Bernie Madoff, former Wall Street kingpin and mastermind of the largest Ponzi scheme in history, died Wednesday at the age of 82 in prison while serving his 150-year sentence. He spent about 12 years in prison for engineering a fraud as high as $65 billion. His death resulted from natural causes as he had been suffering from terminal kidney disease and other health complications.
Madoff used his $500 in savings to start Bernard L. Madoff Investment Securities in 1960. He became an original broker-dealers in the Nasdaq trading system in the early 1970s. His brokerage firm, known as the largest market-maker on the Nasdaq, was located in a Midtown Manhattan tower known as the Lipstick Building.
Madoff’s fraudulent plan, known as a “Ponzi scheme,” consisted of using money from newer investors in order to pay sums owed to earlier investors. In theory, such a scheme could go on nearly indefinitely as long as new investors poured in through intermediaries and smaller firms. As a result, Madoff and his wife, Ruth, led a lavish lifestyle by spending other people’s money on a French villa, expensive cars and yachts. However, the global financial crisis ruined Madoff’s plans in 2008 as several investors demanded to cash out. When he found himself unable to satisfy the redemption requests, Madoff revealed to his sons his business was “one big lie.”
Madoff was arrested on December 11, 2008, when his two sons, who were not part of the scheme, told the authorities about his crimes. This historical fraud exposed holes at the US Securities and Exchange Commission, and affected thousands of victims including but not limited to, individuals, charities, pension funds and hedge funds. Although Madoff alleged his fraud began in the early 1990s, prosecutors and victims believe it started earlier.
Last year, Madoff filed a motion for compassionate release under 18 USC § 3582(c)(1)(A) at the US District Court for the Southern District of New York alleging he suffered from end-stage renal disease and he wanted to die at home. But Judge Denny Chin, who had originally sentenced him to prison, denied the motion, describing Madoff’s crimes as “extraordinarily evil.”