Thousands of people have suffered financially and emotionally because of Madoff’s Ponzi scheme. Charitable foundations funded by Madoff collapsed, including a foundation run by Holocaust survivor Elie Wiesel. In 2015, authorities recovered $11 billion of the money given to Madoff by more than 2,200 investors. Yet, most victims claimed the amount they received was small in comparison to their investment, and their lives have been devastated because of Madoff.
Some of Madoff’s employees have been sent to prison for their role in the Ponzi scheme. Madoff’s brother Peter was sentenced to ten years in prison in 2012. Daniel Bonventre, Madoff’s director of operations, was sentenced to ten years in 2014 along with Annette Bongiorno, Madoff’s assistant and former programmer, who was sentenced to six years. Ruth Madoff was never charged with any crime and, as part of her husband’s guilty plea, was allowed to keep $2.5 million.
Personal Life
Madoff married Ruth Alpern, his high school sweetheart, in 1959. Alpern graduated from Queens College and worked in the stock market. The couple had two children: Mark and Andrew.
Madoff learned of the death of his sons while he was incarcerated; Mark hanged himself in 2010 on the second anniversary of his father’s arrest, and Andrew died of cancer in 2014.
Bibliography
Bernard L. Madoff: Master of the Ponzi Scheme. New York: New York Times, 2015. Print.
"Bernard Madoff."Jewish Virtual Library. American-Israeli Cooperative Enterprise, n.d. Web. 8 May 2016.
Creswell, Julie and Landon Thomas Jr. "The Talented Mr. Madoff." New York Times. New York Times,24 Jan. 2009. Web. 8 May 2016.
Kirtzman, Andrew. Betrayal: The Life and Lies of Bernie Madoff. New York: HarperCollins, 2009. Print.
Timsit, Annabelle. "Bernie Madoff's Sister and Her Husband Found Dead in Apparent Murder-Suicide, Florida Police Say." The Washington Post, 21 Feb. 2022, www.washingtonpost.com/nation/2022/02/21/bernie-madoff-sister-sondra-wiener-murder-suicide/. Accessed 27 Sept. 2024.
Yang, Stephanie. "5 Years Ago, Bernie Madoff Was Sentenced to 150 Yearsin Prison—Here’s How His Scheme Worked." Business Insider. Business Insider, 1 July 2014. Web. 8 May 2016.