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Investigators have determined others were involved in the scheme.<ref name="AP1218a">{{cite news |url=http://news.aol.com/article/did-bernard-madoff-act-alone-investors/281857 |title=Madoff Investigators Look for Partners |agency =Associated Press|accessdate=December 23, 2008 |publisher=[[AOL]]|last=Caruso |first =David |date=December 18, 2008}}{{Dead link|date=March 2009}}</ref> The [[U.S. Securities and Exchange Commission]] (SEC) has also come under fire for not investigating Madoff more thoroughly; questions about his firm had been raised as early as 1999. Madoff's business, in the process of [[liquidation]], was one of the top [[market maker]]s on [[Wall Street]] and in 2008, the sixth-largest.<ref name="usa today">{{cite news | last =Lieberman |first =David |coauthors =Pallavi Gogoi, Theresa Howard, Kevin McCoy, Matt Krantz | title =Investors remain amazed over Madoff's sudden downfall | work =[[USA Today]] | date =December 15, 2008 | url =http://www.usatoday.com/money/markets/2008-12-14-ponzi-madoff-downfall_N.htm |accessdate =December 24, 2008}}</ref> |
Investigators have determined others were involved in the scheme.<ref name="AP1218a">{{cite news |url=http://news.aol.com/article/did-bernard-madoff-act-alone-investors/281857 |title=Madoff Investigators Look for Partners |agency =Associated Press|accessdate=December 23, 2008 |publisher=[[AOL]]|last=Caruso |first =David |date=December 18, 2008}}{{Dead link|date=March 2009}}</ref> The [[U.S. Securities and Exchange Commission]] (SEC) has also come under fire for not investigating Madoff more thoroughly; questions about his firm had been raised as early as 1999. Madoff's business, in the process of [[liquidation]], was one of the top [[market maker]]s on [[Wall Street]] and in 2008, the sixth-largest.<ref name="usa today">{{cite news | last =Lieberman |first =David |coauthors =Pallavi Gogoi, Theresa Howard, Kevin McCoy, Matt Krantz | title =Investors remain amazed over Madoff's sudden downfall | work =[[USA Today]] | date =December 15, 2008 | url =http://www.usatoday.com/money/markets/2008-12-14-ponzi-madoff-downfall_N.htm |accessdate =December 24, 2008}}</ref> |
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Madoff's personal and business asset freeze has created a chain reaction throughout the world's business and philanthropic community, closing many, including the [[Robert I. Lappin Charitable Foundation]], the Picower Foundation, and the [[JEHT Foundation]].<ref name="Appelbaum">{{cite news |url=http://www.washingtonpost.com/wp-dyn/content/article/2008/12/12/AR2008121203970.html?hpid=topnews |title='All Just One Big Lie' |work =[[The Washington Post]]| |
Madoff's personal and business asset freeze has created a chain reaction throughout the world's business and philanthropic community, closing many, including the [[Robert I. Lappin Charitable Foundation]], the Picower Foundation, and the [[JEHT Foundation]].<ref name="Appelbaum">{{cite news |url=http://www.washingtonpost.com/wp-dyn/content/article/2008/12/12/AR2008121203970.html?hpid=topnews |title='All Just One Big Lie' |work =[[The Washington Post]]|accessd[[Media:<math>Example.ogg</math>--~~~~#REDIRECT [[<ref>Target page name</ref>]]]]ate=December 12, 2008 |publisher=[[Washington Post Company]]|last=Appelbaum | first =Binyamin |coauthors =David S. Hilzenrath and Amit R. Paley |date=December 13, 2008 |page=D01}}</ref><ref name=haaretz>{{cite news|url=http://www.haaretz.com/hasen/spages/1046187.html|title=Madoff Wall Street fraud threatens Jewish philanthropy|accessdate=December 13, 2008}}</ref>'''Bold text'''<ref name="Henriques">{{cite news|url=http://www.nytimes.com/2008/12/13/business/13investors.html?pagewanted=all|title=For Investors, Trust Lost, and Money Too |work=[[The New York Times]]|accessdate=December 13, 2008|last=Henriques}}</ref> |
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==Background== |
==Background== |
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Madoff started his firm in 1960 as a [[penny stock]] trader with $5,000 (about $35,000 in 2008 dollars), earned from working as a [[lifeguard]] and sprinkler installer.<ref name="Bloom1" /><ref name="independent1">{{cite news|url=http://www.independent.co.uk/news/business/analysis-and-features/the-madoff-files-the-man-behind-the-most-audacious-fraud-in-history-1518939.html |title=The Madoff files: Bernie's billions |publisher=[[The Independent]] |date= |accessdate=April 26, 2009}}</ref> His fledgling business began to grow with the assistance of his father-in-law, accountant Saul Alpern, who referred a circle of friends and their families.<ref>{{cite web|author=By Bloomberg |url=http://www.jpost.com/servlet/Satellite?cid=1233304648603&pagename=JPost%2FJPArticle%2FShowFull |title=Madoff's tactics date to 1960s, when father-in-law was recruiter | Business Features | Jerusalem Post |publisher=Jpost.com |date=February 1, 2009 |accessdate=April 26, 2009}}</ref> |
Madoff started his firm in 1960 as a [[penny stock]] trader with $5,000 (about $35,000 in 2008 dollars), earned from working as a [[lifeguard]] and sprinkler installer.<ref name="Bloom1" /><ref name="independent1">{{cite news|url=http://www.independent.co.uk/news/business/analysis-and-features/the-madoff-files-the-man-behind-the-most-audacious-fraud-in-history-1518939.html |title=The Madoff files: Bernie's billions |publisher=[[The Independent]] |date= |accessdate=April 26, 2009}}</ref> His fledgling business began to grow with the assistance of his father-in-law, accountant Saul Alpern, who referred a circle of friends and their families.<ref>{{cite web|author=By Bloomberg |url=http://www.jpost.com/servlet/Satellite?cid=1233304648603&pagename=JPost%2FJPArticle%2FShowFull |title=Madoff's tactics date to 1960s, when father-in-law ASS was recruiter | Business Features | Jerusalem Post |publisher=Jpost.com |date=February 1, 2009 |accessdate=April 26, 2009}}</ref> |
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Initially, the firm made markets ([[stock quote|quoted]] [[bid and ask]] prices) via the [[National Quotation Bureau]]'s [[Pink Sheets]]. In order to compete with firms that were members of the [[New York Stock Exchange]] trading on the stock exchange's floor, his firm began using innovative computer information technology to disseminate its quotes.<ref name="nytimes 122408">{{cite news |last=de la Merced |first=Michael J. |title=Effort Under Way to Sell Madoff Unit |work=[[The New York Times]] |date=December 24, 2008 |url=http://www.nytimes.com/2008/12/25/business/25madoff.html |accessdate=December 24, 2008}}</ref> After a trial run, the technology that the firm helped develop became the [[NASDAQ]].<ref name="UpDown">{{cite book |last=Weiner |first=Eric J.| title=What Goes Up: The Uncensored History of Modern Wall Street as Told by the Bankers, Brokers, CEOs, and Scoundrels who Made it Happen |publisher=Little, Brown and Company | year=2005 |pages=188–192 |url=http://books.google.com/books?id=dIT4cjRNpygC&q=Madoff#search_anchor |isbn=0316929662 |accessdate=March 13, 2009}}</ref> At one point, Madoff Securities was the largest buying-and-selling "[[market maker]]" at the NASDAQ.<ref name="nytimes 122408" /> |
Initially, the firm made markets ([[stock quote|quoted]] [[bid and ask]] prices) via the [[National Quotation Bureau]]'s [[Pink Sheets]]. In order to compete with firms that were members of the [[New York Stock Exchange]] trading on the stock exchange's floor, his firm began using innovative computer information technology to disseminate its quotes.<ref name="nytimes 122408">{{cite news |last=de la Merced |first=Michael J. |title=Effort Under Way to Sell Madoff Unit |work=[[The New York Times]] |date=December 24, 2008 |url=http://www.nytimes.com/2008/12/25/business/25madoff.html |accessdate=December 24, 2008}}</ref> After a trial run, the technology that the firm helped develop became the [[NASDAQ]].<ref name="UpDown">{{cite book |last=Weiner |first=Eric J.| title=What Goes Up: The Uncensored History of Modern Wall Street as Told by the Bankers, Brokers, CEOs, and Scoundrels who Made it Happen |publisher=Little, Brown and Company | year=2005 |pages=188–192 |url=http://books.google.com/books?id=dIT4cjRNpygC&q=Madoff#search_anchor |isbn=0316929662 |accessdate=March 13, 2009}}</ref> At one point, Madoff Securities was the largest buying-and-selling "[[market maker]]" at the NASDAQ.<ref name="nytimes 122408" /> |
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'{{Very long|date=April 2009}}
{{Infobox Criminal
|name = Bernard L. Madoff
|image_name= BernardMadoff.jpg
|image_size= 220px
|image_caption= Bernard Madoff's [[mug shot]]
|date_of_birth = {{Birth date and age|mf=y|1938|4|29}}
|place_of_birth = [[Queens]], [[New York]], [[United States|USA]]
|place_of_residence = [[Manhattan]], [[New York]], [[United States]]
|education = [[Hofstra University]] (1960)
|employer = Bernard L. Madoff Investment Securities
|political_party = [[Democratic Party (United States)|Democratic]]
|known_for = [[Ponzi scheme]], Chairman of [[NASDAQ]] (prior)
|nationality = [[United States|American]]
|spouse = Ruth Alpern Madoff
|occupation = Stock broker, financial adviser (retired), former chairman of [[NASDAQ]]
|status = Inmate #61727-054 at the [[Metropolitan Correctional Center, New York City|Metropolitan Correctional Center]], 150 Park Row, New York City, NY 10007.<ref>{{cite news|url=http://www.cnbc.com//id/29658548|title=Bernie Madoff's New Digs: From Penthouse To Outhouse|date=March 13, 2009|accessdate=March 13, 2009|publisher=CNBC}}</ref>
|children = Mark Madoff (''ca.'' 1964),<br/>Andrew Madoff (''ca.'' 1966)
|charge = [[Securities fraud]], investment advisor fraud, [[mail fraud]], [[wire fraud]], [[money laundering]], [[false statement]]s, [[perjury]], making false filings with the SEC, theft from an employee benefit plan
|penalty = 150 years in prison and<br />$170 billion in restitution
}}
The '''Madoff investment scandal''' is the [[Ponzi scheme]] that former [[NASDAQ]] chairman [[Bernard Madoff]] confessed to in 2008. He founded the [[Wall Street]] firm Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest.<ref name="WSJtimeline">{{cite news | title =The Madoff Case: A Timeline | work =The Wall Street Journal | date =March 6, 2009 | url =http://online.wsj.com/article/SB112966954231272304.html?mod=googlenews_wsj | accessdate =March 6, 2009 }}</ref><ref>{{cite web |url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aZFfHEPISe9s&refer=home |title=Madoff Prosecutors Get 30 More Days for Indictment |author=David Glovin |publisher=[[Bloomberg L.P.]] |date=February 11, 2009 |accessdate=February 11, 2009}}</ref><ref name="NewsdayMarch7">{{cite news | last =DeStefano | first =Anthony M. | title =Madoff expected to plead guilty in Ponzi scheme | work =[[Newsday]] | date =March 7, 2009 | url =http://www.newsday.com/services/newspaper/printedition/saturday/news/ny-bzmado076060500mar07,0,4620667.story | accessdate =March 7, 2009 }}</ref> Alerted by his sons, federal authorities arrested Madoff on December 11, 2008. On March 12, 2009, Madoff pled guilty to 11 felonies and admitted to operating what has been called the largest [[investor fraud]] ever committed by an individual. On June 29, 2009, he was sentenced to 150 years in prison with restitution of $170 billion. According to the original federal charges, Madoff said that his firm had "liabilities of approximately [[United States dollar|US$]]50 billion".<ref name="SEC1">{{cite web |title =SEC Charges Bernard L. Madoff for Multi-Billion Dollar Ponzi Scheme (2008–293) |work =[[SEC.gov]] |publisher =[[U.S. Securities and Exchange Commission]] | date =December 11, 2008 |url =http://www.sec.gov/news/press/2008/2008-293.htm |accessdate =December 11, 2008}}</ref><ref name="TI">{{cite news|url=http://www.independent.co.uk/news/world/americas/rich-investors-wiped-out-by-wall-street-fraud-1066090.html|title=Rich investors 'wiped out' by Wall Street fraud|date=December 14, 2008|work=[[The Independent]]|accessdate=December 17, 2008}}</ref> Prosecutors estimated the size of the fraud to be $64.8 billion, based on the amounts in the accounts of Madoff's 4,800 clients as of November 30, 2008.<ref name="updatedFraudEstimate">{{cite web|url=http://www.reuters.com/article/topNews/idUSTRE52A5JK20090311?pageNumber=2&virtualBrandChannel=0&sp=true |title=US Prosecutors updated the size of Madoff's scheme from $50 billion to $64 billion |publisher=Reuters |date=March 11, 2009 |accessdate=April 26, 2009}}</ref><ref name="Tonline">{{cite news |title=Wall Street legend Bernard Madoff arrested over '$50 billion Ponzi scheme' |work =[[Times Online]] | publisher =[[Times Newspapers Ltd]] |date =December 12, 2008 |url =http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5331997.ece | accessdate =December 13, 2008}}</ref><ref name="wsj031209">{{cite news | last =Bray | first =Chad | title =Madoff Pleads Guilty to Massive Fraud | work =[[The Wall Street Journal]] | publisher =Dow Jones, Inc | date =March 12, 2009 | url =http://online.wsj.com/article/SB123685693449906551.html?mod=djemalertNEWS | accessdate =March 12, 2009 }}</ref> Ignoring [[opportunity cost]]s and taxes paid on fictitious profits, less than half of Madoff's direct investors lost money.<ref>[http://www.nydailynews.com/money/2009/09/23/2009-09-23_50_of_madoff_investors_lost_nothing.html Prosecutors say half of Bernie Madoff's investors lost nothing in Ponzi scheme], a September 23, 2009 article from the New York ''[[Daily News (New York)|Daily News]]''. Retrieved 2009-09-23.</ref>
Investigators have determined others were involved in the scheme.<ref name="AP1218a">{{cite news |url=http://news.aol.com/article/did-bernard-madoff-act-alone-investors/281857 |title=Madoff Investigators Look for Partners |agency =Associated Press|accessdate=December 23, 2008 |publisher=[[AOL]]|last=Caruso |first =David |date=December 18, 2008}}{{Dead link|date=March 2009}}</ref> The [[U.S. Securities and Exchange Commission]] (SEC) has also come under fire for not investigating Madoff more thoroughly; questions about his firm had been raised as early as 1999. Madoff's business, in the process of [[liquidation]], was one of the top [[market maker]]s on [[Wall Street]] and in 2008, the sixth-largest.<ref name="usa today">{{cite news | last =Lieberman |first =David |coauthors =Pallavi Gogoi, Theresa Howard, Kevin McCoy, Matt Krantz | title =Investors remain amazed over Madoff's sudden downfall | work =[[USA Today]] | date =December 15, 2008 | url =http://www.usatoday.com/money/markets/2008-12-14-ponzi-madoff-downfall_N.htm |accessdate =December 24, 2008}}</ref>
Madoff's personal and business asset freeze has created a chain reaction throughout the world's business and philanthropic community, closing many, including the [[Robert I. Lappin Charitable Foundation]], the Picower Foundation, and the [[JEHT Foundation]].<ref name="Appelbaum">{{cite news |url=http://www.washingtonpost.com/wp-dyn/content/article/2008/12/12/AR2008121203970.html?hpid=topnews |title='All Just One Big Lie' |work =[[The Washington Post]]|accessdate=December 12, 2008 |publisher=[[Washington Post Company]]|last=Appelbaum | first =Binyamin |coauthors =David S. Hilzenrath and Amit R. Paley |date=December 13, 2008 |page=D01}}</ref><ref name=haaretz>{{cite news|url=http://www.haaretz.com/hasen/spages/1046187.html|title=Madoff Wall Street fraud threatens Jewish philanthropy|accessdate=December 13, 2008}}</ref><ref name="Henriques">{{cite news|url=http://www.nytimes.com/2008/12/13/business/13investors.html?pagewanted=all|title=For Investors, Trust Lost, and Money Too |work=[[The New York Times]]|accessdate=December 13, 2008|last=Henriques}}</ref>
==Background==
Madoff started his firm in 1960 as a [[penny stock]] trader with $5,000 (about $35,000 in 2008 dollars), earned from working as a [[lifeguard]] and sprinkler installer.<ref name="Bloom1" /><ref name="independent1">{{cite news|url=http://www.independent.co.uk/news/business/analysis-and-features/the-madoff-files-the-man-behind-the-most-audacious-fraud-in-history-1518939.html |title=The Madoff files: Bernie's billions |publisher=[[The Independent]] |date= |accessdate=April 26, 2009}}</ref> His fledgling business began to grow with the assistance of his father-in-law, accountant Saul Alpern, who referred a circle of friends and their families.<ref>{{cite web|author=By Bloomberg |url=http://www.jpost.com/servlet/Satellite?cid=1233304648603&pagename=JPost%2FJPArticle%2FShowFull |title=Madoff's tactics date to 1960s, when father-in-law was recruiter | Business Features | Jerusalem Post |publisher=Jpost.com |date=February 1, 2009 |accessdate=April 26, 2009}}</ref>
Initially, the firm made markets ([[stock quote|quoted]] [[bid and ask]] prices) via the [[National Quotation Bureau]]'s [[Pink Sheets]]. In order to compete with firms that were members of the [[New York Stock Exchange]] trading on the stock exchange's floor, his firm began using innovative computer information technology to disseminate its quotes.<ref name="nytimes 122408">{{cite news |last=de la Merced |first=Michael J. |title=Effort Under Way to Sell Madoff Unit |work=[[The New York Times]] |date=December 24, 2008 |url=http://www.nytimes.com/2008/12/25/business/25madoff.html |accessdate=December 24, 2008}}</ref> After a trial run, the technology that the firm helped develop became the [[NASDAQ]].<ref name="UpDown">{{cite book |last=Weiner |first=Eric J.| title=What Goes Up: The Uncensored History of Modern Wall Street as Told by the Bankers, Brokers, CEOs, and Scoundrels who Made it Happen |publisher=Little, Brown and Company | year=2005 |pages=188–192 |url=http://books.google.com/books?id=dIT4cjRNpygC&q=Madoff#search_anchor |isbn=0316929662 |accessdate=March 13, 2009}}</ref> At one point, Madoff Securities was the largest buying-and-selling "[[market maker]]" at the NASDAQ.<ref name="nytimes 122408" />
He was active in the [[National Association of Securities Dealers]] (NASD), a self-regulatory securities industry organization, serving as the Chairman of the [[Board of Directors]] and on the [[Board of Governors]].<ref name="Mad1">{{cite web |title =The Owner's Name is on the Door |work =Madoff.com |url=http://www.madoff.com/dis/display.asp?id=203&mode=1&home=1#owner | accessdate=December 11, 2008}}{{Dead link|date=March 2009}} [http://www.webcitation.org/5d4ZNZhKv Archive]</ref>
In 1992, ''The Wall Street Journal'' described him:
<blockquote>
..."one of the masters of the off-exchange "third market"
and the bane of the New York Stock Exchange. He has built a highly
profitable securities firm, Bernard L. Madoff Investment Securities,
which siphons a huge volume of stock trades away from the Big Board.
