The Madoff Scandal

Bernard Lawrence "Bernie" Madoff is a former stock broker, investment adviser, non-executive chairman of the NASDAQ stock market, and the admitted operator of what has been described as the largest Ponzi scheme in history.

In March 2009, Madoff pleaded guilty to 11 felonies and admitted to turning his wealth management business into a massive Ponzi scheme that defrauded thousands of investors of billions of dollars. Madoff said he began the Ponzi scheme in the early 1990s. (Salkin, 1) However, federal investigators believe the fraud began as early as the 1980s, and the investment operation may never have been legitimate. The amount missing from client accounts, including fabricated gains, was almost $65 billion. The court appointed trustee estimated actual losses to investors of $18 billion. On June 29, 2009, he was sentenced to 150 years in prison, the maximum allowed.

Madoff founded the Wall Street firm Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest on December 11, 2008.The firm was one of the top market maker businesses on Wall Street,which bypassed "specialist" firms by directly executing orders over the counter from retail brokers. (Chuchmach, 1)

On December 10, 2008, Madoff's sons told authorities that their father had just confessed to them that the asset management arm of his firm was a massive Ponzi scheme, and quoting him as saying it was one big lie. The following day, FBI agents arrested Madoff and charged him with one count of securities fraud. The U.S. Securities and Exchange Commission (SEC) had previously conducted investigations into Madoff's business practices, but did not uncover the massive fraud; critics contend that these investigations were very incompetently handled.

It has been referred to as the worst scandal the world has ever seen in the world of finance. While that type of language is hyperbolic at best, there can be no denying that the world was sorely shaken when Bernie Madoff was revealed to be nothing more than a financial criminal. He had been one of the most respected investors up to that point and now at the height of the modern financial crisis of our time this supposed rock in the storm was nothing more than another person that had been dishonest and ended up paying the price for it. (Zuckerman, 1)

Bernie Madoff was a man that was so respected that a lot of people started wondering exactly how he could get away with things for such a long period of time. It spurred on a lot of questions about the current existence of the financial system with most of those questions not returning particularly satisfying answers.

While the Madoff scandal is one that will likely stay with us for a long time, these questions must be asked from a position of understanding. For that reason, join us on a brief journey through the scandal itself, starting from the honest beginnings to the rise and fall of the dishonest operation that followed and eventually swallowed what started as an honest operation.

Bernie Madoff did not ...