Image credit to Wikipedia

Bernard Madoff, America’s worst fraudster,  fooled the world for 20 years

Bernard Madoff committed America’s biggest fraud, got 150 years sentence

Date December 10, 2008… The biggest financial fraud in the history of America was exposed. American financiers facing bankruptcy in the recession

American financier Bernard Lawrence Madoff, facing bankruptcy in the recession, told his sons Mark and Andrew that his advisory business was “a big lie.”

The sons complained to the FBI. Madoff was arrested on December 11, 2008. This fraud was worth about 65 billion dollars. As per today’s rates, this amount is about ₹5.54 lakh crores. Madoff fooled more than 40,000 investors from all over the world for about 20 years.

The retirement money of many people who trusted Madoff was lost. The court sentenced him to 150 years. Son Mark committed suicide in the year 2010.

The second son Andrew died of cancer in 2014. This fraud was done by a person who was also the former chairman of the stock exchange Nasdaq.

He was born on 29 April 1938. He died on 14 April 2021.

Start

Bernard Madoff’s firm had two main parts: Legitimate Market-Making and Proprietary Trading Business. Apart from this, there was a secret advisory business, through which this entire fraud was carried out.

In the advisory business, Madoff promised to give annual returns of up to 8-12% in any kind of market condition. This business attracted people, hedge funds, charities and institutions seeking stable returns.

Madoff often refused to take money from investors to create an aura of exclusivity and increase demand. At the same time, he used to take advantage of his former Nasdaq chairman’s image to increase his trust among the people.

Deceptive Tactics

Madoff did not invest the money he took from people. Instead of investing clients’ funds in stocks, bonds or other securities, they were deposited in a bank account.

Madoff and his team prepared fake account statements to show fake trades and profits. These statements showed holdings in blue-chip stocks and Treasury securities.

When clients requested withdrawals, Madoff would make payments using money from new investors. That is, as long as new deposits exceeded withdrawals, the scheme could run smoothly.

Madoff claimed that a complex options strategy of stock purchases and index options enabled him to generate stable returns. But in reality, no such trades took place.

Fall Down 

Trigger: Madoff’s fraud came to light during the 2008 financial crisis. When the market crashed, fear spread among the people. Investors who had given Madoff their funds to manage started demanding their 7 billion dollars. At that time Madoff had only 200-300 million dollars left in the bank.

Effort to escape: Madoff tried hard to bring in new investments. He pressurized loyal customers and even considered raising funds through illegal means, but the amount of investment could not match the withdrawals. Madoff went bankrupt and could not return the money.

Confession: On December 10, 2008, facing bankruptcy, Madoff confessed to his sons, Mark and Andrew, that the advisory business was “a big lie”. They reported Madoff to the FBI, which led to his arrest on December 11, 2008.

Results 

Victims: Thousands of investors, including retirees, lost life savings; charities were shut down (e.g., the Elie Wiesel Foundation). Feeder funds raised globally, affecting European banks and Middle Eastern investors.

Family fallout: Wife Ruth Madoff was unaware of the fraud, suffered public shaming, and lived in exile. Mark committed suicide in 2010; Andrew died of cancer in 2014.

Sentencing

On March 12, 2009, Madoff pleaded guilty to 11 federal crimes, including securities fraud, money laundering, and perjury. In June 2009, Justice Denny Chin sentenced him to 150 years in prison, calling the fraud “extraordinary evil.”

Madoff, then 71 years old, was ordered to pay a compensation of $ 170 billion . This amount was much more than the assets recovered from him.

The case went beyond Madoff’s conviction. Victims of the fraud pursued Madoff’s associates. 15 defendants were convicted

Madoff’s brother Peter was sentenced to 10 years in prison. Another accused, Ruth Madoff, reached a settlement with complainants, forfeiting most of her assets.

However, even with this effort, many investors were not able to fully recover their losses. Madoff’s primary banker JP Morgan Chase also received suspicious activity.

End

Madoff spent his final days battling kidney disease at FCI Butner in North Carolina. He died on April 14, 2021, at the age of 82, after being denied compassionate release in 2020.

*Source from varies news Paper and web.

THANK YOU

ROUSHAN KUMAR