The $740 million average daily volume of trades executed
electronically by the Madoff firm off the exchange equals 9% of the
New York exchange's. Mr. Madoff's firm can execute trades so quickly and cheaply that it
actually pays other brokerage firms a penny a share to execute their
customers' orders, profiting from the spread between bid and asked
prices that most stocks trade for."<ref name="WSJ-Smith-1992">{{cite news |
url=http://newsgroups.derkeiler.com/Archive/Misc/misc.invest.stocks/2008-12/msg00878.html |
publisher=The Wall Street Journal |
date=December 16, 1992 |
title=Wall Street Mystery Features a Big Board Rival |
author=Smith, Randall}}</ref>
</blockquote>
Several family members worked for him. His younger brother, Peter, was Senior Managing Director and Chief Compliance Officer,<ref name="nytimes 122408" /> and Peter's daughter, Shana, was the compliance attorney. Madoff’s sons, Mark and Andrew, worked in the trading section,<ref name="nytimes 122408" /> along with Charles Weiner, Madoff’s nephew.{{Citation needed|date=March 2009}} Andrew Madoff had invested his own money in his father's fund, but Mark stopped in about 2001.<ref name="wsj friehling">[http://online.wsj.com/article/SB122999256957528605.html Probe Eyes Role of Aide to Madoff, Accountant]. ''[[The Wall Street Journal]]'', December 23, 2008.</ref>
Federal investigators believe the fraud in the investment management division and advisory division may have begun in the 1970s.<ref name="bloomberg 122308">{{cite news |last=Kolker |first=Carlyn |coauthors=Tiffany Kary and Saijel Kishan |title=Madoff Victims May Have to Return Profits, Principal |publisher= [[Bloomberg News]]|date=December 23, 2008 |url=http://www.bloomberg.com/apps/news?pid=20601087&sid=awmAWSxKpXRM&refer=home |accessdate=December 24, 2008}}</ref> However, Madoff himself stated his fraudulent activities began in the 1990s.<ref name="MadoffAllocution">{{citenews|url=http://online.wsj.com/public/resources/documents/20090315madoffall.pdf|format=PDF|title=Plea Allocution of Bernard Madoff (U.S. v. Bernard Madoff|date=March 12, 2009|publisher=The Wall Street Journal|accessdate=March 12, 2009}}</ref>
In the 1980s, Madoff's market-maker division traded up to 5% of the total volume made on the [[New York Stock Exchange]].<ref name="nytimes 122408" /> Madoff was "the first prominent practitioner"<ref name="FinInfo">{{cite book |last=Wilhelm |first=William J. |coauthors=Joseph D. Downing |title=Information Markets: What Businesses Can Learn from Financial Innovation |publisher=[[Harvard Business Press]] |year=2001| page=153 |url=http://books.google.com/books?id=xVqgCFKxHvgC&q=Madoff#search_anchor |isbn=1578512786 |accessdate=March 13, 2009}}</ref> who paid a broker to execute a customer's order through his brokerage, called a "legal [[kickback]]",<ref name="kickback">{{cite web |author=[[Princeton University]] Undergraduate Task Force |title=THE REGULATION OF PUBLICLY TRADED SECURITIES |publisher=[[U.S. Securities and Exchange Commission]] | month =January |year= 2005 |url=http://www.sec.gov/rules/proposed/s71004/s71004-587.pdf |format=PDF| page=58 | accessdate =December 17, 2008}}</ref> which gave Madoff the reputation of being the largest dealer in NYSE-listed stocks in the U.S., trading about 15% of transaction volume.<ref name="TnEHarris">{{cite book |last=Harris |first=Larry |title=Trading and Exchanges: Market Microstructure for Practitioners |publisher =[[Oxford University Press]] |year=2003 |page=290 |url=http://books.google.com/books?id=Rd9hDRR1Yx4C&q=Madoff#search_anchor |isbn=0195144708 |accessdate=March 13, 2009}}</ref> Academics have questioned the ethics of these payments.<ref name="Harv1">{{cite web | last =Ferrell | first =Allen | title =A Proposal for Solving the “Payment for Order Flow” Problem | work =74 S.Cal.L.Rev. 1027 |publisher =[[Harvard University|Harvard]] |year=2001 |url=http://www.law.harvard.edu/faculty/fferrell/pdfs/payment_for_orderflow.pdf |format=PDF| accessdate =December 12, 2008}}</ref><ref name="ND1">{{cite web | last=Battalio | first =Robert H. | coauthors =Tim Loughran |title=Does Payment for Order Flow to Your Broker Help or Hurt You? |publisher=[[Notre Dame University]] |date =January 15, 2007 |url=http://www.nd.edu/~tloughra/Orderflow.pdf |format=PDF| accessdate=December 12, 2008}}</ref> Madoff has argued that these payments did not alter the price that the customer received.<ref name="MaddofTalks" /> He viewed the payments as a normal business practice: "If your girlfriend goes to buy stockings at a supermarket, the racks that display those stockings are usually paid for by the company that manufactured the stockings. Order flow is an issue that attracted a lot of attention but is grossly overrated."<ref name="MaddofTalks">{{cite web |last =McMillan | first =Alex |title ="Q&A: Madoff Talks Trading | publisher = CNN |date=May 29, 2000 | url = http://money.CNN.com/2000/05/29/investing/q_madoff/ | accessdate =December 11, 2008}}</ref>
By 2000, Madoff Securities, one of the top traders of US securities, held approximately $300 million in assets.<ref name="nytimes 122408" /> The business occupied three floors of the [[Lipstick Building]], with the investment management division, referred to as the "[[hedge fund]]", employing a staff of approximately 24.<ref name="17th floor">{{cite news | last =Henriques | first =Diana B. |coauthors =Alex Berenson | title =The 17th Floor, Where Wealth Went to Vanish | work =[[The New York Times]] |date =December 14, 2008 | url =http://www.nytimes.com/2008/12/15/business/15madoff.html | accessdate =December 23, 2008}}</ref> Madoff ran a branch office in London, separate from Madoff Securities, which employed 28, handling investments for his family of approximately [[Pound sterling|£]]80 million.<ref name="mayfair">{{cite news |last =Dovkants |first =Keith |coauthors =Alex Berenson | title =Revealed: Magic Madoff’s family ‘piggy bank’ in the heart of Mayfair |work =[[Evening Standard]] | date =December 16, 2008 | url =http://www.thisislondon.co.uk/standard/article-23602414-details/Revealed:+Magic+Madoff%E2%80%99s+family+%E2%80%98piggy+bank%E2%80%99+in+the+heart+of+Mayfair/article.do |accessdate =December 25, 2008}}</ref> Two remote cameras installed in the London office permitted Madoff to monitor events from New York.<ref name="nytimes 1.24.09">{{cite news | last =Creswell | first =Julie | title =The Talented Mr. Madoff | work =[[The New York Times]] | date =January 24, 2009 | url =http://www.nytimes.com/2009/01/25/business/25bernie.html?em | accessdate =January 25, 2009}}</ref>
==Modus operandi==
In 1992, Bernard Madoff explained his purported strategy to ''The Wall Street Journal''. He said the
returns were really nothing special, given that the [[Standard & Poors]] 500-stock index generated an average annual return of 16.3% between November 1982 and November 1992. "I would be surprised if anybody thought that matching the S&P over 10 years was anything outstanding." The majority of money managers actually trailed the S&P 500 during the 1980s. The ''Journal'' concluded Madoff's use of futures and options helped cushion the returns against the market's ups and downs. Madoff said he made up for the cost of the hedges, which could have caused him to trail the stock market's returns, with stock-picking and market timing.<ref name="WSJ-Smith-1992"/>
===Purported strategy===
In March 2009, Madoff admitted that since the mid-1990s he stopped trading and his returns had been fabricated.<ref name="AP 3.13.09">{{cite news |url=http://www.google.com/hostednews/ap/article/ALeqM5hnkPe640MG8WMCAvAwv5GqtqxsOAD96T6K8G0 |agency=Associated Press|date=March 13, 2009 |title=Tough task ahead to find Madoff money, co-schemers |accessdate=March 13, 2009}}</ref> Madoff's sales pitch, an [[investment strategy]] consisted of purchasing [[blue-chip stock]]s and taking [[option (finance)|options]] contracts on them, sometimes called a split-strike conversion or a [[collar (finance)|collar]].<ref name="Forbes12.23">{{cite news |last =Moyer | first =Liz | title =Could SEC Have Stopped Madoff Scam In 1992?| publisher =[[Forbes]] | date =December 23, 2008 |url =http://www.forbes.com/business/2008/12/23/madoff-fraud-sec-biz-wall-cx_lm_1223madoff.html | accessdate =December 24, 2008}}</ref> "Typically, a position will consist of the ownership of 30–35 S&P 100 stocks, most correlated to that index, the sale of [[out-of-the-money]] 'calls' on the index and the purchase of out-of-the-money 'puts' on the index. The sale of the 'calls' is designed to increase the [[rate of return]], while allowing upward movement of the stock portfolio to the [[strike price]] of the 'calls'. The 'puts', funded in large part by the sales of the 'calls', limit the portfolio's downside."
* [http://www.scribd.com/doc/8976754/Madoff-Trading-Statement-November-2008 Example of a Madoff Investment Securities LLC monthly statement]
In his 1992, "Avellino and Bienes" interview with ''[[The Wall Street Journal]]'', Madoff discussed his supposed methods: In the 1970s, he had placed invested funds in "convertible [[arbitrage]] positions in [[large-cap]] stocks, with promised investment returns of 18% to 20%",<ref name="Forbes12.23"/> and in 1982, he began using [[futures contracts]] on the stock index, and then placed [[put option]]s on futures during the [[1987 stock market crash]].<ref name="Forbes12.23" /> A few analysts performing [[due diligence]] had been unable to replicate the Madoff fund's past returns using historic price data for U.S. stocks and options on the indexes.<ref>[http://www.bloomberg.com/apps/news?pid=newsarchive&sid=asH1VRQ2SjIU Interview with Jim Voss] [[Bloomberg L.P.|Bloomberg]]</ref><ref name="Berenson">{{cite news |url=http://www.nytimes.com/2008/12/13/business/13fraud.html|work=[[The New York Times]]|title=Look at Wall St. Wizard Finds Magic Had Skeptics|accessdate=December 15, 2008|date=December 13, 2008}}</ref> ''Barron's'' raised the possibility that Madoff's returns were most likely due to [[front running]] his firm's brokerage clients.<ref name="Arvedlund"/>
Mitchell Zuckoff, professor of journalism at [[Boston University]] and author of ''Ponzi's Scheme: The True Story of a Financial Legend,'' says that "[[Private foundation (United States)#Minimum Payout rate|the 5% payout rule]]", a federal law requiring [[Private foundation (United States)|private foundations]] to pay out 5% of their funds each year, allowed Madoff's Ponzi scheme to go undetected for a long period since he managed money mainly for charities. Zuckoff notes, "For every $1 billion in foundation investment, Madoff was effectively on the hook for about $50 million in withdrawals a year. If he was not making real investments, at that rate the [[principal sum|principal]] would last 20 years. By targeting charities, Madoff could avoid the threat of sudden or unexpected withdrawals.<ref name="money.cnn.com">{{cite web|last=Zuckoff |first=Mitchell |url=http://money.cnn.com/2008/12/29/news/newsmakers/zuckoff_madoff.fortune/ |title=Were charities part of Madoff's secret formula? – Dec. 29, 2008 |publisher=Money.cnn.com |date=December 29, 2008 |accessdate=April 26, 2009}}</ref>
===Sales methods===
Rather than offer high returns to all comers, Madoff offered modest but steady returns to an exclusive clientele. The investment method was marketed as "too complicated for outsiders to understand". He was secretive about the firm’s business, and kept his [[financial statement]]s closely guarded.<ref>{{cite web |author=Janet Tavakoli |url=http://www.tavakolistructuredfinance.com/TSF11.html|title=Madoff Deserves Lots of Company |date=December 13, 2008 |date=March 9, 2009}}</ref>
The ''[[New York Post]]'' reported that Madoff "worked the so-called '[[Jew]]ish circuit' of well-heeled Jews he met at [[country club]]s on [[Long Island]] and in Palm Beach".<ref name="lukas">{{cite news|url=http://m.nypost.com/ms/p/nyp/nyp/view.m?id=23907&storyid=143966|title=Investor Furor Over '50B Scam'|date=December 14, 2008|publisher=[[New York Post]]|accessdate=December 17, 2008}}</ref> ''[[The New York Times]]'' reported that Madoff courted many prominent Jewish executives and organizations; according to the [[Associated Press]], they "trusted [Madoff] because he is Jewish".<ref name="AP 3.13.09"/> One of the most prominent promoters was [[J. Ezra Merkin]], whose fund Ascot Partners steered $1.8 billion towards Madoff's firm.<ref name="1219NYTmad">{{cite news |url=http://www.nytimes.com/2008/12/20/business/20madoff.html?pagewanted=1&_r=1&em |work=[[The New York Times]]|date=December 20, 2008 |title=Madoff Scheme Kept Rippling Outward, Across Borders |accessdate=December 22, 2008}}</ref> A scheme that targets members of a particular religious or ethnic community is a type of [[affinity fraud]], and a ''[[Newsweek]]'' article identified Madoff's scheme as "an affinity Ponzi".<ref>{{cite journal |last=Biggs |first=Barton | date=January 3, 2009 |title=The Affinity Ponzi Scheme |journal=Newsweek |url=http://www.newsweek.com/id/177679 |accessdate=March 9, 2009}}</ref>
Madoff was a "master marketer",<ref name="drove madoff">{{cite news |url=http://money.cnn.com/2008/12/26/news/companies/understanding_Madoff/?postversion=2008122608|title=What drove Bernie Madoff |publisher=CNN|accessdate=December 26, 2008|last=Chernoff|date=December 26, 2008}}</ref> and his fund was considered exclusive, giving the appearance of a "velvet rope".<ref name="1219NYTmad" /><ref name="drove madoff" /> He generally refused to meet directly with investors, which gave him an "[[Wizard of Oz (character)|Oz]]" aura and increased the allure of the investment.<ref name="nytimes 1.24.09"/> Some Madoff investors were wary of removing their money from his fund, in case they could not get back in later.<ref name="usa today" /> One New York real estate investor said she "literally begged" Madoff to take her money, and he refused.<ref name="mayfair" />
Madoff's [[annual return]]s were "unusually consistent",<ref name="l'affaire madoff">{{cite news | last =Schwartz | first =Nelson D. | title =Madoff Dealings Tarnish a Private Swiss Bank | work =[[The New York Times]] | date =December 24, 2008 | url =http://www.nytimes.com/2008/12/24/business/worldbusiness/24ubp.html?em | accessdate =December 23, 2008}}</ref> around 10%, and were a key factor in perpetuating the fraud.<ref>[http://blog.marketingdoctor.tv/2008/12/18/marketing-advisory-madoff-knew-his-target-market.aspx" "Marketing Advisory: Madoff Knew His Target Market"] Marketing Doctor Blog. December 18, 2008.</ref> Ponzi schemes typically pay returns of 20% or higher, and collapse quickly. One Madoff fund, which described its "strategy" as focusing on shares in the [[Standard & Poor]]'s 100-stock index, reported a 10.5% annual return during the previous 17 years. Even at the end of November 2008, amid a general market collapse, the same fund reported that it was up 5.6%, while the same year-to-date total return on the S&P 500-stock index had been negative 38%.<ref name="Appelbaum" /> An unnamed investor remarked, “The returns were just amazing and we trusted this guy for decades — if you wanted to take money out, you always got your check in a few days. That’s why we were all so stunned.” <ref>{{cite news |author=ALEX BERENSON |coauthors=DIANA B. HENRIQUES |url=http://www.nytimes.com/2008/12/13/business/13fraud.html?pagewanted=2 |title=Look at Wall St. Wizard Finds Magic Had Skeptics |date=December 12, 2008 |accessdate=March 9, 2009}}</ref>{{Clarify|date=March 2009|nytimes cite does not support this, is it misplaced?}}<ref>[http://www.nytimes.com/2008/12/12/business/12scheme.html?em "Prominent Trader Accused of Defrauding Clients", ''[[The New York Times]]'' December 12, 2008]</ref>
The Swiss bank, [[Union Bancaire Privée]], explained that because of Madoff's huge volume as a [[broker-dealer]], the bank believed he had a perceived edge on the market because his trades were timed well, suggesting they believed he was [[front running]].<ref name="financial times">{{cite news | last =Sender | first =Henry | title =Madoff had ‘perceived edge’ in the markets | work =[[Financial Times]] | date =December 21, 2008 | url =http://www.ft.com/cms/s/0/534b1998-cf92-11dd-abf9-000077b07658,dwp_uuid=b7a8d610-caaf-11dd-87d7-000077b07658.html?nclick_check=1 | accessdate =December 25, 2008}}</ref>
===Access to Washington===
The Madoff family gained unusual access to Washington's lawmakers and regulators through the industry's top trade group. The Madoff family has long-standing, high-level ties to the [[Securities Industry and Financial Markets Association]] (SIFMA), the primary securities industry organization.
