Bernie Madoff, 82, the Wall Street con artist who masterminded the largest Ponzi scheme in history and bilked thousands of investors out of billions of dollars, has died in prison.
The Federal Bureau of Prisons confirmed Madoff’s death Wednesday. He died at the Federal Medical Centre in Butner, North Carolina.
The bureau did not specify a cause of death, saying in a statement that it will be determined by a medical examiner.
Madoff’s death comes about 12 years into a 150-year prison sentence stemming from fraud charges that bilked thousands of investors out of an estimated $65 billion in promised returns on $20 billion invested over the years.
His victims ranged from boldface names such as Steven Spielberg, actors Kevin Bacon and Kyra Sedgwick, New York Mets owners Fred Wilpon and Saul Katz and L’Oreal heiress Liliane Bettencourt to small-time investors who invested their pensions and life savings.
“Because of how long this lasted, it was completely devastating to so many victims,” said Matthew L. Schwartz, the former assistant U.S. attorney for the Southern District of New York who led the investigation of Bernard L. Madoff Investment Securities.
“There were so many people who effectively treated him like a bank and kept their entire life savings with him, so when it was all revealed to be a sham, people were not able to live their lives anymore,” Schwartz said. “They couldn’t pay tuition. They couldn’t pay their mortgages.
“There were so many heart-breaking stories of people who thought they had material savings, who had thought they put everything into their nest egg and that they would be able to retire, and instead they ended up effectively homeless.”
Had he died three decades earlier, Madoff, the former chairman of NASDAQ who was an early champion of computer trading, would have left a very different legacy. He had built a reputation for financial wizardry by navigating investments that delivered consistently.
As it turned out, his magic was mostly smoke and mirrors.
Like all Ponzi schemes, Madoff’s used money from new investors to pay off older ones — with a sliver taken off the top to support his own lavish lifestyle, of course. The scheme could go on nearly indefinitely in theory, as long as enough new investors poured in through intermediaries and smaller firms that were equally blinded by the Madoff company’s reputation.
“People are trained to think of Ponzi schemes promising 50 percent returns a month, but Bernie didn’t do that,” said Diana B. Henriques, the author of “Wizard of Lies,” a book about the scandal that was made into a 2017 HBO movie starring Robert De Niro as the financier.
“He paid returns that barely beat the S&P 500 and sometimes didn’t,” Henriques said. “And that disarmed people immediately.”
Then the 2008 financial crisis hit.
Clients requested $7 billion in returns, but Madoff had access to only a fraction of that. The spider web unraveled, and he was reported to have revealed the scheme to his sons, who then reported him to federal authorities. On Dec. 11, 2008, Madoff was arrested and charged with securities fraud.
At the time of his arrest, the firm’s statements showed $65 billion in its accounts, most of it money that didn’t really exist.
“On the morning that I picked up the newspaper and that’s where we found out about the arrest, we were planning to go out and buy a new car,” said David Levi, who, along with his wife, invested with Madoff for 30 years.
“And when we saw the newspaper and what happened, we looked at each other and I said, ‘We’ll be lucky if we can afford to buy food now,'” added Levi, a retired widower.
Before Madoff would become infamous, he became famous, especially in finance circles.
Madoff, who was born April 29, 1938, may have gotten his education in financial malfeasance at an early age. His parents, Ralph, a former plumber, and Sylvia, ran a company called Gibraltar Securities out of their home in Queens, New York, until the Securities and Exchange Commission closed it over its reporting irregularities.
Madoff attended the University of Alabama for a year before he transferred to Hofstra College (now Hofstra University) on Long Island. In 1959, he married his high school sweetheart, Ruth Alpern, and a year later he graduated with a degree in political science and enrolled in Brooklyn Law School.
Madoff dropped out of law school to follow in his parents’ footsteps and dip his toe into the world of finance. With a $50,000 loan from his in-laws and $5,000 saved up from working as a lifeguard, he launched Bernard L. Madoff Investment Securities. He was 22 years old.
As Madoff Securities’ client base grew, so did Madoff’s influence, especially as an early champion of using after-hours computer technology for trading. He was a pioneering figure in the rise of the stock market now known as NASDAQ, serving as its chairman for three years.
Levi, who started investing with his wife, Susan, shortly after their marriage in 1978, recalled that the couple were recommended into the fold by Robert Jaffe, his brother-in-law. Because Jaffe’s father-in-law was Carl Shapiro, the billionaire philanthropist who was one of Madoff’s oldest clients, Levi never thought to question the returns.
“I was told in no uncertain terms just to stay with us, don’t ask any questions,” Levi said. “Well, when you’re dealing with someone basically recommended by Carl Shapiro, who was probably a multibillionaire, I guess you keep your mouth shut.”
It isn’t clear exactly when Madoff started crossing the ethical line, particularly because honesty was not his currency. He pegged the start of his scheme to 1987, but he later claimed that it was 1992. Madoff’s account manager, Frank DiPascali Jr., who began working for him in 1975, testified that the illegalities had been going on “as long as I remember.”
Henriques points to an incident very early in Madoff’s career, stemming from a stock market drop in 1962, just two years after he opened his company. Because he had invested his private clients’ money in highly risky, speculative stocks on over-the-counter markets, their money was wiped out in a matter of hours. So he secretly borrowed money from his father-in-law, bought the stocks from their accounts and looked like a genius who saved their money in the process.
“Confronted with the necessity of admitting failure, he lied, and he covered up,” Henriques said. “I don’t think this was an otherwise honest, straight guy who succumbed to pressures and went over to the dark side. I think this was a genuine Dr. Jekyll/Mr. Hyde story where Mr. Hyde was living in the dark side of Bernie’s life since the very beginning.
“He has a compulsion to look like a success, and to the extent he needs to lie to do that, he’s perfectly fine to do that,” she said. “The lies are a tool to an end, and that end is to be seen as a brilliant investor, a brilliant Wall Street figure.”
He may have duped those closest to him, as well. Over the years, Madoff plugged many family members into the business — employing his younger brother, Peter, as chief compliance officer and his sons, Andrew and Mark, as traders. But because of the government-mandated separation between their roles and his part of the operation, it is not clear what they knew and when.
“As difficult as it is for me to live with the pain I have inflicted on so many, there is nothing to compare with the degree of pain I endure with the loss of my son’s Mark and Andy,” Bernie Madoff told NBC News by email in 2015.
“I live with the knowledge that they never forgave me for betraying their love and trust. As much as I tried to reach out to them in an attempt to explain the circumstances that caused my betrayal they could not find it possible to forgive me,” he wrote.
Last year, Madoff’s lawyer filed a motion begging the court for forgiveness in the form of an early release, reporting that his client was terminally ill with kidney disease. He was reported to have suffered a heart attack in prison six years earlier.
“He’s terminally ill? I’m terminally broke,” Gregg Felson, one of Madoff’s victims, told The Washington Post at the time of the filing. “He deserves no leniency whatsoever.”