On this day in 2008, financier Bernard Madoff is arrested at his New York City apartment and charged with masterminding a long-running Ponzi scheme later estimated to involve around $65 billion, making it one of the biggest investment frauds in Wall Street history.
Madoff, who was born in Queens, New York, in 1938, founded a small trading firm bearing his name in 1960. The business was established, in part, with money he earned working as a lifeguard. Two decades later, Madoff’s firm, which helped revolutionize the way stocks are traded, had grown into one of the largest independent trading operations in the securities industry, and he and his family lived a life of luxury, owning multiple homes, boats and expensive artwork and jewelry.
Based on the success of his legitimate operations, Madoff launched an investment-advisory business as part of his firm, and it was this business that by the 1990s had become a Ponzi scheme, in which he paid his earlier investors with funds received from more recent investors. For years, clients of this business were sent account statements showing consistently high—and fraudulent—returns. Potential new customers clamored for Madoff to invest their money. However, in 2008, with the U.S. economy in crisis, Madoff’s financial swindle began to fall apart as his clients took money out faster than he could bring in fresh cash.
On December 10, 2008, Madoff revealed to his brother and two sons, who worked for the legitimate arm of his firm, that his investment-advisory business was a fraud and nearly bankrupt. Madoff’s sons turned in their father to federal authorities, who arrested him the next day. Madoff was freed on $10 million bail, and placed under 24-hour house arrest at his penthouse on Manhattan’s Upper East Side.
The fallout from Madoff’s scam was widespread: The victims included everyone from his wealthy country-club acquaintances, Hollywood celebrities, banks and hedge funds to universities, charities and ordinary individual investors, some of whom lost their life savings. The charitable foundation of Holocaust survivor and Nobel Peace Prize winner Elie Wiesel lost more than $15 million, and Wiesel also lost his personal savings. Public outrage was further stoked when it was revealed that since the late 1990s a private financial fraud investigator, Harry Markopolos, had repeatedly warned the Securities and Exchange Commission about his suspicion that Madoff was operating a massive investment scam.
On March 12, 2009, Madoff pleaded guilty to the 11 felony counts against him, including securities fraud, money laundering and perjury. On June 29 of that year, a federal district court judge in Manhattan sentenced Madoff to 150 years behind bars, calling his actions “extraordinary evil.”
On December 11, 2010, the second anniversary of Madoff’s arrest, his 46-year-old son Mark was found dead in his Manhattan apartment after committing suicide. Bernard Madoff, who is serving his sentence at the Butner Federal Correctional Complex in North Carolina, has maintained that his family members knew nothing about his crimes and although they have faced intense scrutiny, none have been charged with any wrongdoing. Several of Madoff’s former employees, including his accountant and chief financial officer, have pleaded guilty in connection with the long-running fraud.