28/02/2022, 13:09 Bernie Madoff | Biography, Ponzi Scheme, & Facts | Britannica

menu
search Subscribe Login
keyboard_arrow_down
Bernie Madoff keyboard_arrow_down
Table of Contents

Home keyboard_arrow_right Politics, Law & Government keyboard_arrow_right Businesspeople & Entrepreneurs

Bernie Madoff
American hedge-fund investor
Alternate titles: Bernard Lawrence Madoff

print Print
verified Cite
share Share
more_vert More

By
The Editors of Encyclopaedia Britannica
•
Last Updated: Jan 12, 2022
•
Edit History

zoom_in

Bernie Madoff

Drive change with your PMP®See all media

Work smarter and drive meaningful change. Apply for a PMP® certification now.
PMI 29, 1938 •
New York City •
New York
Born:
April

https://www.britannica.com/biography/Bernie-Madoff 1/5
28/02/2022, 13:09 Bernie Madoff | Biography, Ponzi Scheme, & Facts | Britannica

Died:
April 14, 2021 (aged 82) •
North Carolina

See all related content →

Bernie Madoff, in full Bernard Lawrence Madoff, (born April 29, 1938, Queens,
New York, U.S.—died April 14, 2021, Federal Medical Center, Butner, North Carolina),
American hedge-fund investment manager and former chairman of the NASDAQ
(National Association of Securities Dealers Automated Quotations) stock market. He was
best known for operating history’s largest Ponzi scheme, a financial swindle in which
early investors are repaid with money acquired from later investors rather than from
actual investment income.

Madoff grew up in the predominantly Jewish neighbourhood of Laurelton in Queens,

New York. After spending his freshman year at the University of Alabama, he earned a
degree (1960) in political science from Hofstra University, Hempstead, New York. He
studied law briefly at Brooklyn Law School before founding (1960) Bernard L. Madoff
Investment Securities with his wife, Ruth, who worked on Wall Street after earning a
degree in psychology from Queens College, City University of New York. Madoff’s
specialty was so-called penny stocks—very low-priced shares that traded on the over-the-
counter (OTC) market, the predecessor to the NASDAQ exchange. Madoff served as a
NASDAQ director for three one-year terms.

₱279 ₱192.41 ₱24.05 ₱384.83

₱14,431.37 ₱808.15 ₱539.18 ₱18,712.68

Drive change with your PMP®
SourceWorkwithsmarter
Alibaba.com
and drive meaningful change. Apply for a PMP® certification now.
Alibaba.com
PMI

https://www.britannica.com/biography/Bernie-Madoff 2/5
28/02/2022, 13:09 Bernie Madoff | Biography, Ponzi Scheme, & Facts | Britannica

Madoff cultivated close friendships with wealthy, influential businessmen in New York
City and Palm Beach, Florida, signed them as investors, paid them handsome returns,
and used their positive recommendations to attract more investors. He also burnished
his reputation by developing relationships with financial regulators. He exploited an air
of exclusivity to attract serious, moneyed investors; not everyone was accepted into his
funds, and it became a mark of prestige to be admitted as a Madoff investor.
Investigators later posited that Madoff’s pyramid, or Ponzi, scheme, originated in the
early 1980s. As more investors joined, their money was used to fund payouts to existing
investors—as well as fee payments to Madoff’s firm and, allegedly, to his family and
friends.

Some skeptical individuals concluded that his promised investment returns (10 percent
annually, in both up and down markets) were not credible and questioned why the firm’s
auditor was a small storefront operation with few employees. In 2001 Barron’s financial
magazine published an article that cast doubt on Madoff’s integrity, and financial analyst
Harry Markopolos repeatedly presented the Securities and Exchange Commission (SEC)
with evidence, notably a detailed investigation, “The World’s Largest Hedge Fund Is a
Fraud,” in 2005. Still, the SEC took no actions against Madoff; large accounting firms
such as PricewaterhouseCoopers, KPMG, and BDO Seidman reported no signs of
irregularities in their financial reviews; and JPMorgan Chase bank ignored possible
signs of money-laundering activities in Madoff’s multimillion-dollar Chase bank
account. In fact, the Chase account was used to transfer funds to London-based Madoff
Securities International Ltd., which some said existed solely to convey an appearance of
investing in British and other European securities. No one knew that the supposed
trades were not taking place, because, as a broker-dealer, Madoff’s firm was permitted to
book its own trades. Madoff’s employees reportedly were instructed to generate false
trading records and bogus monthly investor statements.

Drive change with your PMP®

Work smarter and drive meaningful change. Apply for a PMP® certification now.
PMI

https://www.britannica.com/biography/Bernie-Madoff 3/5
28/02/2022, 13:09 Bernie Madoff | Biography, Ponzi Scheme, & Facts | Britannica

The scheme’s longevity was made possible largely through “feeder funds”—management
funds that bundled moneys from other investors, poured the pooled investments into
Madoff Securities for management, and thereby earned fees in the millions of dollars;
individual investors often had no idea that their money was entrusted to Madoff. When
Source with Alibaba.com
Madoff’s operations collapsed in December 2008 amid the global economic crisis, he
Alibaba.com

reportedly admitted the dimensions of the scam to members of his family. The feeder
funds collapsed, and losses were reported by such international banks as Banco
Santander of Spain, BNP Paribas in France, and Britain’s HSBC, often because of the
huge loans that they had made to investors who were wiped out and unable to repay the
debt.

In March 2009 Madoff pleaded guilty to fraud, money laundering, and other crimes.
Madoff’s accountant, David G. Friehling, was also charged in March with securities
fraud; it was later revealed that he had been unaware of the Ponzi scheme, and, after
cooperating with prosecutors, Friehling ultimately served no prison time. The thousands
of people and numerous charitable foundations who had invested with Madoff, directly
or indirectly through feeder funds, thus spent the early months of 2009 assessing their
Drive change with your PMP®
often huge financial losses. U.S. federal investigators continued to pursue suspects,
Work smarter and drive meaningful change. Apply for a PMP® certification now.
including some other PMI
members of the Madoff family. Estimates of losses ranged from
https://www.britannica.com/biography/Bernie-Madoff 4/5
28/02/2022, 13:09 Bernie Madoff | Biography, Ponzi Scheme, & Facts | Britannica

$50 billion to $65 billion, but investigators acknowledged that locating the missing
funds might prove to be impossible. In June 2009 federal judge Denny Chin gave Madoff
the maximum sentence of 150 years in prison.

The Editors of Encyclopaedia Britannica

This article was most recently revised and updated by Amy Tikkanen.

Source with Alibaba.com

Alibaba.com

Wholesale Teething Beads,…

₱192.41 Shop

Drive change with your PMP®

Work smarter and drive meaningful change. Apply for a PMP® certification now.
PMI

https://www.britannica.com/biography/Bernie-Madoff 5/5