Bernie Madoff became a household name after his arrest in December 2008 for the largest Ponzi scheme in history. The scheme, which spanned decades, ultimately caused at least $17 billion in losses to thousands of investors.
This New York investment adviser rose to prominence through high-profile leadership positions in the financial industry, including a stint as non-executive chairman of the Nasdaq Stock Exchange. His firm, Madoff Investment Securities LLC, offered consistent annual returns averaging 10% through a purported strategy that combined the purchase of blue-chip equities and corresponding options. Madoff’s Jewish heritage attracted a large amount of Jewish investors, and his stature in the financial industry was enough for numerous charitable and educational foundations to entrust their money to him. In total, nearly 5,000 investors invested in Madoff’s scheme.
Because of the length of the scheme, nearly half of Madoff’s investors ended up receiving cumulative interest payments exceeding their total investment. Many of these so-called “net winners” later faced “clawback” lawsuits by the court-appointed bankruptcy trustee seeking to recover funds for Madoff’s victims who were not as fortunate.
To date, Madoff’s victims have recovered nearly 50% of their losses through the trustee’s efforts, and this number is expected to increase.
While Madoff initially maintained that he acted alone, it became apparent that the sheer size of his scheme meant he alone could not have kept the scheme going for so long. To date, prosecutors have obtained at least 14 convictions — including a guilty plea from Madoff’s brother, Peter Madoff. Authorities also filed criminal charges against financial juggernaut JPMorgan Chase (JPM), accusing the bank of turning a blind eye to Madoff’s scheme while serving as his primary banker. The bank settled the charges by paying over $2 billion in penalties.