How Bernie Madoff Was Caught: Biggest Ponzi Scheme Ever

On April 29, 1938, Bernie Madoff was born in Queens, New York. Madoff comes from Europe. Ralph and Sylvia, his parents, didn't have it easy in New York, especially since they had to endure what is now referred to as The Great Depression. The lifestyles of Ralph, a plumber, and Sylvia, a housewife, were not exactly luxurious. They started working in finance in the 1960s, but just as the son would later get involved in shady business practices, his parents were briefly shut down by the U.S. Securities and Exchange Commission because Sylvia, whose name was on the company, had "failed to file reports of their financial condition."

Even though the business was shut down in 1964, there were no fines or consumer payments owed. Bernie was only 26 years old at the time. Also, it was rumored that Ralph owed large sums of money in federal taxes; possibly this is why Sylvia's name was given to the corporation. There can be no doubt that these two shady parents sent their kid on a mission to wreck the economy, even though they both passed away in the 1970s. Madoff reportedly took some time to enter the finance industry because, like any young lad, he was more interested in females and sports, particularly swimming. He married a high school sweetheart in 1959, and in 1960 he earned his degree from Hofstra University in Long Island. Madoff began law school, dropped out, and began following in his parents' financial footsteps with the $5,000 he had made as a lifeguard and his part-time job installing sprinkler systems.

In addition to the $5,000, he borrowed an additional $50,000 to launch Bernard L. Madoff Investment Securities, LLC, which is now arguably the most notorious investment company ever founded. The company had a good outside. It was reputed to be a reliable "market maker." According to the website investing-answers, this is defined as being a person or brokerage firm that "is always available to buy and sell assets to give liquidity to the markets."

Simply put, to keep the wheels moving, they buy when people sell and sell when people buy. They invest when people are selling, not when a stock increases in value. According to Investopedia, the presence of market traders would result in more transactions between investors and traders, which would benefit the market as a whole. However, how do they gain money by taking such risks? They do, however, charge a little bit more when they sell the shares they purchased.

A bid-ask spread is what this is called. We can't get into too much detail on the operation of the stock exchange, therefore that is a simple explanation. We need to look into how Mr. Madoff acquired his billions, though. He was highly renowned, as we already mentioned, for providing excellent returns on the funds he handled for his clients. Supposedly, Kevin Bacon and Steven Spielberg were among those clients.

Madoff was regarded as a good man in the financial industry. NASDAQ, also known as the National Association of Securities Dealers Automated Quotations, was founded with his assistance, and he served three years as its chairman. His brother, Peter, was on the board of directors of the Securities Industry and Financial Markets Association for two years and made gifts to charitable organizations and political candidates.

When Madoff was first looked at in 1992, it wasn't until later investigations by private companies that they discovered what they called "inconsistencies" that appeared to be a fraud. For years, investigators had stated that the profits Madoff claimed to be making seemed to be beyond belief.

Harry Markopolos

Financial expert Harry Markopolos had been warning people for years that something didn't seem right. Unfortunately for them, the Securities and Exchange Commission ignored him despite his repeated requests and mounting evidence of what appeared to be a hoax. Yet, he wasn't the only one who didn't believe the figures; many people shied away from doing business with Madoff. But how did Madoff get his hands on the money of so many?

What he had is known as a Ponzi Scheme, which is, to put it simply, a fraud that promises extremely high returns on investments. It was called after Charles Ponzi, who promised to return 50% extra of any money you provided him in just 90 days if you did. Sounds fantastic, but once you pay out the first few, word spreads that there is, in fact, a significant return, and soon plenty of people want to become involved.

While expanding, you continue to accept new investments and use that money to repay previous investors. The issue is that you aren't earning any money. Naturally, if every major investor demanded their money, you'd be in tremendous problems. Instead, you persuade them to retain their money invested because the return will eventually be even greater.

It's believed that Madoff and his closest employees constructed phony stocks that appeared to offer high profits while also manipulating trade records using a computer program. On paper, it appeared that he was making money to the undiscerning eye. When his clients demanded a total refund of $7 billion from him, Bernie said he only had between $200 and $300 million of their money.

This well-known market maker who served on the NASDAQ board has been luring victims into a con all this time. He reportedly had a large number of investors, who collectively lost roughly $65 billion. Additionally, it is estimated that Madoff made around $20 billion.

He reportedly confessed to his sons Andrew and Mark that he had been operating a Ponzi Scheme when they confronted him. Everything, he claimed, was "simply one giant lie." Despite the fact that Madoff's brother Peter was a part of the fraud, the sons were unaware of it. The sons found this difficult, and they both passed away shortly after, Mark by suicide and Andrew by lymphoma.

Although many people who lost money won't get much, if anything, back, the U.S. government assured 24,000 victims in 2017 that a total of $772.5 million would be divided among them. On December 11, 2008, Madoff was taken into custody and accused of securities fraud. He had enough money to cover his bail, which was set at $10 million.

He was put under house arrest for a few months before the bail was revoked because the judge believed Madoff posed a flight risk. In 2009, at the age of 71, he received a 150-year prison term. On November 14, 2139, at the age of 201, he will be released if he maintains good behavior. Of course, that won't happen, and it appears the con artist may have gotten the last laugh.

He got sick a lot in jail because of the stress and other inmates also ended up harming him. Some people say that the attack didn't happen, which is very far from the truth. This could be true, since Madoff said in a letter to his son-in-law, “They call me either Uncle Bernie or Mr. Madoff. I can't walk anywhere without someone shouting their greetings and encouragement, to keep my spirit up. It's really quite sweet, how concerned everyone is about my well-being, including the staff.”

Reliable news sources say it's funny that Madoff used his skills to take advantage of certain markets while in prison. One man who was writing an audio series about Madoff said, “At one point, he cornered the hot chocolate market,” He also said, "He bought all of the Swiss Miss from the commissary and sold it in the prison yard for a profit. He made it so that, if you wanted any, you had to go through Bernie.”

The dark prince of Ponzi, the true wolf of Wall Street, and it appears that he is now a cunning prison salesman of Swiss Miss in his retirement, is one of the largest con artists in the history of the globe.