He was not alone9
The Markopolos Whistle11
Charges and Sentence13
2009 Ponzi Schemes16
The SEC Failure17
SEC post- Madoff19
Hedge Fund Transparency20
Table 1: List of Madoff Clients (taken from the "The New York Times", last updated June 24, 2009)15 Table 2: 2009 Ponzi Scheme SEC Charges17
Figure 1 Fairfield Sentry vs Gateway6
Figure 2 Madoff Investor Funds (taken from http://orgnet.com/madoff.html)7
Operating from central Manhattan, Bernie Madoff developed the first and biggest global Ponzi scheme, an event of greed and dishonesty that lasted for more than 20 years, in which $65 billion dollars vanished from the pockets of some of the world’s richest people, charities and ordinary investors alike. This scheme lasted longer than any other white collar crime in history and along the way ruined countless individuals and organizations. “The Madoff Ponzi scheme has changed the rules of trust that governed the money game.” Unlike other similar schemes, Madoff’s Ponzi scheme also scammed wealthy and investment savvy individuals that Madoff associated with. Bernard Madoff is a former financier, American hedge-fund investment manager, chairman of the NASDAQ (National Association of Securities Dealers Automated Quotations) stock exchange, and chairman of the firm Bernard L. Madoff Investment Securities LLC. He is the main conspirator of the history’s largest investor fraud committed by a single person. As a result of his act, Madoff was sentenced on June 29th, 2009 to 150 years in prison for crimes that the judge called “extraordinarily evil”3 and imposed a sentence that was three times as long as the federal probation office suggested and more than 10 times as long as defense lawyers had requested. Early Career
Bernard Lawrence Madoff was born in New York City on April 29, 1938 and grew up in a predominantly Jewish neighborhood. He earned a degree in political science from New York’s Hofstra University in 1960 and founded the Wall Street firm Bernard L. Madoff Investment Securities LLC the same year.1 He was a pillar of finance and charity. As an outstanding philanthropist he served on boards of nonprofit organizations around the world such as businesses, charities and foundations, many of which were entrusted by his endowments.
The firm started as a penny stock trader with $5,000 dollars he saved from working as a sprinkler system seller and lifeguard. In the beginning the firm started trading common stock over the counter (OTC) through the National Quotation Bureau using Pink sheets. It later challenged the New York Stock Exchange (NYSE) old brokers by using powerful marketing techniques to win clients and promoting electronic trading using innovative computer information technology. His firm grew with help from people around him such as his father-in-law, who referred him to friends and family. Madoff helped created NYSE rival, NASDAQ, where he later became the chairman. The Firm
Bernard L. Madoff Investment Securities LLC functioned as a securities broker and/or dealer in The United States and internationally. Headquartered in New York City, it provided executions for dealers, brokers and financial institutions. The firm had been one of the top market makers on Wall Street with Madoff as the principal face. In plain terms, a market maker is an institution (brokerage company or bank) that is ready to execute stock trades (buying and selling) at every second of the trading day and charges a small fee for every trade via the use of a spread in the ask or bid price. It functioned as a third-maker provider by directly implementing commands from retail brokers. At one point, Madoff Securities was the largest market maker at the NASDAQ and in 2008 was the sixth largest market maker on...