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The 2008 financial crisis was one of the worst that had ever been in today’s modern
society. Zip zip zap zap. Besides the Lehman Brothers that caused the financial meltdown, there’s
another incident that triggered a series of financial chaos in many people’s life. This financial fraud
had wiped out almost 65 billion US Dollar worth of investment from people’s hands, and has been
known as the largest Ponzi Scheme ever in history. A Ponzi Scheme is a pretty simple concept where
investors would give money to an individual, and for this example, giving Madoff their money to
invest. Madoff will afterwards give them a healthy return by using the money given by a newer
investor. This means, no money was actually invested as portion amount of money are just
circulating between investors.

We have a dedicated video with the link down below that talks about the story of a person who
bears the same name as the infamous financial scheme, do check it out. From being the chairman of
the NASDAQ Stock Exchange to 150 years in prison, this is the life of Bernie Madoff, an
American fraudster and financier who was the admitted mastermind of the largest Ponzi scheme
ever in history.

Bernie Madoff was born on the 29th of April 1938 in Queens, New York City, to Sylvia and Ralph
Madoff who was a plumber and stockbroker. His family was Jewish as his grandparents were
emigrants from Poland, Romania and Austria. During Madoff’s early life, he graduated with a
Bachelor of Arts in political science, and only briefly attended Brooklyn Law School before
founded his first company, the Bernard Lawrence Madoff Investment Securities and started work
for himself.

1 year after he was married to Ruth Madoff, Bernie Madoff would start off his investment firm in
1960 at the age of 22 with only 5000 dollars in his pocket which he’d made while working as a
lifeguard and irrigation sprinkler installer during the summertime. He also got a loan of 50,000 US
Dollars from his father-in-law, which is approximately 49,000 dollars in 2022, as large sum of
money was needed in order to compete with large investment firms.

Unlike traditional stock exchanges that uses human traders, Madoff’s firm pioneered the use of
electronic trading and hence was able to provide a lower cost for their services, giving them an
edge in a very competitive market. It was believe that at one point, 5 to 10% of all trades in New
York went through his firm in 1971 and the NASDAQ was born. It came with a wave of new
innovations in electronic trading today, such as Robinhood, Etoro et cetera.

In short, the NASDAQ is the second largest stock exchange in the world that consist of many
tech companies such as Apple, Google, Nvidia. It is a global electronic marketplace for buying
and selling securities. In the early 90s, Bernie Madoff would go on to be the chairman of the
Nasdaq which is consider a highly respected position in the financial world.

Madoff’s firm functioned as a third market trading provider, bypassing exchange specialist firms
by directly executing orders over the counter from retail brokers. Madoff was "the first prominent
practitioner" of payment for order flow, in which a dealer pays a broker for the right to execute a
customer's order. Some academics have questioned the ethics of these payments while Madoff
argued that these payments did not alter the price that the customer received hence making it
perfectly legal.

While the .com bubble had created a roller-coaster sequence from 1990 to 2000, wall street was
gaining momentum once again after 2001. But little did they know the empire that Madoff had
built was just a house of cards, just waiting for the right moment to collapse.

Enter Harry Markopolos, a financial fraud investigator with the experienced of working as a
portfolio manager at Rampart Investment Management in 1999. His firm had caught wind of a
hedge fund manager was consistently retaining a 1 to 2% profit per month throughout these
years, and turns out it was the work of none other than Bernie Madoff.
Markopolos was subsequently given the task of replicating Madoff strategy at his own firm but his
superiors. As Markopolos had went through all the years of experience to reverse engineer the
strategy Madoff was using, he still couldn’t understand how Madoff manage to do it.

According to Harry, it took him just 5 minutes of scanning through the made-up revenue stream
to realized that things just didn’t add up. Madoff’s returns were too consistent regardless of the
market conditions. From there, Harry had two theories, either Madoff was trading on insider
information, or he had just begun to unfold the largest Ponzi Scheme that the world had ever
seen.

It almost seems too ridiculous to believe that a scam at such a scale can happened right under
the nose of some of the greatest financial minds in the world. Perhaps it was Madoff who has the
greater talent of lying and convincing people of his achievements. And who would dare to
question the person who had helped modernized the way stock market trading are done.

As Harry started to deconstruct Madoff’s strategy, he ran into a major mathematical

To make sure he was on the right track, he spoke to dozens of equity firms, but none of them
had made any 3rd party trades for Madoff. In other words, it mean Madoff hadn’t made a single
trade since 1993 but was still able to constantly earning gains every month for his clients.

With all the speculation and mathematical proof available, he informed the Securities and
Exchange Commission otherwise known as the SEC that it was legally and mathematically
impossible to achieve the gains Madoff claimed to deliver. However, Harry didn’t have any hard
evidence against Madoff. It was just a theory and some red flags. Hence he 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 provide further evidence.

