Case of Bernard L. Madoff, a Longtime Fixture of Wall Street

“Bernard [Lawrence] Madoff, a longtime fixture of Wall Street, was arrested and charged on Thursday.” Authorities said that, according to a document filed by Madoff with the US. Securities and Exchange Commission on Jan. 7, 2008, Madoff’s investment advisory business served between eleven and twenty»five clients and had a total of about $17.1 billion in assets under management. “Madoff stated that the business was insolvent and that it had been for years,” Lev Dassin, acting United States Attorney for the Southern District of New York, said in a statement.

“Bernard Madoff is a longstanding leader in the financial services industry,” his lawyer Dan Horwitz told reporters outside a downtown Manhattan courtroom where he was arraigned. ”We will fight to get through this unfortunate set of events.” He stated that he always intended to resume legitimate trading activity, but it proved “difficult, and ultimately impossible” to reconcile his client accounts.

In the end, Madoff realized that his scam would eventually be exposed. Bernard Lawrence Madoff was born on April 29, 1938 in Queens, New York City, New York to Jewish parents Sylvia, a homemaker, and Ralph Madoff, a plumber and stockbroker Bernard Madoff attended the University of Alabama hen transferred to and graduated from Hofstra University in 1960 with a Bachelor of Arts in political science.

He went to Brooklyn Law School for a short period of time, then founded the Wall Street firm of Bernard L. Madoff Investment Securities LLC and continued running it. He was the chairman of the company from 1960 until his arrest in 2008.

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Before opening his firm, Madoff worked as a lifeguard and sprinkler installer. With $5,000 that he saved up, he began trading penny stocks. He also secured a loan of $50,000 from his father-in-law who helped him make the firm larger. In order to compete with other firms that were trading on the New York Stock Exchange floor, Madoff’s company began using innovative computer information technology.

The technology that the firm helped to develop became the NASDAQ. In May 2000, Harry Markopolos, a financial analyst and portfolio manager at Boston options trader Rampart Investment Management, alerted the U.S. Securities and Exchange Commission. Maropolos’ bosses asked him to design a product that could replicate Madoff’s returns. Markopolos concluded almost immediately that Madoff’s numbers didn’t add up. After four hours of trying and failing to replicate Madoff’s returns, Markopolos concluded Madoff was a fraud. He told the SEC that based on his analysis of Madoff’s returns, it was mathematically impossible for Madoff to deliver them using the strategies he claimed to use. In his view, there were only two ways to explain the figures—either Madoff was front-running his order flow or his asset management portion of the business was a massive Ponzi scheme.

The SEC did not act on this submission, or the three others made by Markopolos. In December 2008, the general market downturn accelerated. Madoff was running out of cash and needed to increase his returns to keep his scheme going. As the decline accelerated, investors were twing to withdraw seven billion dollars. Madoff needed new investors to keep the money flowing. Even with new investors still giving money to the firm, it still was not enough to keep up with the constant withdrawals. In November 2008, Bernard Madoff Investment Securities received fund transfers of $164 million from Madoff Securities international in London. CarlJ. Shapiro lent $250 million to Madoff around December 1. On December 5, he accepted $10 million from Martin Rosenman.

On December 10,2008, he suggested to his sons, Mark and Andrew, that the firm pay out over $170 million in bonuses two months ahead of schedule, from $200 million in assets that the firm still had. According to the complaint, Mark and Andrew, reportedly unaware of the firm’s pending insolvency, confronted their father, asking him how the firm could pay bonuses to employees if it could not pay investors. Madoff then admitted that he was “finished,” and that the asset management arm of the firm was in fact a Ponzi scheme and stated that it was “one big lie.” Mark and Andrew then reported him to the authorities. On December 11, 2008, Bernard Madoff was arrested and released on $10 million bail.

On March 12, 2009, he pled guilty to eleven federal crimes and admitted to operating the largest Ponzi scheme in history. On June 29, 2009, Madoff was sentenced to 150 years in prison, the maximum prison term, and $17 billion in restitution. Madoff earns forty dollars a month doing prison labor. A year after his father’s arrest, on December 11, 2010, Mark Madoff, Bernard Madoff’s second son, committed suicide in his Manhattan apartment. On October 8, 2013, a trial began for five former Madoff employees, account managers Annette Bongiorno and Joann Crupi, auditor Daniel Bonventre and computer programmers George Perez and Jerome O’Hara, all accused of helping Madoff conceal the Ponzi scheme. Yesterday, March 24, 2014, these five employees were convicted and will be sentenced in late July.