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Sometimes when a lot of money gets stolen, we can’t help but root for those who took
it.
We might look at a recent heist that must be the closest thing to a real-life Ocean’s
Eleven, when a bunch of old men (the Old blaggers) stole millions of dollars’ worth of precious
stones from a vault in London in 2015.
It’s thought most of the men were arrested, but much of the bounty remains at large.
This is regarded as one of the biggest heists in history.
We might smile when we hear about these aged robbers, but there’s one kind of theft that
people almost always take a dim view of, and that is the financial scam.
Today we are going to look at the biggest financial scam in history, in this episode
of the Infographics Show, The Man Who Stole $65 Billion.
Before we talk about how this $65 billion was stolen, let’s learn something about
the man who took it.
His name is Bernie Madoff.
Unfortunately for him, he is still alive, at the ripe old age of 80.
He was born on April 29, 1938, in Queens, New York.
Madoff’s roots are European, with his parents having Polish, Austrian, and Romanian heritage.
His parents, Ralph and Sylvia, didn’t have an easy time of it in New York, especially
as they had to live through what is now known as The Great Depression.
Ralph was a plumber and Sylvia was a housewife, which didn’t exactly afford them luxuries
in life.
They got involved with finance in the 60s, but just as the son would later enter the
world of dodgy dealings, his parents were at one point shut down by the U.S. Securities
and Exchange Commission because Sylvia, whose name was on the company, had “failed to
file reports of their financial condition.”
The company was closed, but they didn’t have to pay anything in fines or payments
to customers.
This was 1964, when young Bernie was just 26.
It’s also said that Ralph owed a lot of money in federal taxes, and perhaps that’s
why the company was put in Sylvia’s name.
They both gave up the ghost in the 70s anyway, but there can be no doubt that these two sketchy
parents set their son off on a mission to cause financial mayhem.
According to reports, it took Madoff some time to get into finance, and like any young
buck, he was more interested in girls and sports, mainly swimming.
In 1959, he married a girl he had met in high school, and in 1960, he graduated from Hofstra
University in Long Island.
He started law school, then dropped out of law school, and with $5,000 he had earned
as a lifeguard and part-time work installing sprinkler systems, Madoff took his first step
into his parents’ financial footsteps.
On top of the 5,000, he borrowed a further $50,000, and started an investment firm called
Bernard L. Madoff Investment Securities, LLC.
– perhaps now the most infamous investment firm ever created.
The firm looked good from the outside.
It was known as a solid “market maker.”
This is described as being a person or a brokerage house that “is always prepared to buy and
sell securities in order to provide liquidity to the markets,” according to the website,
investing-answers.
In simple terms, they buy when people sell, and sell when people buy, to keep the cogs
turning.
They don’t buy because a stock goes up, they buy when people sell.
This involvement of market traders, according to Investopedia, means traders and investors
will make more transactions, and that’s good for the market in general.
But how do they make cash taking such risks?
Well, they charge a little extra when they sell the stock they bought.
This is known as a Bid-Ask Spread.
That’s a basic explanation, bc we can’t spend too much time on how the stock exchange
works.
What we do need to get into is how Mr. Madoff made his billions.
As we said, he was very well known for his good returns to his clients whose assets he
managed.
Apparently, that client list included such names as Steven Spielberg and Kevin Bacon.
You see, Madoff was seen as a stand-up guy in the financial world.
He even helped form the National Association of Securities Dealers Automated Quotations
(aka NASDAQ) and was chairman of that organization for three terms.
He made donations to humanitarian causes, he gave money to politicians, and his brother,
Peter, served two terms on the board of directors of the Securities Industry and Financial Markets
Association.
So, you might be thinking now, how on Earth could this guy also be involved in a massive
scam?
Madoff was first investigated in 1992, but it wasn’t until the 2000s that subsequent
investigations by private firms found what they called “inconsistencies” that looked
like fraud.
Investigators for years had been saying that the gains Madoff claimed to be making just
didn’t look possible.
In fact, for years, financial analyst Harry Markopolos had been telling people something
just didn’t add up, and embarrassingly for the them, the Securities and Exchange Commission
ignored him, even when he went back numerous times with more evidence of what looked like
a scam.