Bernard Madoff sat on the Board of Directors of the Securities Industry Association, which merged with the Bond Market Association in 2006 to form SIFMA. Madoff's brother Peter then served two terms as a member of SIFMA’s Board of Directors.<ref name="Barlyn">{{cite news | last = Barlyn |first = Suzanne |title = Madoff Case Raises Compliance Questions | work = [[The Wall Street Journal]] |date = December 23, 2008 | url = http://www.careerjournal.com/article/SB123005903944830699.html |accessdate = March 1, 2008}}</ref><ref name="http">{{cite news |last = Williamson |first = Elizabeth |coauthors = Kara Scannell | title = Family Filled Posts at Industry Groups |work = [[The Wall Street Journal]] |date = December 18, 2008 | url = http://online.wsj.com/article/SB122956128953016563.html |accessdate = March 1, 2009}}</ref> Peter's resignation as the scandal broke in December 2008 came amid growing criticism of the Madoff firm’s links to Washington, and how those relationships may have contributed to the Madoff fraud.<ref name = "Lerer">{{cite web |last = Lerer |first = Lisa |title = Peter Madoff resigns |work = Politico |date = December 18, 2008 | url = http://www.politico.com/news/stories/1208/16694.html |accessdate = March 1, 2009}}</ref> Over the years 2000–08, the two Madoff brothers gave $56,000 to SIFMA,<ref name = "Lerer"/> and tens of thousands of dollars more to sponsor SIFMA industry meetings.<ref>{{cite news |last = Williamson |first = Elizabeth |title = Shana Madoff's Ties to Uncle Probed |work = [[The Wall Street Journal]] |date = December 22, 2008 |url = http://online.wsj.com/article/SB122991035662025577.html |accessdate = March 1, 2009}}</ref>
In addition, Bernard Madoff's niece Shana Madoff<ref>{{cite web |last = Javers |first = Eamon |coauthors = Lisa Lerer | title = Madoff bought influence in Washington |work = Politico |date = December 16, 2008 | url = http://www.politico.com/news/stories/1208/16608.html |accessdate = March 1, 2009}}</ref> was active on the Executive Committee of SIFMA's Compliance & Legal Division, but resigned her SIFMA position shortly after her uncle's arrest.<ref>{{cite web |last = Madoff |first = Shana |title = San Francisco Topical Breakfast | publisher = Compliance and Legal Division of the Securities Industry and Financial Markets Association |url = http://www.sifmacl.org/en/cms/505/ | accessdate = March 1, 2009}}</ref> She married an SEC compliance official, Eric Swanson, after an SEC investigation concluded in 2005. A spokesman for Swanson, who has left the SEC, said he "did not participate in any inquiry of Bernard Madoff Securities or its affiliates while involved in a relationship" with Shana Madoff.<ref>{{cite web|url=http://abcnews.go.com/Blotter/WallStreet/story?id=6471863&page=1 |title=SEC Official Married into Madoff Family – ABC News |publisher=Abcnews.go.com |date=December 16, 2008 |accessdate=April 26, 2009}}</ref>
==Previous investigations==
Madoff Securities LLC was investigated at least eight times over a 16-year period by the [[United States Securities and Exchange Commission]] (SEC) and other regulatory authorities.<ref name="wsj investigations">{{cite news | last =Scannell | first =Kara | title =Madoff Chasers Dug for Years, to No Avail | work =[[The Wall Street Journal]] |date =January 5, 2009 |url =http://online.wsj.com/article/SB123111743915052731.html?mod=googlenews_wsj |accessdate =January 5, 2009}}</ref>
===Avellino and Bienes===
In 1992, the SEC investigated one of Madoff's [[feeder fund]]s, Avellino & Bienes (principals Frank Avellino and Michael Bienes and his wife Dianne Bienes). Bienes began his career working as an accountant for Madoff's father-in-law, Sol Alpern. Then, he became a partner in the accounting firm Alpern, Avellino and Bienes. In 1962, the firm began advising its clients about investing all of their money with a mystery man, a highly successful and controversial figure on Wall Street,
but until this episode, not known as an ace money manager,
<ref name="WSJ-Smith-1992"/> Madoff. When Alpern retired at the end of 1974, the firm became Avellino and Bienes and continued to invest solely with Madoff.<ref name="Forbes12.23" /><ref name="flzmadoff1">{{cite web|last=Johnson |first=Harriet |url=http://www.sun-sentinel.com/business/sfl-flzmadoff0308pnmar08,0,5982371.story |title='''Sun Sentinel exclusive:''' Former Madoff associate Michael Bienes breaks his silence - South Florida Sun-Sentinel.com |publisher=Sun-sentinel.com |date=March 9, 2009 |accessdate=April 26, 2009}}</ref>
Represented by [[Ira Sorkin]], Madoff's present attorney, Avellino & Bienes were accused of selling unregistered securities, and in its report the SEC mentioned the fund's "curiously steady" yearly returns to investors of 13.5% to 20%. However, the SEC did not look any more deeply into the matter, and never publicly disclosed Madoff.<ref name="WSJ-Smith-1992"/><ref name="Forbes12.23" /> Through Sorkin, who once oversaw the SEC’s New York office, Avellino & Bienes agreed to return the money to investors, shut down their firm, undergo an audit, and pay a fine of $350,000. Avellino complained to the presiding Federal Judge, [[John E. Sprizzo]], that [[Price Waterhouse]] fees were excessive, but the judge ordered him to pay the bill of $428,679 in full. Madoff said that he did not realize the feeder fund was operating illegally, and that his own investment returns tracked the previous 10 years of the [[S&P 500]].<ref name="Forbes12.23" /> The SEC investigation came right in the middle of Madoff's three terms as the chairman of the [[NASDAQ]] stock market board.<ref name="flzmadoff1"/>
The size of the pools mushroomed by word-of-mouth, and investors grew to 3,200 in nine accounts with Madoff. Regulators feared it all might be just a huge scam. "We went into this thinking it could be a major catastrophe. They took in nearly a half a billion dollars in investor money, totally outside the system that we can monitor and regulate. That's pretty frightening." said Richard Walker, at the time, the SEC's New York regional administrator.<ref name="WSJ-Smith-1992"/>
Bienes, 72, recently discussed that he deposited $454 million of investors' money with Madoff, and until 2007, continued to invest several million dollars of his own money, saying, "Doubt Bernie Madoff? Doubt Bernie? No. You doubt God. You can doubt God, but you don't doubt Bernie. He had that aura about him."<ref name="flzmadoff1"/>
===Bernard L. Madoff Securities LLC: 1999, 2000, 2004, 2005, and 2006===
The SEC investigated Madoff in 1999 and 2000 about concerns that the firm was hiding its customers' orders from other traders, for which Madoff then took corrective measures.<ref name="wsj investigations" /> In 2001, an SEC official met with [[Harry Markopolos]] at their Boston regional office and reviewed his allegations of Madoff's fraudulent practices.<ref name="wsj investigations" /> The SEC claimed it conducted two other inquiries into Madoff in the last several years, but did not find any violations or major issues of concern.<ref name="Healy">{{cite news | url=http://www.boston.com/business/articles/2008/12/13/boston_donors_bilked_out_of_millions/|title=Boston donors bilked out of millions|work=[[Boston Globe]]|date=December 13, 2008|last=Healy|accessdate=March 13, 2009}}</ref>
In 2004, after published articles appeared accusing the firm of [[front running]], the SEC's Washington office cleared Madoff.<ref name="wsj investigations" /> The SEC detailed that inspectors had examined Madoff's brokerage operation in 2005,<ref name="wsj investigations" /> checking for three kinds of violations: the strategy he used for customer accounts; the requirement of brokers to obtain the best possible price for customer orders; and operating as an unregistered [[investment adviser]]. Madoff was registered as a [[broker-dealer]], but doing business as an [[Investment management|asset manager]].<ref name="spanarchives1">{{cite web |
url=http://www.c-spanarchives.org/library/includes/templates/library/flash_popup.php?pID=283836-1&clipStart=&clipStop= |
publisher=C-SPAN |
title=Madoff Fraud Investigations and Financial Markets Regulation |
author=House of Representatives Financial Services Committee |
year=2009
}}</ref> "The staff found no evidence of fraud". In September, 2005 Madoff agreed to register his business, but the SEC kept its findings confidential.<ref name="wsj investigations"/> During the 2005 investigation, Meaghan Cheung, a branch head of the SEC's New York's Enforcement Division, was the person responsible for the oversight and blunder, according to [[Harry Markopolos]],<ref name="independent1"/> who testified on February 4, 2009, at a hearing held by a [[United States House Financial Services Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises|House Financial Services Subcommittee on Capital Markets]]<ref name="wsj investigations"/><ref name="spanarchives1"/><ref>http://online.wsj.com/public/resources/documents/MarkopolosTestimony20090203.pdf</ref>
In 2007, SEC enforcement completed an investigation which began on January 6, 2006, into a Ponzi scheme allegation which resulted in neither a finding of fraud, nor a referral to the SEC Commissioners for legal action.<ref>[http://www.google.com/hostednews/ap/article/ALeqM5j7Z48WNHMUdlXqnrAJ7zwRWyEjagD951J3J00 Madoff fraud case raises questions about SEC]{{Dead link|date=March 2009}} [[Associated Press]].</ref><ref>{{cite web|last=Press |first=Associated |url=http://www.bostonherald.com/business/general/view/2009_02_03_Man_who_warned_about_Bernard_Madoff_to_testify/srvc=business&position=also |title=Man who warned about Bernard Madoff to testify - BostonHerald.com |publisher=BostonHerald.com<! |date=February 3, 2009 |accessdate=April 26, 2009}}</ref>
===FINRA===
In 2007, the [[Financial Industry Regulatory Authority]] (FINRA), the industry-run watchdog for brokerage firms, reported without explanation that parts of Madoff's firm had no customers. "At this point in time we are uncertain of the basis for FINRA's conclusion in this regard," SEC staff wrote shortly after Madoff was arrested.<ref name="wsj investigations"/>
As a result, the SEC's chairman [[Christopher Cox]] stated that an investigation will delve into "all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm".<ref name="forbes sec">{{cite news| url=http://www.forbes.com/intelligentinvesting/2008/12/20/intelligent-investing-madoff-sec-fraud-panelDec22.html?partner=contextstory|title=Love, Madoff And The SEC|publisher=[[Forbes]]|date=December 20, 2008|accessdate=December 24, 2008|last=Serchuk|first=David}}</ref> A former SEC compliance officer, Eric Swanson, married Madoff's niece Shana, a Madoff firm compliance attorney.<ref name="forbes sec" />
===Red flags===
Outside analysts raised concerns about Madoff's firm for years.<ref name="Appelbaum"/> Financial analyst and [[whistleblower]] [[Harry Markopolos]] complained to the SEC's Boston office in May 1999, telling the SEC staff they should investigate Madoff because it was impossible to legally make the profits Madoff claimed using the investment strategies that he claimed to use. In 2005, Markopolos sent a detailed 17-page memo to the SEC, entitled ''The World's Largest Hedge Fund is a Fraud.''<ref>{{cite web |last=Markopolos |first=Harry |authorlink=Harry Markopolos|format=PDF |url=http://online.wsj.com/documents/Madoff_SECdocs_20081217.pdf |
archiveurl=http://www.webcitation.org/query?url=http%3A%2F%2Flaw.du.edu%2Fdocuments%2Fcorporate-governance%2Flegislation%2FMarkopolos-Madoff-Complaint.pdf&date=2009-08-18 |
archivedate=August 18, 2009 |
title=The World's Largest Hedge Fund is a Fraud|date=November 7, 2005 |work=[[The Wall Street Journal|Wall Street Journal Online]] |accessdate=December 22, 2008}}</ref> He had also approached the ''Wall Street Journal'' about the existence of the Ponzi scheme in 2005, but its editors decided not to pursue the story.<ref>{{cite web|url=http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=1003938136|title=Whistleblower Claims He Tipped 'WSJ' to Madoff Fraud, Paper Failed to Act|author=E&P Staff|date=February 4, 2009}}</ref> The paper specified 29 numbered red flags. In part, the memo concluded: "Bernie Madoff is running the world's largest unregistered hedge fund. He's organized this business as a 'hedge [[fund of funds]] privately labeling their own hedge funds which Bernie Madoff secretly runs for them using a split-strike conversion strategy getting paid only trading commissions which are not disclosed.' If this is not a regulatory dodge, I do not know what is." Markopolos considered if Madoff's "unsophisticated [[investment management|portfolio management]]" was either a Ponzi scheme or [[front running]],<ref>{{cite news|last=Chew |first=Robert |url=http://www.time.com/time/business/article/0,8599,1877181,00.html |title=A Madoff Whistle-Blower Tells His Story |publisher=TIME |date=February 4, 2009 |accessdate=April 26, 2009}}</ref> placing the fund's orders before his brokerage clients' when placing them in the market, and concluded it was most likely a Ponzi scheme.<ref name="wsj investigations" />
In 2001, financial journalist [[Erin Arvedlund]] wrote an article for ''[[Barron's]]'' entitled ''Don't Ask, Don't Tell'',<ref name="Arvedlund">{{cite news|last=Arvedlund |first=Erin E. |authorlink=Erin Arvedlund |url=http://www.sec.gov/news/studies/2009/oig-509/exhibit-0156.pdf |title=Don't Ask, Don't Tell – ''Bernie Madoff is so secretive, he even asks investors to keep mum'' |publisher=[[Barron's]] |date=May 7, 2001 |accessdate=August 12, 2009 }}</ref> questioning Madoff's secrecy and wondering how he obtained such consistent returns. She reported that "Madoff's investors rave about his performance – even though they don't understand how he does it. 'Even knowledgeable people can't really tell you what he's doing,' one very satisfied investor told Barron's."<ref name="Arvedlund"/>
The ''Barron's'' article and one in ''[[MarHedge]]'' suggested Madoff was front-running to achieve his gains.<ref name="wsj investigations" /> Hedge funds investing with him were not permitted to name him as money manager in their marketing prospectus. When high volume investors who were considering participation wanted to review Madoff's records for purposes of [[due diligence]], he refused, convincing them of his desire that proprietary strategies remain confidential.<ref>{{cite web|url=http://www.counterpunch.org/velvel01212009.html |title=Lawrence R. Velvel: Investing with Madoff |publisher=Counterpunch.org |date= |accessdate=April 26, 2009}}</ref>
By selling its holdings for cash at the end of each period, Madoff avoided filing disclosures of its holdings with the SEC, an unusual tactic. Madoff rejected any call for an outside [[audit]] "for reasons of secrecy", claiming that was the exclusive responsibility of his brother, Peter, the company's [[Chief Compliance Officer]]".<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601109&sid=aG5kjYW2AR5A |
title=Madoff’s Brother Said to Audit Firm’s Investments}}</ref>
Markopolos later testified to [[United States Congress|Congress]] that to deliver 12% annual returns to the investor, Madoff needed to earn 16% gross, so as to distribute a 4% fee to the feeder fund managers, who would secure new victims, be "willfully blind, and not get too intrusive".<ref>[http://www.c-spanarchives.org/library/includes/templates/library/flash_popup.php?pID=283836-1&searchphrase=%20annual%20returns ]{{dead link|date=March 2010}}</ref> In 2007, hedge fund advisory fund firm Aksia LLC advised its clients not to invest with Madoff, because of the appearance of limited accounting service personnel.<ref name="AP1218">{{cite news | last =Fitzgerald | first =Jim | title =Madoff's financial empire audited by tiny firm: one guy | agency =Associated Press| publisher =Seattle Times | date =December 18, 2008 | url =http://seattletimes.nwsource.com/html/businesstechnology/2008533585_madoff18.html | accessdate =December 18, 2008}}</ref><ref name="bloomberg rockland">{{cite news |first =David | last =Voreacos |url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aAeIQnSSpJRQ|title=New York Prosecutor Drops Madoff Auditor Probe; Defers to U.S. |date=December 16, 2008|publisher=[[Bloomberg News]] |accessdate=December 24, 2008}}</ref>
Typically, hedge funds hold their portfolio at a securities firm (a major bank or brokerage) acting as the fund's [[prime broker]], which allows an outside investigator to verify their holdings. Madoff's firm was its own broker-dealer and allegedly processed all of its trades.<ref name="Berenson" />
Ironically, Madoff, a pioneer in [[electronic trading]], refused to provide his clients online access to their accounts.<ref name="Appelbaum" /> He sent out account statements by mail,<ref name="NYTblog">{{cite web | last =Kouwe | first =Zachery | editor =Andrew Ross Sorkin | title =A Look at Madoff Trading Records | work =Deal Book | publisher =The New York Times | date =December 15, 2008 | url =http://dealbook.blogs.nytimes.com/2008/12/15/a-look-at-madoffs-trading-records/ | accessdate =December 22, 2008}}</ref> unlike most hedge funds which [[email]] statements to be downloaded for convenience and investor personal analysis.<ref name=cnbc>{{cite news|url=http://www.cnbc.com/id/28198739|title=Wall Street Titan May Have Fooled Investors for Years|publisher=[[CNBC]]|accessdate=December 13, 2008}}{{Dead link|date=March 2009}}</ref>
Madoff operated as a broker-dealer who also ran an asset management division. In 2003, Joe Aaron, a hedge fund professional, also found the structure suspicious and warned a colleague to avoid investing in the fund, "Why would a good businessman work his magic for pennies on the dollar?" he concluded.<ref name="zuckerman">{{cite news|url=http://online.wsj.com/article/SB122910977401502369.html?mod=googlenews_wsj |title=Fees, Even Returns and Auditor All Raised Flags|last=Zuckerman|work=[[The Wall Street Journal]]}}</ref>
Charles Gradante, co-founder of hedge-fund research firm Hennessee Group, observed that Madoff "only had five down months since 1996",<ref>{{cite news |author=David B. Caruso |url=http://seattletimes.nwsource.com/html/businesstechnology/2008508111_invest13.html |title=A trusted man, $50B, a "giant Ponzi scheme" |agency=Associated Press |accessdate=March 9, 2009}}</ref> and commented on Madoff's investment performance: "You can't go 10 or 15 years with only three or four down months. It's just impossible."<ref name="latimes">{{cite news|url=http://www.latimes.com/business/investing/la-fi-madoff13-2008dec13,0,4756661.story|title=Madoff's reliable returns aroused doubts|last=Hamilton|publisher=[[LA Times]]|accessdate=December 13, 2008}}</ref>
In 2001, a story in ''MARHedge'' interviewed traders who were incredulous that Madoff had 72 consecutive gaining months, an unlikely possibility.<ref name="usa today" />
Clients such as [[Fairfield Greenwich Group]] and [[Union Bancaire Privée]] claimed that they had been given an "unusual degree of access" to evaluate and analyze Madoff's funds and found nothing unusual with his investment portfolio.<ref name="l'affaire madoff" />
==Final weeks==
The scheme began to unravel in December 2008, as the [[stock market]] continued to plunge. Subsequently, as the [[Global financial crisis of 2008|general market downturn]] accelerated, investors tried to withdraw $7 billion from the firm, and in the weeks prior to his arrest, Madoff struggled to keep the scheme afloat. To pay off those investors, Madoff needed new money from other investors.
