Some may term the Bernie Madoff story as the ‘Scam of the Century’. And they might not be wrong too. It’s estimated he took his investors for a cool $65 billion over the course of nearly two decades. The Ponzi scheme is considered to be the largest financial fraud in U.S. history. 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. One reason that Madoff was so successful was that he was a highly respected, well-established and esteemed financial expert – his reputation was bolstered by the fact that he helped found the NASDAQ stock exchange and served a term as its chair. He earned his investors’ trust because whenever they requested a withdrawal, Madoff’s investment company got their money to them promptly. In addition, unlike other Ponzi schemes, he didn’t tempt investors with unbelievable returns. He reported moderate returns to his investors. On June 29, 2009, he was sentenced to 150 years in prison with restitution of $17 billion.
Madoff and five key employees created millions of fake trades over the years. He employed at the firm his brother Peter, as Senior Managing Director and Chief Compliance Officer; Peter’s daughter Shana Madoff, as the firm’s rules and compliance officer and attorney; and his sons Andrew and Mark. Peter has since been sentenced to 10 years in prison. Mr. DiPascali, a college dropout, joined Mr. Madoff’s firm in 1975 at age 18 and was later a key executive overseeing the bulk of the day-to-day operations of Madoff’s investment-advisory business. Mr. DiPascali testified in the trial of five other former employees, providing a detailed accounting of the inner workings of the firm’s massive Ponzi scheme. He pleaded guilty to 10 criminal charges and is cooperating with the government.
The liquidator working on this scandal-Irving Picard seems to have gotten his hands on the job of a lifetime. Liquidators cop a fair bit of flack in Australia regarding their fees. But, hold your hats; Irving Picard’s fees have just ticked over the $1 billion mark. The fee frenzy surrounding the Bernie Madoff scandal is quite a shock of its own. Irving is a partner in the law firm Baker Hostetler. He is currently serving as the SIPA trustee for the liquidation of Bernard L. Madoff Investment Securities LLC.
As is the common belief that the vast majorities of recoveries have come from realising the assets of the funds, it is not so. There was not much in the first place. Realisations have actually come from hundreds of lawsuits and settlements with other Funds and Banks that directed their clients’ money into the Madoff Funds. Recoveries have overall just topped $10 billion. So far over $6 billion has been paid to investors in the Funds and there is talk of investors being paid their full principal of $17 billion.