| Born | April 29, 1938 Queens, New York ,USA |
| Residence | Manhattan, New York, USA. |
| Nationality | American |
| Education | Hofstra University (1960) |
| Occupation | Financial services , Investment management |
| Employer | Bernard L. Madoff Investment Securities |
| Known for | Alleged Ponzi scheme , Chairman of NASDAQ (prior) |
| Spouse(s) | Ruth Madoff |
| Children | Mark Madoff (ca. 1964), Andrew Madoff (ca. 1966) |
Who is Bernad Madoff?
Bernard Madoff is an American businessman, and the former chairman of the NASDAQ stock exchange.
He founded the Wall Street firm Bernard L. Madoff Investment Securities LLC in 1960 and was its chairman until December 11, 2008, when he was charged with perpetrating what may be the largest investor fraud ever committed by a single person.
On December 10, 2008 Madoff told his sons, Andrew and Mark, that his investments were “one big lie”, a Ponzi scheme. They then passed this information to authorities.
The following day, FBI agents arrested Madoff.
Five days after his arrest, Madoff’s assets and those of the firm were frozen and a receiver was appointed to handle the case.
Banks from outside the U.S. have announced that they have potentially lost billions in U.S. dollars as a result.
Some investors, journalists and economists have questioned Madoff’s statement that he alone is responsible for the large-scale operation, and investigators are looking to determine if there were others involved in the scheme.
Madoff’s firm, was one of the top market maker businesses on Wall Street (the sixth-largest in 2008), often functioning as a “third-market” and directly executed orders over the counter from retail brokers
Personal Assets
Madoff lived in a ranch house in Roslyn, New York – through 1970s
He owned an ocean-front residence in Montauk since 1981.
His primary residence, valued at more than $5 million, is on Manhattan’s Upper East Side.
He also owns a home in France and a $9.3 million mansion in Palm Beach, Florida.
He is a member of the Palm Beach Country Club and owns a 55-foot (17 m) fishing boat named Bull.
What is Ponzi scheme?
1) A Ponzi scheme – fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit.
2) The term “Ponzi Scheme” is used in United States. In some countries it’s called as pyramid scheme.
3) Ponzi scheme usually offers abnormally high short-term returns in order to attract new investors.
4) However, Ponzi scheme requires ever-increasing flow of money from investors in order to keep the scheme going.
5) The system is destined to collapse because the earnings, if any, are less than the payments.
6) Usually, the scheme is interrupted by legal authorities before it collapses because a Ponzi scheme is suspected or because the promoter is selling unregistered securities.
Some of the other major victims of the Bernard Madoff’s fraud case include France’s BNP Paribas, Spain’s Banco Santander, Japan’s Nomura, Royal Bank of Scotland and Man Group.
All about Madoff and his Ponzi scheme
Madoff started his firm in 1960 with an initial investment of $5,000 that he said was earned from working as a lifeguard and installing sprinklers.
At first, the firm made markets (quoted bid and ask prices) via the National Quotation Bureau’s Pink Sheets.
In order to compete with firms that were members of the New York Stock Exchange trading on the stock exchange’s floor, the firm began to use information technology to disseminate its quotes and set it apart from competitors
At one point, Madoff Securities was the largest “market maker” at the NASDAQ, both buying and selling.
His firm was one of the five most active firms in the development of the NASDAQ, and he served as its chairman.
Madoff’s firm traded up to five percent of the total trades made on the New York Stock Exchange.
Madoff’s firm was “the first prominent practitioner” of “paying for order flow”, in other words paying a broker to execute a customer’s order through Madoff, which has been called a “legal kickback”
Using this method, the firm became the largest dealer in NYSE-listed stocks in the U.S., trading about 15% of transaction volume in these stocks.
By the 2000 Internet boom, Madoff Securities held approximately $300 million in assets and was considered to be one of the top traders of securities in the nation.
Through the years, Madoff claimed his investment strategy consisted of purchasing blue-chip stocks and taking options contracts on them, although he may not have invested much at all.
Sources from the investigation assert that it appears Madoff chose a trading strategy that failed, at which point he began the Ponzi scheme.
According to the federal complaint, the Ponzi scheme had been underway since at least 2005.
Madoff had a ‘Jewish circuit’ of wealthy and prosperous Jews he met at country clubs on Long Island and in Palm Beach.
He attracted many investors from the Palm Beach Country Club.
Madoff had a very successful track record year after year, with returns that were “unusually consistent.
Madoff Securities LLC was investigated at least eight times in 16 years by the SEC or other regulatory authorities.
In 1992, the SEC investigated one of Madoff’s feeder funds, Avellino & Bienes, which invested solely with Madoff. Avellina & Bienes was accused of selling unregistered securities.
In its report SEC mentioned the fund’s “curiously steady” promised yearly returns to investors of 13.5% to 20%. However, the SEC did not look any more deeply into the matter.
Avellino shut down in 1993, with investors receiving their money back .
At the time, Madoff said that he didn’t realize the feeder fund was operating illegally at the time of the investigation; the SEC did not publicly name Madoff because he was not accused of wrongdoing.
The SEC looked into Madoff in 1999 and 2000 about concerns that the firm was hiding its customers’ orders from other traders, for which Madoff then took corrective measures.
In 2001,Harry Markopolos ,a financial investigator, informed SEC officials that Madoff’s firm was engaged in fraudulent practices.
SEC also said it conducted two inquiries of Madoff in the last several years and did not find major problems.
In 2005, SEC suspected three violations of rules: the strategy he used for customer accounts, the requirement of brokers to obtain the best possible price for customer orders and violating SEC rules by operating as an unregistered investment adviser. However, SEC did not find any evidence against him. In 2007, SEC enforcement staff completed an investigation into whether Madoff was running a Ponzi scheme and did not find any fraud.
Signs of trouble
In 2005, Markopolos sent a detailed 17 page memo directly to the SEC, entitled The World’s Largest Hedge Fund is a Fraud.
Among the suspicious signs was the fact that Madoff’s company avoided filing disclosures of its holdings with the SEC by selling its holdings for cash at the end of each period. Such a tactic is highly unusual.
They also used an accounting firm whose only client was Madoff.
Although Madoff was a pioneer of electronic trading, he refused to provide his clients online access to their accounts, always sending everything by traditional mail.
Improbably steady investment returns despite highly volatile markets were another red flag.
In 2007, Madoff Family Foundation donated $95,000 to charitable groups. This was a major drop from previous years. In 2006, the foundation had donated $1,277,600
The scheme began to unravel when, in 2008, the general market downturn motivated a large number of investors to cash out their positions.
They attempted to withdraw $7 billion from the firm, but Madoff struggled to raise this sum.
Source: – Various websites.
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