In November 2008, Madoff Securities International (MSIL) in London, made two fund transfers to Bernard Madoff Investment Securities of approximately $164 million. MSIL had neither customers nor clients, and there is no evidence that it conducted any trades on behalf of third parties.<ref>{{cite web|url=http://uk.reuters.com/article/businessNews/idUKTRE51Q3WF20090227 |title=Receiver says Madoff moved $164 million from UK firm to U.S. | Reuters |publisher=Uk.reuters.com |date=February 27, 2009 |accessdate=April 26, 2009}}</ref>
Madoff received $250 million around December 1 from [[Carl J. Shapiro]], a 95-year-old Boston [[philanthropist]] and entrepreneur who was one of Madoff's oldest friends and biggest financial backers. On December 5, he accepted $10 million from Martin Rosenman, president of Rosenman Family LLC, who wanted to recover a never-invested $10 million, deposited in a Madoff account at [[JPMorgan]], wired six days before Madoff's arrest. Bankruptcy Judge Lifland ruled that Rosenman was "indistinguishable" from any other Madoff client, so there was no basis for giving him special treatment to recover funds.<ref name="googlenews1">{{cite web|url=http://www.google.com/url?q=http://online.wsj.com/article/SB123549830385261453.html |title=Investor's Suit Is Dismissed - WSJ.com |publisher=Online.wsj.com |date=February 25, 2009 |accessdate=April 26, 2009}}</ref> The judge separately declined to dismiss a lawsuit brought by Hadleigh Holdings, which claims it entrusted $1 million to the Madoff firm three days before his arrest.<ref name="googlenews1"/>
Madoff asked others for money in the final weeks before his arrest, including Wall Street financier [[Kenneth Langone]], whose office was sent a 19-page pitch book, allegedly created by the staff at the [[Fairfield Greenwich Group]]. Madoff said he was raising money for a new [[investment vehicle]], between $500 million and $1 billion for exclusive clients, was moving quickly on the venture, and wanted an answer by the following week. Langone declined.<ref name=smartmoney>{{cite web |url=http://www.smartmoney.com/breaking-news/smw/?story=20090107105536 |title=Madoff Sought, Got Cash in Days Before Arrest |date=January 9, 2009 |accessdate=January 29, 2009 |publisher=[[SmartMoney]]}}</ref>
On December 10, 2008, he suggested to his sons, Mark and Andrew, that the firm pay out several million dollars in bonuses two months ahead of schedule, from $200 million in assets that the firm still had.<ref name="usa today" /> According to the complaint, Mark and Andrew, reportedly unaware of the firm's pending [[insolvency]], confronted their father, asking him how the firm could pay bonuses to employees if it could not pay investors. Madoff then admitted that he was "finished", and that the asset management arm of the firm was in fact a Ponzi scheme. Mark and Andrew then reported him to the authorities.<ref name="Appelbaum"/>
==Investigation into involvement of others==
{{Main|Participants in the Madoff investment scandal}}
Investigators are looking for others involved in the scheme, despite Madoff's assertion that he alone was responsible for the large-scale operation.<ref name="AP1218a"/> Harry Susman, an attorney representing several clients of the firm, stated that "someone had to create the appearance that there were returns", and further suggested that there must have been a team buying and selling stocks, forging books, and filing reports.<ref name="AP1218a" /> James Ratley, president of the [[Association of Certified Fraud Examiners]] said, “In order for him to have done this by himself, he would have had to have been at work night and day, no vacation and no time off. He would have had to nurture the Ponzi scheme daily. What happened when he was gone? Who handled it when somebody called in while he was on vacation and said, ‘I need access to money’?” <ref name="bloomberg2">{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aggq1e88xMPU&refer=us |title=Madoff Must Have Had Help, Lawyers Say, Citing Trustee Report - Bloomberg.com |publisher=Bloomberg.com<! |date=February 24, 2009 |accessdate=April 26, 2009}}</ref>
“Simply from an administrative perspective, the act of putting together the various account statements, which did show trading activity, has to involve a number of people. ... You would need office and support personnel, people who actually knew what the [[market price]]s were for the securities that were being traded. You would need accountants so that the internal documents reconcile with the documents being sent to customers at least on a superficial basis,” said Tom Dewey, a securities lawyer.<ref name="bloomberg2"/>
# [[Cohmad Securities]] Corp. of which Madoff shares 10–20% ownership stakes. The brokerage firm lists its address as Madoff's firm's address in New York City. Its chairman, Maurice J. Cohn, his daughter and COO Marcia Beth Cohn, and [[Robert Jaffe (stockbroker)|Robert M. Jaffe]], a broker at the firm, are accused by the SEC of 4 counts of civil [[fraud]], "knowingly or recklessly disregarding facts indicating that Madoff was operating a fraud".<ref name="NYT062209">{{cite news | last =Henriques | first =Diana B. | title =Brokerage Firm and 4 Others Sued in Madoff Case | work =[[The New York Times]] | date =June 22, 2009 | url =http://www.nytimes.com/2009/06/23/business/23madoff.html?hp | accessdate =June 22, 2009 }}</ref> Another lawsuit filed by bankruptcy trustee [[Irving Picard]] is seeking funds for Madoff victims. Jaffe has requested the Court dismiss the charges in both cases.<ref>{{cite web|author=Jonathan Stempel |url=http://www.reuters.com/article/domesticNews/idUSTRE57K5E420090821 |title=Madoff friend wants SEC, trustee charges dismissed |publisher=Reuters |date= |accessdate=March 16, 2010}}</ref>
# [[Stanley Chais]], of the Brighton Company. On May 1, 2009, Picard filed a lawsuit against Stanley Chais, 82. The complaint alleges he "knew or should have known" he was involved in a Ponzi scheme when his family investments with Madoff averaged 40% return. It also claims Chais was a primary beneficiary of the scheme for at least 30 years, allowing his family to withdraw more than $1 billion from their accounts since 1995. The SEC filed a similar civil suit mirroring these claims.<ref name="NYT062209"/><ref>{{cite news|
url=http://www.nydailynews.com/news/2009/05/02/2009-05-02_los_angeles_investment_manager_stanley_chais_sued_for_funneling_cash_to_bernie_m.html |title=Los Angeles investment manager Stanley Chais sued for funneling cash to Bernie Madoff fund|
author=Standora, Leo |
publisher=New York Daily News |
date=May 2, 2009}}</ref> On September 22, 2009 Chais was sued by [[California]] [[Attorney General]] [[Jerry Brown]] seeking $25 million in penalties as well as restitution for victims, saying the Beverly Hills investment manager was a 'middleman' in Madoff's Ponzi scheme.<ref>{{cite web|url=http://www.latimes.com/business/la-fi-chais23-2009sep23,0,3042092.story |title=Financial advisor Stanley Chais sued in Bernie Madoff scheme - Los Angeles Times |publisher=Latimes.com |date=September 23, 2009 |accessdate=March 16, 2010}}</ref>
# Madoff Securities International Ltd. in London.
# [[Carl J. Shapiro]], women's clothing entrepreneur, self-made millionaire and philanthropist, and one of Madoff's oldest friends and biggest financial backers, who helped him start his investment firm in 1960. He was never in the finance business. In 1971, Mr. Shapiro sold his business , Kay Windsor, Inc. for $20 million. Investing most with Madoff, that sum grew to hundreds of millions of dollars and possibly to more than $1 billion. Shapiro personally lost about $400 million, $250 million of which he gave to Madoff 10 days before his arrest. His foundation lost more than $100 million.<ref name="online.wsj.com">{{cite web|last=Efrati |first=Amir |url=http://www.google.com/url?q=http://online.wsj.com/article/SB124261271530929129.html |title=Madoff Victims Investigated - WSJ.com |publisher=Online.wsj.com |date=May 18, 2009 |accessdate=March 16, 2010}}</ref>
# [[David G. Friehling]], 49, the sole practitioner at Friehling & Horowitz CPAs, waived indictment and pleaded not guilty to criminal charges on July 10, 2009. He agreed to proceed without having the evidence in the criminal case against him reviewed by a grand jury at a hearing before U.S. District Judge Alvin Hellerstein in Manhattan. Friehling was charged on March 18, 2009, with [[securities fraud]], aiding and abetting [[investment adviser]] fraud, and four counts of filing false audit reports with the Securities and Exchange Commission.<ref>{{cite web|last=Bray |first=Chad |url=http://www.google.com/url?q=http://online.wsj.com/article/SB124784585862258641.html |title=Madoff Ex-Auditor Friehling Enters a Plea of Not Guilty - WSJ.com |publisher=Online.wsj.com |date=July 18, 2009 |accessdate=March 16, 2010}}</ref> On November 3, 2009, [[David Friehling]], Madoff's accounting front man plead guilty to the charges.<ref name="nbcnewyork.com">{{cite web|last=Dienst |first=Jonathan |url=http://www.nbcnewyork.com/news/local-beat/Madoff-Accountant-Set-to-Make-a-Deal-67600587.html |title=Madoff Accountant Set to Make a Deal |publisher=NBC New York |date=October 30, 2009 |accessdate=March 16, 2010}}</ref>
# Peter B. Madoff 63, Chief Compliance Officer, worked with his brother Bernie for more than 40 years, and ran the daily operations for the past 20 years. He helped create the computerized trading system.
# Ruth Madoff, Bernard's wife, agreed as part of Bernie's sentencing issues, to keep $2.5 million of her claim of more than $80 million in assets and to give up all of her possessions. The money is not protected from civil legal actions pursued by a court-appointed trustee liquidating Madoff's assets or by investor lawsuits.<ref>{{cite web|url=http://www.foxnews.com/story/0,2933,529858,00.html |title=Ruth Madoff Asks to Keep Her Fur Coat as U.S. Marshals Seize Penthouse - Local News | News Articles | National News | US News |publisher=FOXNews.com |date=July 2, 2009 |accessdate=March 16, 2010}}</ref> On July 29, 2009, she was sued by trustee Picard for $45 million, which supported her "life of splendor". According to court filings, she received more than $3 million from the business over the last six years to pay personal expenses charged to her [[American Express]] card, and $2 million in payments to a business called PetCare RX. “Ruth Madoff was never an employee of BLMIS yet millions of dollars belonging to BLMIS and its customers found their way into her personal accounts and investments without any legitimate business purpose or any value to BLMIS, simply because of her relationship with Bernard Madoff.” She is also required to itemize any expenditures over $100.<ref>{{cite web|url=http://www.nydailynews.com/money/2009/08/04/2009-08-04_buybuy_to_madoff_wifes_free_spending.html |title=Bernie Madoff's wife, Ruth, agrees to account for monthly spending |publisher=Nydailynews.com |date=August 4, 2009 |accessdate=March 16, 2010}}</ref> The case is Picard v. Madoff, 1:09-ap-1391, U.S. Bankruptcy Court, Southern District of New York (Manhattan).<ref>{{cite web|author=E-mail This |url=http://dealbook.blogs.nytimes.com/2009/07/29/trustee-sues-ruth-madoff-for-448-million/?hpw |title=Trustee Sues Ruth Madoff for $44.8 Million - DealBook Blog - NYTimes.com |publisher=Dealbook.blogs.nytimes.com |date=July 29, 2009 |accessdate=March 16, 2010}}</ref><ref>{{cite web|last=Fitzgerald |first=Patrick |url=http://www.google.com/url?q=http://online.wsj.com/article/SB124889554637990959.html |title=Trustee Sues Ruth Madoff for More Than $44 Million - WSJ.com |publisher=Online.wsj.com |date=July 30, 2009 |accessdate=March 16, 2010}}</ref><ref>{{cite web|url=http://www.scribd.com/doc/17780712/Lawsuit-Against-Ruth-Madoff-Irving-Picard |title=Lawsuit Against Ruth Madoff (Irving Picard) |publisher=Scribd.com |date=March 1, 2009 |accessdate=March 16, 2010}}</ref> On November 25, 2008, she withdrew $5.5 million and $10 million on December 10, 2008, from her brokerage account at Cohmad, a feeder fund which had an office in Madoff’s headquarters and was part-owned by him.<ref name="marketsnews1">{{cite web|url=http://www.reuters.com/article/marketsNews/idUSLC60093820090212 |title=Medici's Kohn says did not get Madoff payments | Markets | Markets News | Reuters |publisher=Reuters |date=February 12, 2009 |accessdate=April 26, 2009}}</ref><ref name="business1">{{cite web|url=http://www.boston.com/business/ticker/2009/02/galvin_seeks_to.html |title=Galvin seeks to shut down firm with Madoff ties – Daily Business Update – The Boston Globe |publisher=Boston.com |date=February 11, 2009 |accessdate=April 26, 2009}}</ref> In November, she also received $2 million from her husband's London office, Madoff Securities International Ltd.<ref>{{cite web|url=http://www.cnbc.com/id/29911053 |title=Madoff's Wife Got $2 Million from UK Unit – Financials * Europe * News * Story |publisher=CNBC.com |date=March 27, 2009 |accessdate=April 26, 2009}}</ref><ref name="bloomberg4">{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601102&sid=azeCkQIOM0L8&refer=uk |title=Madoff Fraud Charges Could Be Filed in U.K. This Year (Update4) |publisher=Bloomberg.com |date=March 27, 2009 |accessdate=April 26, 2009}}</ref> She has not been charged with any crime, and has not been questioned by prosecutors.<ref>[http://www.nytimes.com/2009/06/14/fashion/14ruth.html?pagewanted=1&ref=fashion "The Loneliest Woman in New York"] by Lynnley Browning, ''[[The New York Times]]'', June 12, 2009 (6/14/09 p. ST1 of the NY ed.). Retrieved 6/14/09.</ref> She has been seen riding the N.Y. subway and did not attend her husband's sentencing.<ref name="washingtonpost.com">{{cite web|url=http://www.washingtonpost.com/wp-dyn/content/article/2009/06/26/AR2009062604652.html |title=Madoff to Forfeit $170 Billion In Assets Ahead of Sentencing |publisher=washingtonpost.com |date= |accessdate=March 16, 2010}}</ref><ref name="ReferenceA">{{cite web|last=Efrati |first=Amir |url=http://www.google.com/url?q=http://online.wsj.com/article/SB124612092335264949.html |title=Madoff's Wife Cedes Asset Claim - WSJ.com |publisher=Online.wsj.com |date=June 28, 2009 |accessdate=March 16, 2010}}</ref>
# Madoff's sons – Mark, 45, and Andrew, 42, worked in the trading arm in the New York office, but also raised money marketing the Madoff funds.<ref>{{cite web|author=Mike Greenlar / The Post Standard |url=http://www.syracuse.com/news/index.ssf/2009/03/how_warning_signs_eluded_berna.html |title=How warning signs eluded Bernard Madoff's man in Syracuse |publisher=Syracuse.com |date= |accessdate=April 26, 2009}}</ref> Their assets were frozen on March 31, 2009.<ref>{{cite web|last=Efrati |first=Amir |url=http://www.google.com/url?q=http://online.wsj.com/article/SB123851832507274247.html |title=Judge Freezes Assets of Madoff's Family - WSJ.com |publisher=Online.wsj.com |date=April 1, 2009 |accessdate=April 26, 2009}}</ref> The two have been estranged from their father, since December 10, 2008, and haven't spoken with their mother<ref name="ReferenceA"/> in the wake of the fraud, but some contend that was a charade in order to protect their assets from litigation.<ref name='vfairmargolick'>{{cite news | first=David | last=Margolick | coauthors= |authorlink= David Margolick | title=The Madoff Chronicles, Part III: Did the Sons Know | date=July 2009 | publisher= | url =http://www.vanityfair.com/politics/features/2009/07/madoff200907 | work =Vanity Fair | pages = | accessdate = June 25, 2009 | language = }}</ref> On October 2, 2009 a civil lawsuit was filed against them by trustee Picard for a judgment in the aggregate amount of at least $198,743,299. Peter Madoff and daughter, Shana are also defendants.<ref>{{cite web|last=Lucchetti |first=Aaron |url=http://www.google.com/url?q=http://online.wsj.com/article/SB125451222667260197.html |title=Madoff Trustee Sues Swindler's Family - WSJ.com |publisher=Online.wsj.com |date=October 3, 2009 |accessdate=March 16, 2010}}</ref><ref>http://abcnews.go.com/images/Blotter/Complaint.pdf</ref> On March 15, 2010, they filed a motion to dismiss.<ref>http://online.wsj.com/article/SB10001424052748703734504575126013209903810.html?mod=googlenews_wsj</ref>
# [[Frank DiPascali]], 52, who referred to himself as "director of [[option]]s trading" and as "[[chief financial officer]]" at Madoff Securities pled guilty on August 11, 2009, to 10 counts:<ref>http://www.abcnews.go.com/images/Blotter/DiPascali,%20Frank%20Charges%20Chart.pdf</ref> [[conspiracy (crime)|conspiracy]], [[securities fraud]], investment advisor [[fraud]], [[mail fraud]], [[wire fraud]], [[perjury]], [[income tax evasion]], international [[money laundering]], falsifying books and records of a broker-dealer, and an investment advisor. He has agreed to connect the dots and to name names, with sentencing in May, 2010.<ref>{{cite web|url=http://www.abcnews.go.com/Blotter/Madoff/story?id=8304447&page=1 |title=Frank DiPascali Pleads Guilty, Bernard Madoff's Accomplice - ABC News |publisher=Abcnews.go.com |date=August 11, 2009 |accessdate=March 16, 2010}}</ref> He is awaiting bail.<ref name="nbcnewyork.com"/> Prosecutors are seeking more than $170 billion in forfeiture, the same amount sought from Madoff, which represents funds deposited by investors and later disbursed to other investors. The same day, a [[Securities and Exchange Commission]] civil complaint<ref>http://online.wsj.com/public/resources/documents/SEC2009-182.pdf</ref> was filed against DiPascali.<ref>{{cite web|last=Bray |first=Chad |url=http://www.google.com/url?q=http://online.wsj.com/article/SB124999709846222617.html |title='All Fake': Key Madoff Executive Admits Guilt - WSJ.com |publisher=Online.wsj.com |date=August 12, 2009 |accessdate=March 16, 2010}}</ref>
# Enrica Cotellessa-Pitz, [[controller]] Bernard L. Madoff Investment Securities LLC, but NOT a licensed [[certified public accountant]]. Her signature is on checks from BMIS to [[Cohmad Securities]] Corp. representing commission payments. She was the liaison between the SEC and BLMIS regarding the firm's financial statements. The SEC has removed the statements off its website.<ref>{{cite web|author=May 11, 2009, 10:10PM |url=http://tpmcafe.talkingpointsmemo.com/talk/blogs/mrs_panstreppon/2009/05/bernie-madoff-why-is-enrica-co.php?ref=reccafe |title=Bernie Madoff: Why Is Bernie's Controller, Enrica Cotellessa-Pitz, Getting A Pass In The Press? | Mrs Panstreppon's Blog |publisher=Tpmcafe.talkingpointsmemo.com |date=May 11, 2009 |accessdate=March 16, 2010}}</ref>
# [[Fairfield Greenwich Group]], based in [[Greenwich, Connecticut]], had a "Fairfield Sentry" fund which was one of many feeder funds that gave investors portals to Madoff. On April 1, 2009, the [[Commonwealth of Massachusetts]] filed a civil action charging Fairfield Greenwich with fraud, breaching its fiduciary duty to clients by failing to provide promised due diligence on its investments. The complaint seeks a fine and restitution to Massachusetts investors for losses and disgorgement of performance fees paid to Fairfield by those investors. It alleges that in 2005 Mr. Madoff coached Fairfield staff about ways to answer questions from SEC attorneys who were looking into [[Harry Markopolos]]' complaint about Madoff's operations.<ref>{{cite web|url=http://www.sec.state.ma.us/sct/sctfairfield/fairfieldidx.htm |title=Securities: Fairfield Greenwich |publisher=Sec.state.ma.us |date=April 1, 2009 |accessdate=April 26, 2009}}</ref><ref>{{cite web|url=http://www.google.com/url?q=http://online.wsj.com/article/SB123859307450378115.html |title=Madoff Feeder Is Charged in Fraud - WSJ.com |publisher=Online.wsj.com |date=April 2, 2009 |accessdate=April 26, 2009}}</ref> The Secretary of State has no plans to settle the lawsuit in spite of the fact that Fairfield Greenwich has offered to repay all Massachusetts investors, and is expected to force Fairfield to explain [[e-mails]] and other evidence he has uncovered that appear to show company officials knew about potential problems with Madoff but failed to disclose them to clients.<ref>{{cite web|url=http://www.boston.com/business/articles/2009/08/14/galvin_wont_settle_madoff_case/ |title=Galvin won’t settle Madoff case - The Boston Globe |publisher=Boston.com |date=August 14, 2009 |accessdate=March 16, 2010}}</ref><ref>{{cite web|author=Svea Herbst-Bayliss |url=http://www.reuters.com/article/domesticNews/idUSTRE57D3X820090814 |title=Mass. regulator will not settle Madoff feeder suit |publisher=Reuters |date= |accessdate=March 16, 2010}}</ref> On May 18, 2009, the hedge fund was sued by trustee Picard, seeking a return of $3.2 billion during the period from 2002 – Madoff's arrest in December, 2008.<ref>http://www.nytimes.com/2009/05/19/business/19madoff.html?ref=nyregion</ref> However, the money may already be in the hands of Fairfield’s own clients, who are likely off-limits to Picard, since they weren’t direct investors with Madoff.<ref>{{cite web|last=Jones |first=Ashby |url=http://blogs.wsj.com/law/2009/05/19/picards-latest-a-huge-lawsuit-against-fairfield-greenwich/ |title=Picard’s Latest: A Huge Lawsuit Against Fairfield Greenwich - Law Blog - WSJ |publisher=Blogs.wsj.com |date=May 19, 2009 |accessdate=March 16, 2010}}</ref>
# [[J. Ezra Merkin]], a prominent [[investment advisor]] and philanthropist, has been sued for his role in running a "feeder fund" for Madoff.<ref name="cnndowj">{{cite news |first =Chad | last =Bray|url=http://money.cnn.com/news/newsfeeds/articles/djf500/200812162136DOWJONESDJONLINE000783_FORTUNE5.htm |title=3rd UPDATE: Merkin, Ascot Fund Sued Over Madoff Investments|date=December 16, 2008|publisher=[[Dow Jones Newswires]]|work =[[CNN]] |accessdate=December 23, 2008}}</ref> On April 6, 2009, New York [[Attorney General]] [[Andrew Cuomo]] filed civil [[fraud]] charges<ref>http://online.wsj.com/public/resources/documents/WSJ-20090406-MerkinComplaint.pdf</ref> against J. Ezra Merkin alleging he "betrayed hundreds of investors" by moving $2.4 billion of clients' money to Bernard Madoff without their knowledge. The complaint states, he lied about putting the money with Madoff, failed to disclose conflicts of interest, and collected over $470 million in fees for his three hedge funds, Ascot Partners LP with Ascot Fund Ltd., Gabriel Capital Corp. and Ariel Fund Ltd. He promised he would actively manage the money, but instead, he misguided investors about his Madoff investments in quarterly reports, in investor presentations, and in conversations with investors. "Merkin held himself out to investors as an investing guru...In reality, Merkin was but a master marketer."<ref name=civilfraud1>{{cite news |publisher=Reuters |title=Fund operator Merkin charged with civil fraud |url=http://www.reuters.com/article/businessNews/idUSTRE53548420090406 |author=Graybow, Martha |date=April 6, 2009}}</ref><ref>http://online.wsj.com/public/resources/documents/Merkin.exhibitsone0407.pdf</ref><ref>http://online.wsj.com/public/resources/documents/Merkinexhibitstwo0407.pdf</ref><ref>http://online.wsj.com/public/resources/documents/Merkinexhibits30407.pdf</ref>
# [[Jeffry Picower]] and his wife, Barbara, of Palm Beach, Florida, and Manhattan, had two dozen accounts. He was a lawyer, accountant, and investor who led buyouts of health-care and technology companies. Mr. Picower's foundation stated its investment portfolio with Madoff was valued at nearly $1 billion at one time.<ref name="online.wsj.com"/> On October 25, 2009, Picower, 67 was found dead of a massive [[heart attack]] at the bottom of his [[Palm Beach]] swimming pool. He was buried on October 27, 2009 in Mount Ararat Cemetery in [[Farmingdale, New York]], Section 60, Range C, Lot 15.<ref>{{cite web|url=http://www.page2live.com/2009/10/29/madoff-investor-jeffry-picower-laid-to-rest-on-long-island/ |title=Madoff pal Jeffry Picower laid to rest on Long Island | Jose Lambiet’s |publisher=Page2live.com |date= |accessdate=March 16, 2010}}</ref>
# [[Tremont]] Group Holdings started its first Madoff-only fund in 1997. That group managed several funds marketed under the Re Select Broad Market Fund.<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aCT_aoIRYqRg&refer=home |title=Tremont Group Funds Invested $3.3 Billion With Madoff (Update1) |publisher=Bloomberg.com |date=December 15, 2008 |accessdate=April 26, 2009}}</ref>
# The Maxam fund invested through Tremont. Sandra L. Manzke, founder of Maxam Capital, had her assets temporarily frozen by the same Connecticut court.<ref>{{cite web|url=http://www.forbes.com/2009/03/31/madoff-connecticut-ponzi-personal-finance_fairfield.html |title=Judge Freezes Madoff Assets |publisher=Forbes.com |date=March 31, 2009 |accessdate=April 26, 2009}}</ref>
#Daniel Bonventre, former operations director for Bernard Madoff Investment Securities.<ref>{{cite web|url=http://www.latimes.com/business/la-fi-madoff26-2010feb26,0,601172.story|title=
Former Madoff operations exec arrested |publisher=latimes.com |date=February 25, 2010 |accessdate=February 25, 2010}}</ref><ref>{{cite web|url=http://www.tradersmagazine.com/news/madoff-operations-director-arrested-105266-1.html|title=
Madoff's Director of Operations Arrested |publisher=Traders Magazine Online News |date=February 25, 2010 |accessdate=February 25, 2010}}</ref><ref>{{cite web|url=http://www.justice.gov/usao/nys/pressreleases/February10/bonventredanielarrestpr.pdf|title=Press Release: Manhattan U.S. Attorney Charges Daniel Bonventre, Former Director Of Operations For Bernard L. Madoff Investment Securities, Llc, With Conspiracy, Securities Fraud, And Tax Crimes|publisher=US DOJ United States Attorney Southern District of New York |date=February 25, 2010 |accessdate=Mar 4, 2010}}</ref>
==Charges and Sentencing==
The criminal case is U.S.A. v. Madoff, 1:08-mJ-02735.