He wasn’t the only person that didn’t trust the numbers, however, and many people
refused to do business with Madoff.
But how did Madoff get hold of people’s money?
What he had is called a Ponzi Scheme, which simply put, is a scheme that offers huge returns
on investments.
It was named after Charles Ponzi, who said that if you gave him some money, he’d give
you back 50 percent more in just 90 days.
Sounds great, but what happens is that you pay off these first few people, and word gets
around that indeed there is a huge return, and soon many people want to get in on the
act.
You keep taking new money, and pay off older investors with that cash while expanding.
The problem is, you aren’t actually making any money.
Obviously, if all the big investors demand their cash, you’d be in trouble, but what
you do is convince them to keep their money invested as the return will later be even
bigger.
It’s said that Madoff, with his closest staff, manipulated trade reports with a computer
program, while they also created bogus stocks that seemed to give high returns.
On paper, to the undiscerning eye, it looked like he was making money.
The poop hit the fan for Bernie when his clients wanted back, in total, $7 billion, and he
said all he had of their money was between $200 and $300 million.
This market maker with a good reputation who had sat on the board of NASDAQ had all this
time just been enticing people into a scam.
It’s thought he had thousands of investors, and in total they lost about $65 billion.
It’s also said Madoff himself made around $20 billion, or thereabouts.
Apparently when he was confronted by his sons, Andrew and Mark, he admitted to them that
he had been running a Ponzi Scheme.
He said that everything was “just one big lie”.
The sons knew nothing about the scam, although Madoff’s brother Peter was involved.
This wasn’t easy for the sons, and they both died soon after, with Mark taking his
own life and Andrew dying of lymphoma.
What’s amazing is how candid and cold Madoff was after he got caught, once stating, “I
certainly wouldn’t invest in the stock market.
I never believed in it.”
He also once admitted that he was surprised that he had gotten away with it for so long.
Madoff called the investigators useless, saying, “I was astonished.
They never even looked at my stock records.”
Many of those who lost money won’t get much, or anything, back, but in 2017 the U.S. government
promised 24,000 victims that a total of $772.5 million was to be shared among them.
Madoff was arrested and charged with securities fraud on December 11, 2008.
His bail was set at $10 million, and he had enough cash to pay for that.
He was kept under house arrest for a few months until a judge revoked the bail, stating that
Madoff was a flight risk.
He was sentenced to 150 years in jail in 2009 at the age of 71.
If he behaves well, he’ll get out on November 14, 2139, at the age of 201.
That’s not going to happen of course, and it seems the trickster may have got his comeuppance.
He was sick on many occasions in jail due to stress, and was also attacked by inmates.
Others say that the attack was for some reason made up, and it is far from the truth.
This might just be the case, seeing that in a letter to his daughter-in-law, Madoff said,
“They call me either Uncle Bernie or Mr. Madoff.
I can't walk anywhere without someone shouting their greetings and encouragement, to keep
my spirit up.
It's really quite sweet, how concerned everyone is about my well-being, including the staff.”
What’s quite amusing are reports by reputable media that while in prison Madoff had used
his talents to exploit certain markets.
“At one point, he cornered the hot chocolate market,” said one man who’d been writing
an audio series about Madoff.
He added, “He bought up every package of Swiss Miss from the commissary, and sold it
for a profit in the prison yard.
He made it so that, if you wanted any, you had to go through Bernie.”
So, there it is, the abridged story of one of the world’s biggest con artists, the
dark prince of Ponzi, the real wolf of Wall Street, and it seems now a shrewd prison peddler
of Swiss Miss, in his retirement.
And while we can all agree that what he did was horrible, we can also all agree that if
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What are your thoughts about the Madoff Heist?
Is he any more unethical than an ordinary house burglar, a bunch of old British men
who committed a jewel heist, a common street thief that runs off with your iPhone?
Let us know your thoughts in the comments!
Also, be sure to check out our other video called What Happened to Malaysia Airlines
flight 370?!
Thanks for watching, and, as always, don’t forget to like, share, and subscribe.
See you next time!