Five years ago, Wall Street awoke to the shocking news that one of its most respected denizens was a fraud—and the repercussions continue to be felt.
Bernard Madoff was arrested on the morning of Dec. 11, 2008, two days after admitting the fraud to his sons and one day after they turned him in to the authorities. About three months later, Madoff pleaded guilty and in June 2009 was sentenced to 150 years in prison for running a $65 billion Ponzi scheme, the largest in history.
Despite the speed with which Madoff was sent to jail in the wake of his arrest, unraveling his scam has taken much longer. The court-appointed trustee in the case, Irving Picard, has recovered only $9 billion of the $17.5 billion lost in the fraud, and continues to battle with former investors and Madoff's banks in an effort to find more. Five former Madoff employees are on trial right now for aiding and abetting the fraud, and eight others have pleaded guilty in the case—giving lie to Madoff's claim that he acted alone. All told, 15 people, including Madoff, have been charged in the case, with the most recent arrest coming in September: former Madoff business partners Paul Konigsberg, who has pleaded not guilty.
In addition, JPMorgan Chase, Madoff's primary banker for decades, is in talks with prosecutors about a deferred-prosecution settlement over allegations that the bank failed to notify regulators that something might have been amiss at Madoff.
Thousands lost their life savings when the Madoff scheme collapsed five years ago, and at least three people, including Madoff's son, Mark, committed suicide in the aftermath.
A number of notable hedge funds were caught up in the Madoff fraud, and the scheme's unraveling spooked many investors about the space. In the wake of the scandal, hedge funds have a new focus on transparency, seeking to reassure investors that they are no Madoffs.