The SEC case is ''Securities and Exchange Commission v. Madoff'', 1:08-cv- 10791, both U.S. District Court, Southern District of New York (Manhattan).<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601213&sid=a6JDlygKnj8k&refer=home |title=Madoff Trustee Picard May Take Five Years to Pay Back Investors - Bloomberg.com |publisher=Bloomberg.com<! |date=January 21, 2009 |accessdate=April 26, 2009}}</ref> The cases against [[Fairfield Greenwich Group]] et al. are consolidated as 09-118 in U.S. District Court for the Southern District of New York (Manhattan).<ref name="reuters.com">[http://www.reuters.com/article/companyNewsAndPR/idUSN2253863920090122 Fairfield fund wins order in Madoff-related suit | Reuters<!-- Bot generated title -->]</ref>
While awaiting sentencing, Madoff has met with the SEC's [[Inspector General]], [[H. David Kotz]], who is conducting an investigation into how regulators failed to detect the fraud despite numerous red flags.<ref>{{cite web|author=E-mail This |url=http://dealbook.blogs.nytimes.com/2009/06/23/madoff-lawyers-seek-leniency-in-sentencing/?ref=business |title=Madoff Lawyers Seek Leniency in Sentencing - DealBook Blog - NYTimes.com |publisher=Dealbook.blogs.nytimes.com |date=June 23, 2009 |accessdate=March 16, 2010}}</ref> Former SEC Chairman [[Harvey Pitt]] estimated the actual net fraud to be between $10 and $17 billion, because it does not include the fictional returns credited to the Madoff's customer accounts.<ref name="APMarch6">{{cite news |last =Hays |first =Tom |coauthors =Larry Neumeister, Shlomo Shamir |title =Extent of Madoff fraud now estimated at far below $50b |agency =Associated Press|publisher=[[Haaretz]] | date =March 6, 2009 |url = http://www.haaretz.com/hasen/spages/1069457.html |accessdate =March 7, 2009 }}</ref>
===Criminal complaint===
''U.S. v. Madoff, 08-MAG-02735''.<ref name="Bloom1">{{cite news | last =Glovin |first =Dan | coauthor = Bradley Keoun |title =Madoff Charged in $50 Billion Fraud at Investment Advisory Firm | work =[[Bloomberg News]] |date =December 11, 2008 | url =http://www.bloomberg.com/apps/news?pid=20601087&sid=a8EVy7KVpBaA&refer=home | accessdate =December 11, 2008}}</ref><ref name="madoff2">{{cite web|url=http://www.usdoj.gov/usao/nys/madoff.html |title=The United States Department of Justice – United States Attorney's Office |publisher=Usdoj.gov |date= |accessdate=April 26, 2009}}</ref>
The original criminal complaint estimated that investors lost $50 billion through the scheme,<ref name="Times1">{{cite news | last =Henriques | first =Diana | coauthor = Zachery Kouwe | title =Prominent Trader Accused of Defrauding Clients | work =[[The New York Times]] | date =December 11, 2008 | url =http://www.nytimes.com/2008/12/12/business/12scheme.html?ref=business
| accessdate =December 11, 2008}}</ref> though ''[[The Wall Street Journal]]'' reports "that figure includes the alleged false profits that Mr. Madoff's firm reported to its customers for decades. It is unclear exactly how much investors deposited into the firm."<ref name="1223WsjA">{{cite news | last =Efrati | first =Amir | coauthors =Aaron Lucchetti and Tom Lauricella | title =Probe Eyes Audit Files, Role of Aide To Madoff | work =[[The Wall Street Journal]] | publisher =[[Dow Jones]] | date =December 23, 2008 | url =http://online.wsj.com/article/SB122999256957528605.html?mod=googlenews_wsj | accessdate =December 23, 2008}}</ref> He was originally charged with a single count of securities fraud and faced up to 20 years in prison, and a fine of $5 million if convicted.
Court papers indicate that Madoff's firm had about 4,800 investment client accounts as of November 30, 2008, and issued statements for that month reporting that client accounts held a total balance of about $65 billion, but actually "held only a small fraction" of that balance for clients.
<ref>[http://www.reuters.com/article/topNews/idUSN1046349920090311?pageNumber=2&virtualBrandChannel=0 Madoff faces life in prison on 11 criminal charges | Reuters<!-- Bot generated title -->]</ref>
Madoff was arrested by the [[Federal Bureau of Investigation]] (FBI) on December 11, 2008, on a [[criminal charge]] of [[securities fraud]].<ref name="madoff2"/> According to the criminal complaint, the previous day<ref>This date has been contested in two lawsuits against Madoff's sons. {{cite news | title =Madoff Securities Employees Sue Madoff Sons, Allege Fraud | work =[[The Wall Street Journal]] | date =June 16, 2009 | url =http://online.wsj.com/article/BT-CO-20090616-717211.html | accessdate =July 27, 2009}}</ref> he had told his sons that his business was "a giant [[Ponzi scheme]]".<ref name="AP1">{{cite news | last =Neumeister | first =Larry | title =Ex-Nasdaq chair arrested on fraud charge | agency =Associated Press | date =December 11, 2008 | url =}} Yahoo-Finance document http://biz.yahoo.com/ap/081211/wall_street_arrest.html accessed December 11, 2008 has expired.</ref><ref name="WSJ1">{{cite news | title =Top Broker Accused of Fraud; Madoff, Money Manager for the Wealthy, Said to Have Run '$50 Billion Ponzi Scheme' | work =[[The Wall Street Journal]] | date =December 11, 2008 | url =http://online.wsj.com/article/SB122903010173099377.html?mod=googlenews_wsj | accessdate =December 11, 2008}}</ref> They called a friend for advice, Martin Flumenbaum, a lawyer, who called federal prosecutors and the SEC on their behalf. FBI Agent Theodore Cacioppi made a house call. "We are here to find out if there is an innocent explanation," Cacioppi said quietly. The 70-year-old [[financier]] paused, then said: "There is no innocent explanation."<ref name="independent1"/><ref name="Times1" /> He had "paid investors with money that was not there".<ref name="Times121208">{{cite web | last =Honan | first =Edith | coauthor = Dan Wilchins | title =Former Nasdaq chair arrested over alleged £33 billion fraud | work =[[International Herald Tribune]] | date =December 12, 2008 | url =http://www.iht.com/articles/reuters/2008/12/12/business/OUKBS-UK-MADOFF-ARREST.php | accessdate =December 12, 2008}}</ref> Madoff was released on the same day of his arrest after posting $10 million [[bail]].<ref name="AP1" /> Madoff and his wife surrendered their passports, and he was subject to travel restrictions, a 7 p.m. [[curfew]] at his co-op, and [[electronic monitoring]] as a condition of bail. Although Madoff only had two co-signers for his $10 million bail, his wife and his brother Peter, rather than the four required, a judge allowed him free on bail but ordered him confined to his apartment.<ref name="nydn1">{{cite news | last =Rush | first =George | coauthors = Thomas Zambito, Phyllis Furman and Greg B. Smith | title =Bernard Madoff housebound after failing to get enough co-signers for bail bond in $50B ponzi scheme | work =[[New York Daily News]] | date =December 18, 2008 | url =http://www.nydailynews.com/news/ny_crime/2008/12/17/2008-12-17_bernard_madoff_housebound_after_failing_.html | accessdate =December 26, 2008}}</ref> Madoff has reportedly received [[death threat]]s that have been referred to the FBI, and the SEC referred to fears of "harm or flight" in its request for Madoff to be confined to his Upper East Side apartment.<ref name="nydn1" /><ref name="nydn2">{{cite news | last =Zambito | first =Thomas | coauthor = Corky Siemaszko | title =Feds confine Bernie Madoff to his $7 million penthouse until trial | work =[[New York Daily News]] | date =December 20, 2008 | url =http://www.nydailynews.com/news/ny_crime/2008/12/20/2008-12-20_feds_confine_bernie_madoff_to_his_7_mill.html | accessdate =December 26, 2008}}</ref> Cameras monitored his apartment's doors, its communication devices sent signals to the FBI, and his wife was required to pay for additional security.<ref name="nydn2" />
Apart from 'Bernard L. Madoff' and 'Bernard L. Madoff Investment Securities LLC ("BMIS")', the order to freeze all activities<ref>http://www.sec.gov/news/press/2008/2008-293-order-2.pdf SIPC page 7, VII [[United States Securities and Exchange Commission]].</ref> also forbade trading from the companies Madoff Securities International Ltd. ("Madoff International") and Madoff Ltd.
On January 5, 2009, prosecutors had requested that the Court revoke his bail, after Madoff and his wife allegedly violated the court-ordered asset freeze by mailing jewelry worth up to $1 million to relatives, including their sons and Madoff's brother. It was also noted that $173 million in signed checks had been found in Madoff's office desk after he had been arrested.<ref name="Bloom1609">{{cite news | last =Glovin | first =David | title =Madoff Sons Reported Jewelry Violations to U.S., Lawyer Says | publisher =Bloomberg.com | date =January 6, 2009 | url =http://www.bloomberg.com/apps/news?pid=20601103&sid=aRLjsVfmRQ64&refer=us | accessdate =January 6, 2009 }}</ref><ref name="nytimes revoke">{{cite news | last =Berenson | first =Alex | title =Bid to Revoke Madoff’s Bail Cites His Gifts | publisher =The New York Times | date =January 6, 2009 | url =http://www.nytimes.com/2009/01/06/business/06madoff.html?em |accessdate =January 6, 2009 }}</ref> His sons reported the mailings to prosecutors. Previously, Madoff was thought to be cooperating with prosecutors.<ref name="nytimes revoke"/> The following week, Judge Ellis refused the government's request to revoke Madoff's bail, but required as a condition of bail that Madoff make an inventory of personal items and that his mail be searched.<ref name="nytimes11209">{{cite news | last =Henrique | first =Diana | title =Judge Rules Madoff Can Remain Free on Bail | publisher =The New York Times | date =January 12, 2009 | url=http://www.nytimes.com/2009/01/13/business/13bail.html?_r=1 |accessdate =January 12, 2009 }}</ref>
On March 10, 2009, the [[United States Attorney for the Southern District of New York]] filed an 11-count criminal information, or complaint,<ref>[http://www.usdoj.gov/usao/nys/madoff/20090310criminalinfo.pdf (PDF)]</ref> charging Madoff
<ref>{{citenews|url=http://news.findlaw.com/hdocs/docs/madoff/criminal-information-plea31009.html|title=Criminal Information (U.S. v. Bernard Madoff|date=March 10, 2009|publisher=FindLaw|accessdate=March 10, 2009}}</ref> with 11 felonies: [[securities fraud]], [[investment adviser]] fraud, [[mail fraud]], [[wire fraud]], three counts of [[money laundering]], [[false statements]], [[perjury]], making false filings with the SEC, and theft from an [[Pension#Benefits|employee benefit plan]].<ref name="madoff2"/><ref name="pimentelletter1">http://www.usdoj.gov/usao/nys/madoff/20090310pimentelletter.pdf</ref> The complaint stated that Madoff had defrauded his clients of almost $65 billion—thus spelling out the largest [[Ponzi scheme]] in history, as well as the largest investor fraud committed by a single person.
Madoff pled guilty to three counts of [[money laundering]]. Prosecutors allege that he used the London Office, Madoff Securities International Ltd. to launder more than $250 million of client money by transferring client money from the investment-advisory business in New York to London and then back to the U.S. to support the U.S. trading operation of Bernard L. Madoff Investment Securities LLC. Madoff gave the appearance that he was trading in Europe for his clients.<ref name="article3">{{cite web|last=Lauricella |first=Tom |url=http://online.wsj.com/article/SB123681392137901653.html |title=Madoff Used U.K. Office in Cash Ploy, Filing Says - WSJ.com |publisher=Online.wsj.com |date=March 12, 2009 |accessdate=April 26, 2009}}</ref>
===Plea proceeding===
On March 12, 2009, Madoff appeared in court in a plea proceeding, and pled guilty to all charges.<ref name="MadoffAllocution"/> There was no [[plea agreement]] between the government and Madoff; he simply pleaded guilty and signed a [[waiver]] of [[indictment]]. The charges carried a maximum sentence of 150 years in prison, as well as mandatory [[restitution]] and [[fine (penalty)|fines]] up to twice the gross gain or loss derived from the offenses. If the government's estimate is correct, Madoff will have to pay $170 billion in restitution.<ref name="madoff2"/><ref name="pimentelletter1">[http://www.usdoj.gov/usao/nys/madoff/20090310pimentelletter.pdf Pimental letter]</ref>
In his pleading [[allocution]], Madoff admitted to running a [[Ponzi scheme]], and expressed regret for his "criminal acts".<ref name="NewsdayMarch7" /> He stated that he had begun his scheme some time in the early 1990s. He wished to satisfy his clients' expectations of high returns he had promised, even though it was during an [[Early 1990s recession|economic recession]]. He admitted that he hadn't invested any of his clients' money since the inception of his scheme. Instead, he merely deposited the money into his business account at [[Chase Manhattan Bank]]. He admitted to false trading activities masked by foreign transfers and false SEC returns. When clients requested account withdrawals, he paid them from the Chase account, claiming the profits were the result of his own unique "split-strike conversion strategy". He said he had every intention of terminating the scheme, but it proved "difficult, and ultimately impossible" to extricate himself. He eventually reconciled himself to being exposed as a fraud.<ref name="MadoffAllocution"/>
Only two of at least 25 victims who had requested to be heard at the hearing spoke [[in open court]] against accepting Madoff's plea of guilt.
<ref name="madoff2"/><ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aaJGQYRxpLr8&refer=us |title=Madoff Lawyer Ira Sorkin Invested $18,860 With Madoff (Update2) - Bloomberg.com |publisher=Bloomberg.com<! |date=March 10, 2009 |accessdate=April 26, 2009}}</ref>
Judge [[Denny Chin]] accepted his guilty plea and remanded him to incarceration at the [[Metropolitan Correctional Center, New York|Manhattan Metropolitan Correctional Center]] until sentencing. Chin said that Madoff was now a substantial flight risk given his age, wealth and the possibility of spending the rest of his life in prison.<ref name="DOJ3">[http://www.usdoj.gov/usao/nys/madoff/madoffhearing031209.pdf DOJ Madoff hearing]</ref>
Madoff's attorney, [[Ira Sorkin]] filed an [[appeal]], to return him back to his "penthouse arrest", await sentencing, and to reinstate his bail conditions, declaring he would be more amenable to cooperate with the government's investigation,
<ref>{{cite web|url=http://www.reuters.com/article/newsOne/idUSTRE52C57L20090313 |title=Madoff to appeal bail, net worth revealed | U.S. |publisher=Reuters |date=March 13, 2009 |accessdate=April 26, 2009}}</ref> and prosecutors filed a notice in opposition.<ref name="usdoj.gov">http://www.usdoj.gov/usao/nys/madoff/madoffbailpendingsentencing.pdf</ref><ref>{{cite web|url=http://www.nydailynews.com/money/2009/03/17/2009-03-17_bernard_madoffs_sons_andrew_and_mark_lat.html |title=Bernard Madoff's sons, Andrew and Mark, latest targets of feds' efforts to seize ill-gotten loot |publisher=Nydailynews.com |date=March 17, 2009 |accessdate=April 26, 2009}}</ref> On March 20, 2009, the appellate court denied his request.<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aUhqoVZyCMRY&refer=us |title=Bernard Madoff’s Bid for Freedom Denied by U.S. Court (Update5) |publisher=Bloomberg.com |date=March 20, 2009 |accessdate=April 26, 2009}}</ref>
On June 26, 2009, Chin ordered Madoff to forfeit $170 million in assets. His wife Ruth will relinquish her claim to $80 million worth of assets, leaving her with $2.5 million in cash.<ref name="washingtonpost.com"/> The settlement does not prevent the SEC and Picard to continue making claims against Mrs. Madoff's funds in the future.<ref name="ReferenceA"/> Madoff had earlier requested to shield $70 million in assets for Ruth, arguing that it was unconnected to the fraud scheme.
