Bernard Madoff, the investment manager who orchestrated the largest Ponzi scheme in history, has died, according to US media reports.
Madoff, 82, passed away at a federal prison in North Carolina, where he was serving a 150-year sentence after pleading guilty in 2009.
A Wall Street legend for his seemingly golden touch, Madoff was a prominent broker who served as chair of the Nasdaq stock exchange in the early 1990s. His firm, Bernard L Madoff Investment Securities, also managed an increasing pile of private and institutional money and reported steady, market-beating returns.
But in 2008 he confessed to his sons that the firm had become a massive Ponzi scheme disguising years of losses. It was “one big lie”, he told his family. Though he claimed to be the master of a strategy known as “split strike conversion”, Madoff had simply been using new investors’ money to pay off existing ones.
After Madoff’s sons turned him in, prosecutors initially pegged the scheme at $64.8bn, based on the value of investors’ accounts as of November 2008. But Irving Picard, the trustee charged with recovering money for Madoff’s victims, determined that all but $17bn was imaginary. The fraud wiped out fortunes, poisoned relations and ended up destroying Madoff’s family.
Both his sons worked at the family business. One died by suicide two years after Madoff confessed his crime; another died of cancer in 2014. A brother, Peter Madoff, was released from prison last year after serving nine years for falsifying documents and other crimes related to the scheme.
Madoff and his wife Ruth were stripped of most of their assets, including their $14.5m Manhattan penthouse and a luxurious 56-foot yacht named “Bull”. She dyed her hair red to avoid being recognised in public.
After more than a decade of litigation, Picard has recovered $14bn from wealthy investors and hedge funds who took money out of the scheme and banks and asset managers who recommended it to their clients.
Madoff was born in Queens, New York, in 1938 to a middle-class family. After his father’s sporting goods business failed, he supported himself through college by installing sprinkler systems. In 1960 he founded a tiny brokerage, in office space borrowed from his father-in-law. His business grew by leaps and bounds, in part because he employed the controversial tactic of paying traders to send their orders to him.
By the 1970s he had also started a side business managing money for a series of wealthy Jewish families. Its remarkably reliable returns attracted growing interest both in the US and from asset managers overseas.
Madoff’s stellar results had long sparked suspicions on Wall Street. Traders at many of the largest American banks complained they never encountered him as a counterparty. Despite receiving repeated tips to investigate him, the US Securities and Exchange Commission failed to uncover the fraud.
Madoff benefited from his reputation as a Wall Street grandee. In addition to chairing Nasdaq, he served as vice-chair of the National Association of Securities Dealers, an industry regulatory group.
Many of his clients remained with him for decades, so he never had to produce money he claimed he had made for them. But the house of cards collapsed in late 2008, triggered by the wider financial crisis. As the stock market tumbled, investors moved to withdraw billions of dollars that Madoff did not have.
The fallout elicited shock and panic from Manhattan to Palm Beach, Florida, where Madoff had recruited many of his investors at the Palm Beach Country Club.
Among the thousands of investors swindled by Madoff was Mort Zuckerman, the real estate magnate, the pension fund of the town of Fairfield, Connecticut, Royal Bank of Canada and the Hadassah Jewish charity. Many, including Elie Wiesel, the Holocaust survivor, were Jewish, like Madoff.
“We thought he was God, we trusted everything in his hands,” Wiesel said at the time, adding that Madoff was “one of the greatest scoundrels, thieves, liars, criminals”.
The losses suffered by the Wilpon family were considered one reason they were eventually forced to sell their New York Mets baseball team last year to the hedge fund manager Steve Cohen for $2.4bn. Madoff investments have also contributed to years of financial strain at Yeshiva University in New York, where he had been a member of the board.
In a prison interview granted to the Financial Times in 2011, Madoff acknowledged his crimes and offered a self-serving justification.
“You have to understand my history,” he sighed. “I started with $500 in capital. I watched my father go bankrupt. I was very driven. But I was always outside the club, the club being the New York Stock Exchange and white shoe firms. They fought me every step of the way.”
As he handed down Madoff’s sentence in 2009, Judge Denny Chin saw it otherwise. He described Madoff’s crimes as “extraordinarily evil . . . Not merely a bloodless financial crime . . .[but] one that takes a staggering human toll.”