Five Years Later: The Bernard Madoff Ponzi Scheme

Dec 11 2013 | 2:19pm ET

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.


In Depth

Why Ponzi Schemes Work: An In-Depth Look At The Allen Stanford Fraud

Dec 21 2014 | 10:30am ET

Texan Allen Stanford first appeared on the radars of financial regulators in 1997...

Lifestyle

Hedgie Funds US Squash Program

Dec 24 2014 | 8:46am ET

Squash, anyone?

Guest Contributor

EidoSearch’s Top Three Market Projections For 2015

Dec 23 2014 | 4:03am ET

It is that time of year again when prognosticators make their big market calls for...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.