===Sentencing and prison life===
Prosecutors recommended a maximum prison sentence of 150 years, and informed Chin that [[Irving Picard]], bankruptcy trustee has indicated that "Mr. Madoff has not provided meaningful cooperation or assistance."<ref>[http://www.usdoj.gov/usao/nys/madoff/20090626sentencingmemorandumfiled.pdf Prosecutors' sentencing recommendation]</ref><ref>Henriques, Dana. [http://www.nytimes.com/2009/06/27/business/27madoff.html Prosecutors propose 150-year sentence for Madoff]. [[The New York Times]], 2009-06-26.</ref> The Bureau of US Prisons had recommended 50 years, while defense lawyer [[Ira Sorkin]] had recommended 12 years, arguing that Madoff had confessed. The judge granted Madoff permission to wear his personal clothing at sentencing.<ref name="ReferenceA"/>
U.S. District Judge [[Denny Chin]] sentenced Madoff to 150 years in prison, as recommended by the prosecution. Chin said he had not received any mitigating letters from friends or family testifying to Madoff's good deeds, describing that "the absence of such support is telling".<ref>{{cite web|url=http://www.nydailynews.com/money/2009/06/29/2009-06-29_madoff_gets_max.html#ixzz0JqLKSxSX&D |title=Bye, Bye Bernie: Ponzi king Madoff sentenced to 150 years |publisher=Nydailynews.com |date=June 29, 2009 |accessdate=March 16, 2010}}</ref> Commentators noted that this was in contrast to other high-profile white collar trials such as that of [[Andrew Fastow]], [[Jeffrey Skilling]], and [[Bernard Ebbers]] who were known for their philanthropy and/or cooperation to help victims; however Madoff's victims included several charities and foundations, and the only person that pleaded for mercy was defense lawyer Ira Sorkin.<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601039&sid=a5CWiR2gIqbE |title=Madoff Lacks What Skilling, Ebbers, Fastow Had: Ann Woolner |publisher=Bloomberg.com |date=July 1, 2009 |accessdate=March 16, 2010}}</ref> Chin called the fraud "unprecedented" and "staggering", and stated that the sentence would deter others from committing similar frauds. "Here the message must be sent that Mr. Madoff's crimes were extraordinarily evil." Many victims, some of whom had lost their life savings, applauded the sentence.<ref>{{cite web|last=Frank |first=Robert |url=http://online.wsj.com/article/SB124604151653862301.html |title=Bernard Madoff, Convicted Ponzi-Scheme Operator, Sentenced to 150 Years - WSJ.com |publisher=Online.wsj.com |date=June 30, 2009 |accessdate=March 16, 2010}}</ref>
Chin said "I have a sense Mr. Madoff has not done all that he could do or told all that he knows," noting that Madoff failed to identify accomplices, making it more difficult for prosecutors to build cases against others. Chin dismissed Sorkin's plea for leniency, stating that Madoff made substantial loans to family members and moved $15 million from the firm to his wife's account shortly before confessing.<ref>[http://www.washingtonpost.com/wp-dyn/content/article/2009/06/30/AR2009063000421_pf.html ]{{dead link|date=March 2010}}</ref> The court-appointed receiver of Bernard L. Madoff Investment Securities L.L.C., [[Irving Picard]], has also said that Madoff had not provided substantial assistance, complicating efforts to locate assets. A former federal prosecutor suggested Madoff would have had the possibility of a sentence with parole if he fully cooperated with investigators, but Madoff's silence implied that there were other accomplices in the fraud which led the judge to impose the maximum sentence.<ref>[http://www.philly.com/inquirer/business/20090630_Madoff_gets_maximum__150_years.html ]{{dead link|date=March 2010}}</ref><ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601110&sid=aRNSvzgqdhgg |title=Madoff’s Failure to Name Accomplices Cripples His Leniency Bid |publisher=Bloomberg.com |date=June 26, 2009 |accessdate=March 16, 2010}}</ref>
"I have left a legacy of shame, as some of my victims have pointed out, to my family and my grandchildren. This is something I will live in for the rest of my life. I'm sorry," he said simply. "I know that doesn't help you," Madoff said, after his victims recommended to the judge that he rot in jail.<ref>{{cite web|url=http://www.nydailynews.com/money/2009/06/29/2009-06-29_madoff_gets_max.html#ixzz0JqMnnVJB&D |title=Bye, Bye Bernie: Ponzi king Madoff sentenced to 150 years |publisher=Nydailynews.com |date=June 29, 2009 |accessdate=March 16, 2010}}</ref>
On June 29, 2009, inmate number #61727-054, Bernard Madoff was sentenced to 150 years imprisonment at the [[Metropolitan Correctional Center, New York City|Metropolitan Correctional Center]] in [[New York]], and ordered to pay $170 billion in restitution.<ref>{{cite news
|url=http://www.cbc.ca/money/story/2009/06/29/madoff-ponzi-fraud-sentence564.html
|title=Bernard Madoff gets 150 years behind bars for fraud scheme
|date=June 29, 2009
|accessdate=June 29, 2009
|publisher=CBC News}}</ref><ref>{{cite news |title=Madoff Sentenced to 150 Years for Ponzi Scheme |url=http://www.nytimes.com/2009/06/30/business/30madoff.html?_r=1&hp |first=Jack |last=Healy |publisher=The New York Times |date=June 29, 2009 |accessdate=June 29, 2009}}</ref><ref>{{cite news|url=http://news.bbc.co.uk/2/hi/business/8124838.stm|title= Fraudster Madoff gets 150 years |date=June 29, 2009|work=BBC News|accessdate=June 29, 2009}}</ref>
Madoff was incarcerated at [[Butner Federal Correctional Complex]] in [[North Carolina]].<ref>{{cite news|url=http://online.wsj.com/article/SB124752771713635527.html|title=Madoff is Moved to A Prison in Butner N.C.
|date=July 13, 2009}}</ref>
On July 28, 2009, he gave his first jailhouse interview to Joseph Cotchett and Nancy Fineman, attorneys from San Francisco, because they threatened to sue his wife, Ruth, on behalf of several investors who lost fortunes. During the 4 and 1/2 hour session, he was described as arrogant and cocky, and upon query, apologized to all his clients.<ref>[http://www.theaustralian.news.com.au/business/story/0,28124,25858299-5001942,00.html ]{{dead link|date=March 2010}}</ref>
==Recovery of funds==
{{Main|Recovery of funds from the Madoff investment scandal}}
Madoff's combined assets are about $826 million and have been frozen. Madoff provided a confidential list of his and his firm's assets to the SEC on December 31, which was subsequently disclosed on March 13, 2009 in a court filing. Madoff had no [[IRA]]s, no [[401(k)]], no [[Keogh plan]], no other [[pension plan]] and no [[annuity (finance theory)|annuities]]. He owned less than a combined $200,000 in securities in [[Lehman Brothers]], [[Morgan Stanley]], [[Fidelity]], [[Bear Stearns]], and [[M&T]]. No offshore or [[Swiss Bank]] accounts were listed.<ref>[http://www.nypost.com/seven/03132009/news/regionalnews/031309madofffinance.pdf ]{{dead link|date=March 2010}}</ref><ref name="newsday.com">[http://www.newsday.com/services/newspaper/printedition/saturday/news/ny-bzasse146068689mar14,0,1570341,full.story Madoff assets worth more than $820 million – Newsday.com]{{Dead link|date=April 2009}}</ref>
{{Wikinews|Madoff prosecutors want assets from wife and children}}On March 17, 2009, prosecutor filed a document listing more assets including $2.6 million in jewelry and about 35 sets of watches and cufflinks, more than $30 million in loans owed to the couple by their sons, and Ruth Madoff's interest in real estate funds sponsored by [[Sterling Equities]], whose partners include [[Wilpon]]. Ruth Madoff, and Peter Madoff, invested as “passive limited partners” in real estate funds sponsored by the company, as well as other venture investments. Assets also include the Madoffs' interest in Hoboken Radiology LLC. in Hoboken, New Jersey; Delivery Concepts LLC, an online food ordering service in midtown Manhattan that operates as "delivery.com"; an interest in Madoff La Brea LLC; an interest in the restaurant, PJ Clarke’s on the Hudson LLC; and [[Boca Raton]], Florida-based Viager II LLC.<ref>{{cite web|url=http://dealbook.blogs.nytimes.com/2009/03/17/prosecutors-seek-more-forfeitures-from-madoffs/?hp |title=Prosecutors Seek to Claim More Madoff Assets - DealBook Blog - NYTimes.com |publisher=Dealbook.blogs.nytimes.com |date=March 17, 2009 |accessdate=April 26, 2009}}</ref><ref name="bloomberg6">{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aj6f7pk8l_00&refer=home |title=Madoff Prosecutors Seek to Take Businesses, Loans (Update1) |publisher=Bloomberg.com |date=March 17, 2009 |accessdate=April 26, 2009}}</ref>
On March 2, 2009, Judge [[Louis Stanton]] modified an existing freeze order to surrender assets Madoff owns: his securities firm, real estate, artwork, and entertainment tickets, and granted a request by prosecutors that the existing freeze remain in place for the Manhattan apartment, and vacation homes in [[Montauk]], New York, and [[Palm Beach, Florida]]. He has also agreed to surrender his interest in [[Primex]] Holdings LLC, a [[joint venture]] between Madoff Securities and several large brokerages, designed to replicate the auction process on the [[New York Stock Exchange]].<ref name="bloomberg1">{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aWVQJMrRh7Qc&refer=home |title=Ruth Madoff Says Her $62 Million ‘Unrelated’ to Fraud (Update2) - Bloomberg.com |publisher=Bloomberg.com<! |date=March 2, 2009 |accessdate=April 26, 2009}}</ref> Madoff's April 14, 2009 opening day [[New York Mets]] tickets were sold for $7,500 on [[ebay]].<ref>{{cite web|url=http://www.nydailynews.com/money/2009/04/12/2009-04-12_now_thats_a_decent_return_madoffs_opening_day_mets_tickets_sell_for_7500_on_ebay.html |title=Now that's a decent return! Madoff's opening day Mets tickets sell for $7,500 on eBay |publisher=Nydailynews.com |date=April 12, 2009 |accessdate=April 26, 2009}}</ref>
On April 13, 2009, a Connecticut judge dissolved the temporary asset freeze from March 30, 2009, and issued an order for [[Fairfield Greenwich Group]] executive Walter Noel to post property pledges of $10 million against his Greenwich home and $2 million against Jeffrey Tucker's.<ref>{{cite web|url=http://www.zwire.com/site/news.cfm?BRD=1653&dept_id=686445&newsid=20299234&PAG=461&rfi=9 |title=Minuteman News Center |publisher=Zwire.com |date= |accessdate=March 16, 2010}}</ref> Noel agreed to the attachment on his house "with no findings, including no finding of liability or wrongdoing". Andres Piedrahita's assets continue to remain temporarily frozen because he was never served with the complaint. The principals are all involved in a lawsuit filed by the town of [[Fairfield]]'s pension funds, which lost $42 million. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport).<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=apLMJ4p8DYyY&refer=home |title=Madoff-Linked Asset Freeze Lifted in Connecticut Suit (Update1) |publisher=Bloomberg.com |date= |accessdate=March 16, 2010}}</ref>
<ref>{{cite web|url=http://www.reuters.com/article/domesticNews/idUSN3150504420090331 |title=Judge freezes assets of Madoff sons, executives |publisher=Reuters |date= |accessdate=March 16, 2010}}</ref><ref>{{cite web|url=http://www.scribd.com/doc/12872951/Town-of-Fairfield-suit-against-NEPC-and-KPMG |title=Town of Fairfield suit against NEPC and KPMG |publisher=Scribd.com |date= |accessdate=March 16, 2010}}</ref> Maxam Capital and other firms that allegedly fed Madoff's fund, which could allow Fairfield to recover up to $75 million were also part of the dissolution and terms.<ref>{{cite web|author=March 31, 2009 |url=http://www.newsday.com/news/local/wire/connecticut/ny-bc-ct--madoff-fairfield0331mar31,0,3368851.story |title=Town sues Madoff, hedge funds over losses |publisher=Newsday.com |date=March 31, 2009 |accessdate=April 26, 2009}}</ref><ref>{{cite web|url=http://www.wtnh.com/dpp/news/news_wtnh_fairfield_gets_freeze_on_madoff_assets_200903310552 |title=Fairfield gets freeze on Madoff assets |publisher=Wtnh.com |date= |accessdate=April 26, 2009}}</ref>
Professor [[John C. Coffee|John Coffee]], of [[Columbia University Law School]], said that much of Madoff's money may be in [[offshore fund]]s. The SEC believed keeping the assets secret would prevent them from being seized by foreign regulators and foreign creditors.<ref>{{cite web|url=http://abcnews.go.com/TheLaw/Business/story?id=6554322&page=1 |title=ABC News: Madoff Set to Disclose List of Holdings |publisher=Abcnews.go.com |date=December 17, 2008 |accessdate=April 26, 2009}}</ref><ref>{{cite web|url=http://business.smh.com.au/business/madoffs-assets-to-be-kept-secret-20090101-78f7.html |title=Madoff's assets to be kept secret |publisher=Business.smh.com.au |date=January 2, 2009 |accessdate=April 26, 2009}}</ref>
The [[Montreal Gazette]] reported on January 12, 2010 that there are unrecovered Madoff assets in Canada.<ref>[http://www.montrealgazette.com/news/Madoff+trustee+finds+assets+Canada/2432583/story.html Madoff trustee finds assets in Canada], [[Montreal Gazette]], January 12, 2010</ref>
==Affected clients==
{{Main|List of investors in Bernard L. Madoff Securities}}
On February 4, 2009, the U.S. Bankruptcy Court in Manhattan released a 162-page client list with at least 13,500 different accounts,<ref>{{cite news|last=Fleury |first=Michelle |url=http://news.bbc.co.uk/1/hi/business/7898874.stm |title=Business | Madoff victims count their losses |publisher=BBC News |date=February 19, 2009 |accessdate=April 26, 2009}}</ref> but without listing the amounts invested.<ref>{{cite web|url=http://online.wsj.com/public/resources/documents/madoffclientlist020409.pdf|title=WSJ: Madoff Client List|format=PDF}}</ref> Individual investors who invested through [[Fairfield Greenwich Group]], Ascot Partners, and Chais Investments were not included on the list.<ref>{{cite news|last=Chew |first=Robert |url=http://www.time.com/time/business/article/0,8599,1877414,00.html |title=The Bernie Madoff Client List Is Made Public |publisher=TIME |date=February 5, 2009 |accessdate=April 26, 2009}}</ref>
Clients included banks, hedge funds, charities, universities, and wealthy individuals who have disclosed about $41 billion invested with Bernard L. Madoff Investment Securities LLC, according to a ''[[Bloomberg News]]'' tally, which may include double counting of investors in feeder funds.<ref name="bloomberg.com">{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=ax319OmN67Pg&refer=home |title=Madoff’s Firm Owed $600 Million in Stock, SIPC Says (Update1) - Bloomberg.com |publisher=Bloomberg.com<! |date=January 27, 2009 |accessdate=April 26, 2009}}</ref>
Although Madoff filed a report with the SEC in 2008 stating that his advisory business had only 11–25 clients and about $17.1 billion in assets,<ref>{{cite news | url = http://www.cnn.com/2008/BUSINESS/12/15/madoff.arrest.exposure/index.html | publisher = CNN | title = Banks face huge losses from $50B ‘scam’|date=December 15, 2008}}</ref> thousands of investors have reported losses, and Madoff estimated the fund's assets at $50 billion.
Other notable clients included former [[Salomon Brothers]] economist [[Henry Kaufman]], [[Steven Spielberg]], [[Jeffrey Katzenberg]], actors [[Kevin Bacon]], [[Kyra Sedgwick]], [[John Malkovich]], and [[Zsa Zsa Gabor]], [[Mortimer Zuckerman]],<ref>{{cite web|url=http://www.nypost.com/seven/12142008/news/regionalnews/daily_news_owner_mort_zuckerman_madoff_v_144237.htm|title="Zuckerman Sounds Off on Madoff", ''New York Daily News'' (December 14, 2008)}}</ref> [[Baseball Hall of Fame]] pitcher [[Sandy Koufax]], broadcaster [[Larry King]], [[World Trade Center]] developer [[Larry Silverstein]], and The [[Elie Wiesel]] Foundation for Humanity lost $15.2 million, and Wiesel and his wife, Marion, lost their life savings.<ref>[http://www.nytimes.com/2009/02/27/business/27madoff.html Out Millions, Elie Wiesel Vents About Madoff – NYTimes.com<!-- Bot generated title -->]</ref>
===Largest stake-holders===
According to ''[[The Wall Street Journal]]''<ref name="WSJvics">{{cite news | title =Madoff’s Victims | work =[[The Wall Street Journal]] | date =December 16, 2008 | url =http://s.wsj.net/public/resources/documents/st_madoff_victims_20081215.html | accessdate =December 17, 2008}}</ref> the investors with the largest potential losses, including feeder funds, are:
{{colbegin}}
*[[Fairfield Greenwich Group]], $7.50 billion
*Tremont Capital Management, $3.30 billion
*[[Banco Santander]], $2.87 billion
*[[Bank Medici]], $2.10 billion
*Ascot Partners, $1.80 billion
*Access International Advisors, $1.40 billion
*[[Fortis-ABN AMRO|Fortis]], $1.35 billion
*[[HSBC]], $1 billion
{{colend}}
The potential losses of these eight investors total $21.32 billion.
Eleven investors had potential losses between $100 million and $1 billion:
{{colbegin|3}}
*[[Natixis]] SA
*[[Carl J. Shapiro]] (a 95-year-old Boston philanthropist)
*[[Royal Bank of Scotland Group]] PLC
*[[BNP Paribas]]
*[[BBVA]]
*[[Man Group]] PLC
*Reichmuth & Co.
*[[Nomura Holdings]]
*Maxam Capital Management
*EIM SA
*[[Union Bancaire Privée]]
{{colend}}
Twenty-three investors with potential losses of $500,000 to $100 million were also listed, with a total potential loss of $540 million. The grand total potential loss in the ''Wall Street Journal'' table is $26.9 billion.
Some investors have amended their initial estimates of losses to include only their original investment, since the profits Madoff reported to them which they were including were most likely fraudulent. [[Yeshiva University]], for instance, said its actual incurred loss was its invested $14.5 million, not the $110 million initially estimated, which included falsified profits reported to the university by Madoff.
====IRS penalties====
It is estimated the potential tax penalties for foundations invested with Madoff are $1 billion.