This is because, Madoff had ties with the SEC and occasionally would even called to provide
advice to Madoff on how to get around the auditors testimony. Example such as cooling falsified
documents in the fridge so that the auditors wouldn’t notice that they had been freshly printed.

Since then, Harry had co-author a book with the leader of his legal team, titled No One Would
Listen. The book details the frustrating efforts he and his legal team made over a ten-year period
to alert the government, the industry, and the press about Madoff's fraud. If interested, you can
get the book on Amazon with the link down below.

The stakes were so high that Harry would underwent many ways to protect himself and his
family, such as routinely check his car for bombs and licensing for firearms while trying to expose
Madoff’s fraud.

https://youtu.be/d7F3NkVZ4Ww (Protecting Self)

https://www.youtube.com/watch?v=gDqGSmTPtOQ&t=67s (7 min)

But someone as smart as Madoff must have known that it was just a matter of time before the
truth would come to light. In the end, it wasn’t Harry or the SEC that exposed Madoff’s financial
fraud, as it was a greater force that had come to play as winter approaches. In December 2008,
Wall Street was drowning in seas of red. Almost everything was completely wiped out in the
Nasdaq with far greater lost seen in the DOW traders.

Trillions of dollars were wiped out from the stock market as subprime mortgages in the US
tumbled mainly due to the Lehman Brothers. To know more of what happened in 2008 that
causes the huge financial meltdown, you can check out the full story on the top right or in the
video description below.
As the global economy was brought down onto its knees, people were panicking, cutting their
losses which creates further selloff. Madoff knew the end was near. As fear has taken over the
stock market, no new money would be pumping into his account and his clients had asked for
their original investment back, the scam would be over and exposed.

Hence, Madoff pulled every string available to get some new cash in. In London, he had created
a new firm called Madoff Securities International which is a subsidiary. Suspiciously, without any
available client, this newly established firm was able to transfer 164 million US Dollars in
November. Billionaire Carl Shapiro alongside a few other investors had put in a total of 260
million US Dollar while the market was still volatile.

Even with those large amounts of cash going into Madoff’s account, he was still desperate to the
extent of dishing out a 19 pages booklet detailing his new investment scheme. But it seemed that
the withdrawal from his clients were still more than what Madoff could bring in.

With the mountain of stress and anxiety that Madoff had to face while not able to fulfil client’s
withdrawal request, he finally plan to turn himself in to the authorities without the intention of
running or hiding at all as he knew it was the end, and the scam is over.

His two sons, Mark and Andrew Madoff had only known about the scam 1 week before the whole
things was exposed. Fearing that they’d become accomplices in their father’s crime, they quickly
called a lawyer who in turn got them in touch with federal prosecutors and the SEC and turned
their father in. And on December 11, 2008, Madoff was arrested at his home and charged with
securities fraud.

Madoff posted $10 million bail in December 2008 and remained under 24-hour monitoring and
house arrest in his Upper East Side penthouse apartment until March 12, 2009. Bernie and his
wife, Ruth sat at home on Christmas Eve as the reality of their world falls apart. The two
childhood sweethearts laid down in bed and consumed a cocktail of prescription medication.

On Christmas Day, the couple woke up and realized their attempt to run away from their
problems had failed. As the worst is yet to come, Judge Denny Chin revoked his bail and
remanded him to the Metropolitan Correctional Center. Chin ruled that Madoff was a flight risk
because of his age, his wealth, and the prospect of spending the rest of his life in prison.

Madoff didn’t fight and admitted on his crimes. With 65 billion US Dollars wiped out from
billionaire’s holdings to everyday people’s pension fund across the entire country, Madoff was
pleaded guilty and was sentenced to the maximum of 150 years in prison at the age of 71 years
old.

In his plea allocution, Madoff stated he began his Ponzi scheme in 1991. He admitted he had
never made any legitimate investments with his clients' money during this time. He was sent to a
prison near Butner, North Carolina with many inmates inside trying to do harm to him. Just a
week later, he was sent to a hospital with severe injuries such as broken ribs and a collapsed
lung. While undergoing recovery, he was also diagnosed with chronic kidney disease.

Both of Madoff son had passed away with mark committing suicide after the scandal and Andrew
died from cancer. His wife, Ruth said she no longer speaks with him. Bernie is allowed a 15-
minute phone call each day but he doesn't use it because in his own words ‘he doesn't have
anyone to talk to’.

On April 14, 2021, Madoff died of natural cause at the age of 82 in Federal Medical Center in
Butner, a federal prison for inmates with special health needs and was cremated in Durham
North Carolina. Thus, ending the story of Bernie Madoff, the mastermind behind the greatest
Ponzi Scheme the world has ever seen.