February 26, 2024

Bernard Madoff, mastermind of the largest investment fraud in US history that ripped off tens of thousands of customers valued at up to $ 65 billion, died on Wednesday. He was 82 years old.

His death at the Federal Medical Center in Butner, North Carolina has been confirmed by the Federal Bureau of Prisons.

Madoff died apparently of natural causes, the AP previously reported, citing an unidentified person who was familiar with the matter. He would have turned 83 on April 29th.

Madoff was serving a 150-year sentence in prison where he had been treated for a kidney disease that his lawyer had described as incurable. His request for a compassionate release from prison was denied in June.

He pleaded guilty to a plot in 2009 that investigators said began in the early 1970s and defrauded up to 37,000 people in 136 countries in four decades when Madoff was brought to his knees on December 11, 2008 – after his both sons had given him up. The victims included famous director Steven Spielberg, actor Kevin Bacon, former New York Mets owner Fred Wilpon, Hall of Fame pitcher Sandy Koufax and Nobel Peace Prize winner Elie Weisel, and ordinary investors like Burt Ross, who lost $ 5 million to have .

Madoff insisted that the scam didn’t start until the early 1990s, when “the market stalled due to the outbreak of the recession and the Gulf War”.

In a 2013 email to CNBC from prison, Madoff claimed the market break that sparked the Great Recession led to his scam.

“I thought this was just a short-term trade that could be caught up again once the market became receptive,” he wrote. “The rest is my tragic story that I can never recover.”

In fact, according to investigators, Madoff has not executed a single trade for his advisory clients in years. Instead of using what is known as a split strike conversion strategy, as he claimed, he simply deposited the investors’ funds into a Chase bank account, paid off new customers with funds from previous customers – a classic pyramid scheme – and provided his customers with a fake account statement. The “returns” on the investment reported in these statements – around $ 50 billion in total – were pure fiction.

The Bernard L. Madoff Investment Securities scandal shook investor confidence, which had already been damaged by the financial crisis. And it led to profound changes in the Securities and Exchange Commission, which missed the fraud for years despite repeated warnings, including from independent investigator Harry Markopolos, who set out to analyze Madoff’s improbable returns and found them fraudulent back in 2000 to explain.

A subsequent investigation by the agency’s inspector general, H. David Kotz, found that SEC law enforcement officials decided to take Madoff’s word that his operation was legitimate rather than pursuing clear evidence of fraud.

“When Madoff gave evasive or conflicting answers to key questions on the testimony, they simply accepted his explanations as plausible,” Kotz wrote.

In early 2020, Madoff asked a judge to release him from prison. He was in end-stage kidney disease and too old to have a transplant.

“You know there has never been a day in prison that I did not feel guilty for the pain I inflicted on the victims and my family,” he told the Washington Post at the time. He said his goal was to explain his actions to his grandchildren.

“You know I lost both of my sons and my wife is not really well. So it’s terrible,” he told the Post. “I was very close to my family. I made a terrible mistake. And you know I suffer from it. I will suffer from it when I get out.”

But about four months later, a judge denied the motion, saying Madoff had “committed one of the most egregious financial crimes of all time” and “many people are still suffering.”

Bernard Lawrence Madoff was born in Queens, New York on April 29, 1938, to Sylvia and Ralph Madoff, a plumber who became a stockbroker.

Known on Wall Street for more than 50 years, Bernie Madoff was a great money manager who started his own company at the age of 22 and became the non-executive chairman of Nasdaq in 1990. He was credited with helping develop some of the systems and market structures that moved the stock market beyond the trading floor and resulted in modern electronic trading.

But Madoff’s life collapsed in the depths of the financial crisis in 2008.

Bernie Madoff is leaving Manhattan Federal Court in New York, USA on Monday, January 5th, 2009.

Jin Lee | Bloomberg | Getty Images

Madoff was inundated with redemption requests from his customers and could no longer sustain the fraud. On December 10, 2008, he confessed to his sons, Mark and Andrew, that the investment advisory business was a lie. Madoff had hoped to buy some time to distribute hundreds of millions of dollars in rewards to employees and then close the company. But Mark and Andrew, who were executives in the company’s trading business – which operated independently of the fraudulent advisory business – got none of it and alerted the local authorities.

A day later, on December 11, 2008, the FBI searched his offices in the Lipstick Building on Third Avenue in Midtown Manhattan.

On March 12, 2009, Madoff pleaded guilty to eleven federal crimes and admitted running the largest private Ponzi program in history. Three months later, he was sentenced to a maximum sentence of 150 years in prison with a refund of $ 170 billion.

In court, he insisted that it was all his idea – that his family knew nothing – even though his wife Ruth had once kept the books, his sons were senior executives, and his younger brother Peter was the chief compliance officer.

Andrew Madoff sits between his girlfriend Catherine Hooper and mother Ruth Madoff as he appears on NBC’s “TODAY” show in 2011.

Peter Kramer | NBC NewsWire | Getty Images

However, a trustee hired to track down funds for investors did not buy them. Irving H. Picard sued dozens of people and organizations, including Madoff’s family members, claiming they either knew of the scam or turned a blind eye while it generated millions of dollars in benefits.

The suspicion was too great for the older son Mark. In 2010, two years before the day of his father’s arrest, he became the third suicide-related fraud. He was 46 years old. Four years later, Andrew died of lymphoma at the age of 48.

Picard eventually reached settlements with the sons’ estates and with Ruth Madoff, who continues to deny any knowledge of the fraud and reportedly lives humbly in Connecticut.

In the end, more than a dozen people, including Peter Madoff, were convicted of federal crimes in addition to Madoff, but none of the others were charged with knowing about the fraud. JPMorgan Chase, Madoff’s main bank, paid $ 2.6 billion to the US government and Madoff victims in 2014 to clarify allegations that it was not maintaining adequate controls. After Chase initiated some unspecified reforms, prosecutors dropped charges against the bank.

Medical examiners remove Mark Madoff’s body from his New York apartment on December 11, 2010.

Emmanuel Dunnand | AFP | Getty Images

By mid-2020, Picard had collected more than $ 14 billion for Madoff’s clients, or roughly 75 cents for every dollar invested, a number typically unknown in a Ponzi program. While in jail, Madoff tried repeatedly to have the recoveries recognized, claiming he had pressured his biggest investors to return some of their money.

“These parties were well aware of the incriminating evidence I possessed of their complicit activities and have deliberately presented settlements,” he wrote in 2013.

But Picard and federal investigators said Madoff never provided them any useful help. The remorse he claimed in every message was also suspect. When convicted in 2009, Madoff turned to his victims. “I’m sorry,” he said. “I know that won’t help you.”

It was not like that.

Cheers broke out as Federal Judge Denny Chin ordered the maximum sentence for “extraordinarily evil” crimes.

Ross, a former Fort Lee, New Jersey mayor who testified at the hearing, told Chin: “Put Madoff in jail for the rest of his life. May Satan grow a fourth mouth in which Madoff can spend the rest of eternity . “

In an email to CNBC on Wednesday, Madoff’s chief prosecutor Marc Litt said, “It is sadly fitting that he died in prison.”

“I believe I speak for the team that prosecuted Mr. Madoff and his staff when I say his death closes a dark chapter of deception and greed that has irreversibly damaged the lives of tens of thousands of victims,” ​​Litt said who is now in private practice. “From start to finish, this episode brought nothing but devastation to everyone he touched.”

– CNBC’s Jim Forkin contributed to this report.