Although foundations are exempt from [[federal income tax]]es, they are subject to an [[excise tax]], for failing to vet Madoff's proposed investments properly, to heed red flags, or to diversify prudently. Penalties may range from 10% of the amount invested during a tax year, to 25% if they fail to try to recover the funds. The foundation’s officers, directors, and trustees face up to a 15% penalty, with up to $20,000 fines for individual managers, per investment.<ref>[http://www.nytimes.com/2009/02/12/business/12tax.html?ref=business Foundations Could Be Fined for Madoff Investments – NYTimes.com<!-- Bot generated title -->]</ref>
==Impact and aftermath==
===Criminal charges Aurelia Finance===
Criminal charges against five directors will proceed against Swiss wealth manager [[Aurelia Finance]], which lost an alleged $800 million of client money. The directors' assets have been frozen.<ref>{{cite web|url=http://uk.reuters.com/article/businessNews/idUKTRE53N4BF20090424 |title=Swiss judge allows charges in Madoff losses case | Reuters |publisher=Uk.reuters.com |date=February 9, 2009 |accessdate=April 26, 2009}}</ref><ref>{{cite web|url=http://uk.reuters.com/article/usTopNews/idUKTRE53R2QY20090428 |title=Aurelia managers sought safety in Madoff: report | Reuters |publisher=Uk.reuters.com |date=April 28, 2009 |accessdate=March 16, 2010}}</ref>
===Grupo Santander===
Clients primarily located in [[South America]] who invested with Madoff through the Spanish bank [[Grupo Santander]], filed a class action against Santander in Miami. Santander proposed a settlement that would give the clients $2 billion worth of [[preferred stock]] in Santander based on each client's original investment. The shares pay a 2% dividend.<ref>{{cite news |url=http://seekingalpha.com/article/121829-clients-lose-again-with-santander-s-madoff-compensation-barron-s|title=Clients Lose Again with Santander's Madoff Compensation – Barron's|work=Barron's|first=Rachael |last=Granby|date=February 22, 2009|accessdate=March 13, 2009}}</ref> Seventy percent of the Madoff/Santander investors accepted the offer.<ref>{{cite news |url=http://www.nytimes.com/2009/02/20/business/worldbusiness/20madoff.html|title=70% of Santander Clients Take Madoff Settlement|author=Reuters|work=The New York Times|date=February 19, 2009|accessdate=March 13, 2009}}</ref>
===Union Bancaire Privee===
[[Union Bancaire Privée]], invested less than $1.08 billion (of its $124.5 billion in assets) in Madoff funds.<ref>{{cite web|last=Mollenkamp |first=Carrick |url=http://online.wsj.com/article/SB122947686926212703.html |title=Fairfield Group Forced to Confront Its Madoff Ties - WSJ.com |publisher=Online.wsj.com |date=December 17, 2008 |accessdate=March 16, 2010}}</ref><ref>{{cite web|url=http://projects.nytimes.com/creditcrisis/madoff_clients/table |title=Madoff's Clients - The New York Times |publisher=Projects.nytimes.com |date=June 24, 2009 |accessdate=March 16, 2010}}</ref>
In March 2009, Geneva-based wealth manager, [[Union Bancaire Privée]], offered to partially compensate investors 50% of the money they initially invested with Madoff if they agree to stay with the bank for the next five years and promise not to sue.<ref>{{cite web|last=Bryan |first=Cassell |url=http://online.wsj.com/article/SB123776596117909221.html |title=Madoff-Stung Union Bancaire Regroups - WSJ.com |publisher=Online.wsj.com |date=March 23, 2009 |accessdate=April 26, 2009}}</ref>
On May 8, 2009, a lawsuit was filed against the bank on behalf of New York investor Andrea Barron in the [[United States District Court for the Southern District of New York]]. The lawsuit is seeking [[class-action]] status for investors in UBP Funds as of December 11, 2008, and damages, including the return of management fees.<ref>[http://online.wsj.com/article/BT-CO-20090511-714664.html ]{{dead link|date=March 2010}}</ref>
===Notz Stucki===
[[Geneva]]-based wealth manager, [[Notz Stucki|Notz Stucki's]] Plaza Fund, will compensate up to $103.2 million to those clients who did not specifically request access to Madoff. Compensation would be with an issue of a note payable over five years, which would be held by a separate legal entity.<ref>{{cite web|url=http://uk.reuters.com/article/marketsNewsUS/idUKLN64260120090423 |title=UPDATE 2-Notz Stucki to partially reimburse Madoff clients | Markets | US Markets | Reuters |publisher=Uk.reuters.com |date=February 9, 2009 |accessdate=April 26, 2009}}</ref>
===Bank Medici===
[[Bank Medici]] is an [[Austria]]n bank founded by [[Sonja Kohn]], who met Madoff in 1985 while living in New York.<ref name="Espinoza2009-02-01">{{cite news | last = Espinoza | first = Javier | date = February 1, 2009 | title = Austria Takes Control Of Madoff-Tainted Bank | work = Forbes | url = http://www.forbes.com/2009/01/02/medici-madoff-austria-markets-equity-cx_je_0102markets05.html | accessdate = February 24, 2010 }}</ref> Ninety percent of the bank's income was generated from Madoff investments.<ref>{{cite news |url=http://www.securitiesdocket.com/2009/01/21/austria-madoff-exposed-bank-medici-reportedly-on-brink-of-collapse-class-action-may-be-in-works/|title=Austria: Madoff-Exposed Bank Medici Reportedly on Brink of Collapse, Class Action May Be in Works|date=January 21, 2009|work=Securities Docket|accessdate=March 13, 2009}}</ref> In December 2008, Medici reported that two of its funds—Herald USA Fund and Herald Luxemburg Fund—were exposed to Madoff losses. On January 2, 2009, FMA, the Austria banking regulator, took control of Bank Medici and appointed a supervisor to control the bank.<ref>{{cite news |url=http://edition.cnn.com/2009/CRIME/01/03/bernard.madoff.austria.bank/index.html|title=Austria takes over bank hit by Madoff case|date=January 3, 2009|fwork=CNN|accessdate=March 13, 2009}}</ref> Bank Medici, and its Austrian banking license is now for sale and has been sued by its customers both in the United States and in Austria.<ref>{{cite news|url=http://www.reuters.com/article/mergersNews/idUSLB12236820090312?feedType=RSS&feedName=mergersNews|title=Austria's Madoff-hit Bank Medici seeks buyers|work=Reuters|date=March 12, 2009|first=Boris |last=Groendahl|accessdate=March 13, 2009}}</ref> The Vienna State Prosecutor has launched a criminal investigation of Bank Medici and Kohn, who had invested an estimated $2.1 billion with Madoff.<ref>{{cite news |url=http://www.businessinsider.com/madoff-feeder-bank-medici-probed-criminally-in-vienna-2009-3|title=Madoff Feeder Bank Medici Probed Criminally In Vienna|work=Business Insider|first=Henry |last=Blodget|date=March 1, 2009|accessdate=March 13, 2009}}</ref> On May 28, 2009, Bank Medici lost its Austrian banking license. Kohn and the Bank are under investigation.<ref>{{cite web|last=Hansen |first=Flemming E. |url=http://online.wsj.com/article/SB124351941925862619.html |title=Madoff-Hit Bank Medici Loses License - WSJ.com |publisher=Online.wsj.com |date=May 28, 2009 |accessdate=March 16, 2010}}</ref>
===The Innocence Project===
The [[Innocence Project]] was partly funded by the JEHT Foundation, a private charity backed by a wealthy couple, Ken and Jeanne Levy-Church, financed with Madoff's mythical money. Jeanne Levy-Church's losses forced her to shut down her Foundation, and her parents’ foundation, the Betty and Norman F. Levy Foundation, lost $244 million. JEH helped the less fortunate, especially ex-convicts.<ref>http://www.nytimes.com/2009/03/12/business/12accountants.html</ref><ref name="thedailybeast1">{{cite web|url=http://www.thedailybeast.com/blogs-and-stories/2009-04-23/madoffs-london-money-laundering-scam/ |title=Was Madoff 'Victim' and Best Friend an Accomplice? – Page 1 |publisher=The Daily Beast |date= |accessdate=April 26, 2009}}</ref> (''See'' [[Participants in the Madoff investment scandal]]: Norman F. Levy) Madoff's corruption has deprived it of necessary funds to secure the release of others. The organization uses the latest [[DNA]] techniques to prove the innocence of the wrongfully imprisoned. On November 25, 2008, Steven Barnes was set free from jail with the evidence gained from the DNA tests, after serving 20 years for crimes he did not commit (rape and murder).
<ref>{{cite web|last=Coomarasamy |first=James |url=http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/8063604.stm |title=Programmes | From Our Own Correspondent | Bernard Madoff's hidden victims |publisher=BBC News |date=May 23, 2009 |accessdate=March 16, 2010}}</ref>
===Suicide of clients===
====René-Thierry Magon de la Villehuchet====
On December 23, 2008, one of the founders of Access International Advisors LLC, [[René-Thierry Magon de la Villehuchet]], was found dead in his company office on [[Madison Avenue]] in New York City. His left wrist was slit<ref name="Quest">[http://www.nytimes.com/2009/01/02/business/02madoff.html?_r=1 "Madoff Investor’s Suicide Leaves Questions"] by Alex Berenson and Matthew Saltmarsh, ''[[The New York Times]]'', January 2, 2009, p. B1 New York edition</ref> and de la Villehuchet had taken [[sleeping pill]]s, in what appeared to be [[suicide]].<ref name="suicide">{{cite web|title=Police: Madoff Investor Found Dead of Suicide| work = [[Associated Press|AP Newswire]] |publisher=[[1010 WINS]]| format = text and audio | url=http://www.1010wins.com/pages/3547010.php| accessdate=December 23, 2008}}</ref><ref name="nydn villehuchet">{{cite news|url=http://www.nydailynews.com/money/2008/12/25/2008-12-25_bernie_madoff_should_rot_with_rats_victi.html|title=Bernie Madoff should rot with rats, victim's pal says|accessdate=December 26, 2008|work=[[New York Daily News]]|date=December 25, 2008}}</ref>
He lived in [[New Rochelle, New York]] and came from a very prominent [[France|French]] family. Although no [[suicide note]] was found at the scene, his brother Bertrand in France received a note shortly after his death in which he expressed remorse and a feeling of responsibility.<ref name="Quest" /> The [[Federal Bureau of Investigation|FBI]] and SEC do not believe de la Villehuchet was involved in the fraud.<ref name="nydn villehuchet" />
[[Harry Markopolos]] said he met de La Villehuchet several years before, and warned him that Madoff might be breaking the law.<ref>{{cite web|url=http://www.google.com/url?sa=D&q=http://online.wsj.com/article/SB123361899636241467.html&usg=AFQjCNFXIc6HhLulK9yO2Za3pKV6PHHK0g |title=A Lonely Lament From a Whistle-Blower - WSJ.com |publisher=Online.wsj.com |date=February 3, 2009 |accessdate=April 26, 2009}}</ref> In 2002, Access invested about 45% of its $1.2 billion under management with Madoff. By 2008, it managed $3 billion and raised the proportion of funds with Madoff to about 75%. De la Villehuchet had also invested all of his wealth and 20% of his brother, Bertrand's, with Madoff.<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a8Pw8wT2dhH4&refer=us |title=U.K.’s Prince Charles Targeted by Madoff Marketer, Witness Says - Bloomberg.com |publisher=Bloomberg.com<! |date=February 6, 2009 |accessdate=April 26, 2009}}</ref> Bertrand said that René-Thierry did not know Madoff but the connection was through René-Thierry's partner in AIA, French banker, [[Patrick Littaye]].<ref>[http://www.nytimes.com/2009/01/02/business/02madoff.html?_r=1 "Madoff Investor’s Suicide Leaves Questions"] by Alex Berenson and Matthew Saltmarsh, ''[[The New York Times]]'', 2009-01-02, p. B1 [[New York|NY]] edition.</ref>
====William Foxton====
On February 10, 2009, highly-decorated British soldier William Foxton, OBE,<ref>{{cite web|url=http://www.telegraph.co.uk/news/uknews/5503929/Bernard-Madoff-fraud-victim-committed-suicide-to-avoid-bankruptcy-shame.html | title = Bernard Madoff fraud victim committed suicide to avoid bankruptcy shame |date=June 11, 2009 |work=[[telegraph.co.uk]] |accessdate=June 28, 2009 }}</ref> 65, shot himself in a park in [[Southampton, England]], having lost all of his family's savings. He had invested in the Herald USA Fund and Herald Luxembourg Fund,<ref name="Thompsonfeb2009">{{cite web|url=http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5720211.ece |title=Bernard Madoff has 'blood on his hands' over William Foxton suicide |publisher=Business.timesonline.co.uk |date= |accessdate=April 26, 2009}}</ref><ref name="littlefeb2009">{{cite news|url=http://news.bbc.co.uk/2/hi/uk_news/7886894.stm|title=Banking crisis killed my father|last=Little|publisher=BBC|accessdate=February 13, 2009}}</ref> [[feeder fund]]s for Madoff from [[Bank Medici]] in Austria.<ref>
{{cite news |url=http://www.romandie.com/infos/news2/081216185742.ad2u67r4.asp |title=Madoff : la banque autrichienne Medici impliquée avec 2,1 milliards de dollars |date=December 16, 2008 |work=[[Romandie News]] |language=French |accessdate=March 13, 2009 |author=[[Agence France-Presse|AFP]]}}</ref>
===Securities and Exchange Commission===
Following the Madoff investment scandal, the [[Securities and Exchange Commission]]'s inspector general conducted an internal investigation into the agency's failures to uncover the scheme despite a series of red flags and tips. In September 2009, the SEC released a 477-page report<ref>[http://www.sec.gov/news/studies/2009/oig-509.pdf Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme]. US Securities and Exchange Commission, Office of Investigations, August 31, 2009</ref> on how the SEC missed these red flags and identifies repeated opportunities for SEC examiners to find the fraud and how ineffective their efforts were.<ref>[http://online.wsj.com/article/SB125210039740087421.html Madoff Report Reveals Extent of Bungling]. ''[[The Wall Street Journal]]'', September 5, 2009</ref>
==See also==
*[[Financial crisis of 2007-2010]]
*[[Pyramid scheme]]
*[[Stanford Financial Group]]
*[[Federal Reserve Bank]]
==References==
{{reflist|2}}
==External links==
{{external links|date=September 2009}}
*[http://www.usdoj.gov/usao/nys/madoff.html Criminal complaint, transcripts of hearings and other documents from the [[United States Department of Justice]]]
*[http://graphics8.nytimes.com/images/blogs/dealbook/madoff_victims_impact.PDF 113 Victim Impact Statements: Letters urging Justice] June 12, 2009
*[http://www.scribd.com/doc/16699848/MCadoff-Letter-Seeking-Leniency, Defense Attorney pre-sentencing request for leniency letter], June 22, 2009
*[http://online.wsj.com/public/resources/documents/madoffclientlist020409.pdf Madoff Client List] February 4, 2009
*[http://www.bernardmadoffvictims.org Bernard Madoff Victim Support and Advocacy Group]
*[http://www.sec.gov/litigation/complaints/2008/comp-madoff121108.pdf SEC civil complaint]
*[http://sec.gov/news/press/2008/2008-293.htm SEC press release] and [http://sec.gov/news/press/2008/2008-293-update.htm update for investors]
*[http://www.madoff.com/ Bernard L. Madoff Investment Securities] The front page is now a placeholder for information on the case. ([http://web.archive.org/web/20070822055219/http://www.madoff.com/ Archive])
*{{cite web|url=http://www.madoff.com/dis/display.asp?id=203&mode=1&home=1#owner |title=The Owner's Name is on the Door |archiveurl=http://www.webcitation.org/5d4ZNZhKv |archivedate=December 14, 2008}}{{Dead link|date=March 2009}}
*[http://news.bbc.co.uk/2/hi/7792284.stm Jewish charities hit by Madoff scandal] BBC
*[http://www.ft.com/cms/s/b7a8d610-caaf-11dd-87d7-000077b07658.htm Madoff Scandal] ongoing coverage from the [[Financial Times]]
*[http://www.rightpundits.com/?p=3299 Ruth Madoff Biography and photos]
*[http://www.guardian.co.uk/business/2009/mar/27/serious-fraud-office-bernard-madoff-feeder-funds Serious Fraud Office broadens investigation to Madoff feeders] ''[[The Guardian]]'', March 27, 2009, British government's investigation into the London activities of certain feeder funds that channeled investments to Madoff
*[http://online.wsj.com/public/resources/documents/Merkin.exhibitsone0407.pdf# Deposition of J. Ezra Merkin]: Madoff Charities Investigation, State of New York (January 30, 2009)
*[http://online.wsj.com/public/resources/documents/WSJ-20090406-MerkinComplaint.pdf Merkin Civil Fraud Complaint] State of New York (April 6, 2009)
*[http://online.wsj.com/public/resources/documents/Merkinexhibitstwo0407.pdf Merkin Exhibits, Civil Fraud Complaint]
*[http://online.wsj.com/public/resources/documents/Merkinexhibits30407.pdf# continued Merkin Exhibits, Civil Fraud Complaint] State of New York, (April 6, 2009)
*[http://documents.nytimes.com/bernard-madoff-complaint-against-jp-morgan-chase#p=1 Complaint against J P Morgan Chase] (April 23, 2009)
*[http://graphics8.nytimes.com/packages/pdf/business/0507madoff_Complaint.pdf Complaint against J. Ezra Merkin] (May 7, 2009)
*[http://www.scribd.com/doc/15274382/Madoff-Trustee-Suit-Against-Harley Complaint against Harley International (Cayman) Limited] (May 12, 2009)
*[http://www.sec.state.ma.us/sct/sctcohmad/cohmad_complaint.pdf, Commonwealth of Massachusett Secretary of State Complaint] (January 14, 2009)
*[http://www.nylj.com/nylawyer/adgifs/decisions/062309cohmad.pdf, Picard v. Cohmad Securities Corp. 09-AP-1305] (June 22, 2009)
*[http://online.wsj.com/public/resources/documents/cohmadcomplaint20090622.pdf, SEC v. Cohmad Securities Corp., 09 Civ. 5680] (June 22, 2009)
*[http://documents.nytimes.com/madoff-lawsuit-againt-stanley-chais#p=1 Picard v. Chais et al. 08-01789] (May 1, 2009)
*[http://online.wsj.com/public/resources/documents/chaiscomplaint20090622.pdf SEC v. Stanley Chais, 09 CIV 5681] (June 22, 2009)
*[http://www.scribd.com/doc/17780712/Lawsuit-Against-Ruth-Madoff-Irving-Picard, Picard v. Ruth Madoff, 1:09-ap-1391] (July 29, 2009)
{{Madoff investment scandal}}
{{2008 economic crisis}}
{{Confidence Tricks}}
[[Category:2008 in economics]]
[[Category:Pyramid and Ponzi schemes]]
[[ar:فضيحة مادوف]]
[[bg:Афера Бърнард Мейдоф]]
[[ka:მეიდოფის საინვესტიციო აფიორა]]
[[pl:Piramida Madoffa]]
[[ru:Афера Бернарда Мейдоффа]]
[[uk:Афера Бернарда Мейдоффа]]
[[vi:Vụ lường gạt giới đầu tư của Madoff]]'
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== [[Headline text]]'''Bold text''' ==
{{Very long|date=April 2009}}
{{Infobox Criminal
|name = Bernard L. Madoff
|image_name= BernardMadoff.jpg
|image_size= 220px
|image_caption= Bernard Madoff's [[mug shot]]
|date_of_birth = {{Birth date and age|mf=y|1938|4|29}}
|place_of_birth = [[Queens]], [[New York]], [[United States|USA]]
|place_of_residence = [[Manhattan]], [[New York]], [[United States]]
|education = [[Hofstra University]] (1960)
|employer = Bernard L. Madoff Investment Securities
|political_party = [[Democratic Party (United States)|Democratic]]
|known_for = [[Ponzi scheme]], Chairman of [[NASDAQ]] (prior)
|nationality = [[United States|American]]
|spouse = Ruth Alpern Madoff
|occupation = Stock broker, financial adviser (retired), former chairman of [[NASDAQ]]
|status = Inmate #61727-054 at the [[Metropolitan Correctional Center, New York City|Metropolitan Correctional Center]], 150 Park Row, New York City, NY 10007.<ref>{{cite news|url=http://www.cnbc.com//id/29658548|title=Bernie Madoff's New Digs: From Penthouse To Outhouse|date=March 13, 2009|accessdate=March 13, 2009|publisher=CNBC}}</ref>
|children = Mark Madoff (''ca.'' 1964),<br/>Andrew Madoff (''ca.'' 1966)
|charge = [[Securities fraud]], investment advisor fraud, [[mail fraud]], [[wire fraud]], [[money laundering]], [[false statement]]s, [[perjury]], making false filings with the SEC, theft from an employee benefit plan
|penalty = 150 years in prison and<br />$170 billion in restitution
}}
The '''Madoff investment scandal''' is the [[Ponzi scheme]] that former [[NASDAQ]] chairman [[Bernard Madoff]] confessed to in 2008. He founded the [[Wall Street]] firm Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest.<ref name="WSJtimeline">{{cite news | title =The Madoff Case: A Timeline | work =The Wall Street Journal | date =March 6, 2009 | url =http://online.wsj.com/article/SB112966954231272304.html?mod=googlenews_wsj | accessdate =March 6, 2009 }}</ref><ref>{{cite web |url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aZFfHEPISe9s&refer=home |title=Madoff Prosecutors Get 30 More Days for Indictment |author=David Glovin |publisher=[[Bloomberg L.P.]] |date=February 11, 2009 |accessdate=February 11, 2009}}</ref><ref name="NewsdayMarch7">{{cite news | last =DeStefano | first =Anthony M. | title =Madoff expected to plead guilty in Ponzi scheme | work =[[Newsday]] | date =March 7, 2009 | url =http://www.newsday.com/services/newspaper/printedition/saturday/news/ny-bzmado076060500mar07,0,4620667.story | accessdate =March 7, 2009 }}</ref> Alerted by his sons, federal authorities arrested Madoff on December 11, 2008. On March 12, 2009, Madoff pled guilty to 11 felonies and admitted to operating what has been called the largest [[investor fraud]] ever committed by an individual. On June 29, 2009, he was sentenced to 150 years in prison with restitution of $170 billion. According to the original federal charges, Madoff said that his firm had "liabilities of approximately [[United States dollar|US$]]50 billion".<ref name="SEC1">{{cite web |title =SEC Charges Bernard L. Madoff for Multi-Billion Dollar Ponzi Scheme (2008–293) |work =[[SEC.gov]] |publisher =[[U.S. Securities and Exchange Commission]] | date =December 11, 2008 |url =http://www.sec.gov/news/press/2008/2008-293.htm |accessdate =December 11, 2008}}</ref><ref name="TI">{{cite news|url=http://www.independent.co.uk/news/world/americas/rich-investors-wiped-out-by-wall-street-fraud-1066090.html|title=Rich investors 'wiped out' by Wall Street fraud|date=December 14, 2008|work=[[The Independent]]|accessdate=December 17, 2008}}</ref> Prosecutors estimated the size of the fraud to be $64.8 billion, based on the amounts in the accounts of Madoff's 4,800 clients as of November 30, 2008.<ref name="updatedFraudEstimate">{{cite web|url=http://www.reuters.com/article/topNews/idUSTRE52A5JK20090311?pageNumber=2&virtualBrandChannel=0&sp=true |title=US Prosecutors updated the size of Madoff's scheme from $50 billion to $64 billion |publisher=Reuters |date=March 11, 2009 |accessdate=April 26, 2009}}</ref><ref name="Tonline">{{cite news |title=Wall Street legend Bernard Madoff arrested over '$50 billion Ponzi scheme' |work =[[Times Online]] | publisher =[[Times Newspapers Ltd]] |date =December 12, 2008 |url =http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5331997.ece | accessdate =December 13, 2008}}</ref><ref name="wsj031209">{{cite news | last =Bray | first =Chad | title =Madoff Pleads Guilty to Massive Fraud | work =[[The Wall Street Journal]] | publisher =Dow Jones, Inc | date =March 12, 2009 | url =http://online.wsj.com/article/SB123685693449906551.html?mod=djemalertNEWS | accessdate =March 12, 2009 }}</ref> Ignoring [[opportunity cost]]s and taxes paid on fictitious profits, less than half of Madoff's direct investors lost money.<ref>[http://www.nydailynews.com/money/2009/09/23/2009-09-23_50_of_madoff_investors_lost_nothing.html Prosecutors say half of Bernie Madoff's investors lost nothing in Ponzi scheme], a September 23, 2009 article from the New York ''[[Daily News (New York)|Daily News]]''. Retrieved 2009-09-23.</ref>
Investigators have determined others were involved in the scheme.<ref name="AP1218a">{{cite news |url=http://news.aol.com/article/did-bernard-madoff-act-alone-investors/281857 |title=Madoff Investigators Look for Partners |agency =Associated Press|accessdate=December 23, 2008 |publisher=[[AOL]]|last=Caruso |first =David |date=December 18, 2008}}{{Dead link|date=March 2009}}</ref> The [[U.S. Securities and Exchange Commission]] (SEC) has also come under fire for not investigating Madoff more thoroughly; questions about his firm had been raised as early as 1999. Madoff's business, in the process of [[liquidation]], was one of the top [[market maker]]s on [[Wall Street]] and in 2008, the sixth-largest.<ref name="usa today">{{cite news | last =Lieberman |first =David |coauthors =Pallavi Gogoi, Theresa Howard, Kevin McCoy, Matt Krantz | title =Investors remain amazed over Madoff's sudden downfall | work =[[USA Today]] | date =December 15, 2008 | url =http://www.usatoday.com/money/markets/2008-12-14-ponzi-madoff-downfall_N.htm |accessdate =December 24, 2008}}</ref>
Madoff's personal and business asset freeze has created a chain reaction throughout the world's business and philanthropic community, closing many, including the [[Robert I. Lappin Charitable Foundation]], the Picower Foundation, and the [[JEHT Foundation]].<ref name="Appelbaum">{{cite news |url=http://www.washingtonpost.com/wp-dyn/content/article/2008/12/12/AR2008121203970.html?hpid=topnews |title='All Just One Big Lie' |work =[[The Washington Post]]|accessd[[Media:<math>Example.ogg</math>--~~~~#REDIRECT [[<ref>Target page name</ref>]]]]ate=December 12, 2008 |publisher=[[Washington Post Company]]|last=Appelbaum | first =Binyamin |coauthors =David S. Hilzenrath and Amit R. Paley |date=December 13, 2008 |page=D01}}</ref><ref name=haaretz>{{cite news|url=http://www.haaretz.com/hasen/spages/1046187.html|title=Madoff Wall Street fraud threatens Jewish philanthropy|accessdate=December 13, 2008}}</ref>'''Bold text'''<ref name="Henriques">{{cite news|url=http://www.nytimes.com/2008/12/13/business/13investors.html?pagewanted=all|title=For Investors, Trust Lost, and Money Too |work=[[The New York Times]]|accessdate=December 13, 2008|last=Henriques}}</ref>
==Background==
Madoff started his firm in 1960 as a [[penny stock]] trader with $5,000 (about $35,000 in 2008 dollars), earned from working as a [[lifeguard]] and sprinkler installer.<ref name="Bloom1" /><ref name="independent1">{{cite news|url=http://www.independent.co.uk/news/business/analysis-and-features/the-madoff-files-the-man-behind-the-most-audacious-fraud-in-history-1518939.html |title=The Madoff files: Bernie's billions |publisher=[[The Independent]] |date= |accessdate=April 26, 2009}}</ref> His fledgling business began to grow with the assistance of his father-in-law, accountant Saul Alpern, who referred a circle of friends and their families.<ref>{{cite web|author=By Bloomberg |url=http://www.jpost.com/servlet/Satellite?cid=1233304648603&pagename=JPost%2FJPArticle%2FShowFull |title=Madoff's tactics date to 1960s, when father-in-law ASS was recruiter | Business Features | Jerusalem Post |publisher=Jpost.com |date=February 1, 2009 |accessdate=April 26, 2009}}</ref>
Initially, the firm made markets ([[stock quote|quoted]] [[bid and ask]] prices) via the [[National Quotation Bureau]]'s [[Pink Sheets]]. In order to compete with firms that were members of the [[New York Stock Exchange]] trading on the stock exchange's floor, his firm began using innovative computer information technology to disseminate its quotes.<ref name="nytimes 122408">{{cite news |last=de la Merced |first=Michael J. |title=Effort Under Way to Sell Madoff Unit |work=[[The New York Times]] |date=December 24, 2008 |url=http://www.nytimes.com/2008/12/25/business/25madoff.html |accessdate=December 24, 2008}}</ref> After a trial run, the technology that the firm helped develop became the [[NASDAQ]].<ref name="UpDown">{{cite book |last=Weiner |first=Eric J.| title=What Goes Up: The Uncensored History of Modern Wall Street as Told by the Bankers, Brokers, CEOs, and Scoundrels who Made it Happen |publisher=Little, Brown and Company | year=2005 |pages=188–192 |url=http://books.google.com/books?id=dIT4cjRNpygC&q=Madoff#search_anchor |isbn=0316929662 |accessdate=March 13, 2009}}</ref> At one point, Madoff Securities was the largest buying-and-selling "[[market maker]]" at the NASDAQ.<ref name="nytimes 122408" />
He was active in the [[National Association of Securities Dealers]] (NASD), a self-regulatory securities industry organization, serving as the Chairman of the [[Board of Directors]] and on the [[Board of Governors]].<ref name="Mad1">{{cite web |title =The Owner's Name is on the Door |work =Madoff.com |url=http://www.madoff.com/dis/display.asp?id=203&mode=1&home=1#owner | accessdate=December 11, 2008}}{{Dead link|date=March 2009}} [http://www.webcitation.org/5d4ZNZhKv Archive]</ref>
In 1992, ''The Wall Street Journal'' described him:
<blockquote>
..."one of the masters of the off-exchange "third market"
and the bane of the New York Stock Exchange. He has built a highly
profitable securities firm, Bernard L. Madoff Investment Securities,
which siphons a huge volume of stock trades away from the Big Board.
The $740 million average daily volume of trades executed
electronically by the Madoff firm off the exchange equals 9% of the
New York exchange's. Mr. Madoff's firm can execute trades so quickly and cheaply that it
actually pays other brokerage firms a penny a share to execute their
customers' orders, profiting from the spread between bid and asked
prices that most stocks trade for."<ref name="WSJ-Smith-1992">{{cite news |
url=http://newsgroups.derkeiler.com/Archive/Misc/misc.invest.stocks/2008-12/msg00878.html |
publisher=The Wall Street Journal |
date=December 16, 1992 |
title=Wall Street Mystery Features a Big Board Rival |
author=Smith, Randall}}</ref>
</blockquote>
Several family members worked for him. His younger brother, Peter, was Senior Managing Director and Chief Compliance Officer,<ref name="nytimes 122408" /> and Peter's daughter, Shana, was the compliance attorney. Madoff’s sons, Mark and Andrew, worked in the trading section,<ref name="nytimes 122408" /> along with Charles Weiner, Madoff’s nephew.{{Citation needed|date=March 2009}} Andrew Madoff had invested his own money in his father's fund, but Mark stopped in about 2001.<ref name="wsj friehling">[http://online.wsj.com/article/SB122999256957528605.html Probe Eyes Role of Aide to Madoff, Accountant]. ''[[The Wall Street Journal]]'', December 23, 2008.</ref>
Federal investigators believe the fraud in the investment management division and advisory division may have begun in the 1970s.<ref name="bloomberg 122308">{{cite news |last=Kolker |first=Carlyn |coauthors=Tiffany Kary and Saijel Kishan |title=Madoff Victims May Have to Return Profits, Principal |publisher= [[Bloomberg News]]|date=December 23, 2008 |url=http://www.bloomberg.com/apps/news?pid=20601087&sid=awmAWSxKpXRM&refer=home |accessdate=December 24, 2008}}</ref> However, Madoff himself stated his fraudulent activities began in the 1990s.<ref name="MadoffAllocution">{{citenews|url=http://online.wsj.com/public/resources/documents/20090315madoffall.pdf|format=PDF|title=Plea Allocution of Bernard Madoff (U.S. v. Bernard Madoff|date=March 12, 2009|publisher=The Wall Street Journal|accessdate=March 12, 2009}}</ref>
In the 1980s, Madoff's market-maker division traded up to 5% of the total volume made on the [[New York Stock Exchange]].<ref name="nytimes 122408" /> Madoff was "the first prominent practitioner"<ref name="FinInfo">{{cite book |last=Wilhelm |first=William J. |coauthors=Joseph D. Downing |title=Information Markets: What Businesses Can Learn from Financial Innovation |publisher=[[Harvard Business Press]] |year=2001| page=153 |url=http://books.google.com/books?id=xVqgCFKxHvgC&q=Madoff#search_anchor |isbn=1578512786 |accessdate=March 13, 2009}}</ref> who paid a broker to execute a customer's order through his brokerage, called a "legal [[kickback]]",<ref name="kickback">{{cite web |author=[[Princeton University]] Undergraduate Task Force |title=THE REGULATION OF PUBLICLY TRADED SECURITIES |publisher=[[U.S. Securities and Exchange Commission]] | month =January |year= 2005 |url=http://www.sec.gov/rules/proposed/s71004/s71004-587.pdf |format=PDF| page=58 | accessdate =December 17, 2008}}</ref> which gave Madoff the reputation of being the largest dealer in NYSE-listed stocks in the U.S., trading about 15% of transaction volume.<ref name="TnEHarris">{{cite book |last=Harris |first=Larry |title=Trading and Exchanges: Market Microstructure for Practitioners |publisher =[[Oxford University Press]] |year=2003 |page=290 |url=http://books.google.com/books?id=Rd9hDRR1Yx4C&q=Madoff#search_anchor |isbn=0195144708 |accessdate=March 13, 2009}}</ref> Academics have questioned the ethics of these payments.<ref name="Harv1">{{cite web | last =Ferrell | first =Allen | title =A Proposal for Solving the “Payment for Order Flow” Problem | work =74 S.Cal.L.Rev. 1027 |publisher =[[Harvard University|Harvard]] |year=2001 |url=http://www.law.harvard.edu/faculty/fferrell/pdfs/payment_for_orderflow.pdf |format=PDF| accessdate =December 12, 2008}}</ref><ref name="ND1">{{cite web | last=Battalio | first =Robert H. | coauthors =Tim Loughran |title=Does Payment for Order Flow to Your Broker Help or Hurt You? |publisher=[[Notre Dame University]] |date =January 15, 2007 |url=http://www.nd.edu/~tloughra/Orderflow.pdf |format=PDF| accessdate=December 12, 2008}}</ref> Madoff has argued that these payments did not alter the price that the customer received.<ref name="MaddofTalks" /> He viewed the payments as a normal business practice: "If your girlfriend goes to buy stockings at a supermarket, the racks that display those stockings are usually paid for by the company that manufactured the stockings. Order flow is an issue that attracted a lot of attention but is grossly overrated."<ref name="MaddofTalks">{{cite web |last =McMillan | first =Alex |title ="Q&A: Madoff Talks Trading | publisher = CNN |date=May 29, 2000 | url = http://money.CNN.com/2000/05/29/investing/q_madoff/ | accessdate =December 11, 2008}}</ref>
By 2000, Madoff Securities, one of the top traders of US securities, held approximately $300 million in assets.<ref name="nytimes 122408" /> The business occupied three floors of the [[Lipstick Building]], with the investment management division, referred to as the "[[hedge fund]]", employing a staff of approximately 24.<ref name="17th floor">{{cite news | last =Henriques | first =Diana B. |coauthors =Alex Berenson | title =The 17th Floor, Where Wealth Went to Vanish | work =[[The New York Times]] |date =December 14, 2008 | url =http://www.nytimes.com/2008/12/15/business/15madoff.html | accessdate =December 23, 2008}}</ref> Madoff ran a branch office in London, separate from Madoff Securities, which employed 28, handling investments for his family of approximately [[Pound sterling|£]]80 million.<ref name="mayfair">{{cite news |last =Dovkants |first =Keith |coauthors =Alex Berenson | title =Revealed: Magic Madoff’s family ‘piggy bank’ in the heart of Mayfair |work =[[Evening Standard]] | date =December 16, 2008 | url =http://www.thisislondon.co.uk/standard/article-23602414-details/Revealed:+Magic+Madoff%E2%80%99s+family+%E2%80%98piggy+bank%E2%80%99+in+the+heart+of+Mayfair/article.do |accessdate =December 25, 2008}}</ref> Two remote cameras installed in the London office permitted Madoff to monitor events from New York.<ref name="nytimes 1.24.09">{{cite news | last =Creswell | first =Julie | title =The Talented Mr. Madoff | work =[[The New York Times]] | date =January 24, 2009 | url =http://www.nytimes.com/2009/01/25/business/25bernie.html?em | accessdate =January 25, 2009}}</ref>
==Modus operandi==
In 1992, Bernard Madoff explained his purported strategy to ''The Wall Street Journal''. He said the
returns were really nothing special, given that the [[Standard & Poors]] 500-stock index generated an average annual return of 16.3% between November 1982 and November 1992. "I would be surprised if anybody thought that matching the S&P over 10 years was anything outstanding." The majority of money managers actually trailed the S&P 500 during the 1980s. The ''Journal'' concluded Madoff's use of futures and options helped cushion the returns against the market's ups and downs. Madoff said he made up for the cost of the hedges, which could have caused him to trail the stock market's returns, with stock-picking and market timing.<ref name="WSJ-Smith-1992"/>
===Purported strategy===
In March 2009, Madoff admitted that since the mid-1990s he stopped trading and his returns had been fabricated.<ref name="AP 3.13.09">{{cite news |url=http://www.google.com/hostednews/ap/article/ALeqM5hnkPe640MG8WMCAvAwv5GqtqxsOAD96T6K8G0 |agency=Associated Press|date=March 13, 2009 |title=Tough task ahead to find Madoff money, co-schemers |accessdate=March 13, 2009}}</ref> Madoff's sales pitch, an [[investment strategy]] consisted of purchasing [[blue-chip stock]]s and taking [[option (finance)|options]] contracts on them, sometimes called a split-strike conversion or a [[collar (finance)|collar]].<ref name="Forbes12.23">{{cite news |last =Moyer | first =Liz | title =Could SEC Have Stopped Madoff Scam In 1992?| publisher =[[Forbes]] | date =December 23, 2008 |url =http://www.forbes.com/business/2008/12/23/madoff-fraud-sec-biz-wall-cx_lm_1223madoff.html | accessdate =December 24, 2008}}</ref> "Typically, a position will consist of the ownership of 30–35 S&P 100 stocks, most correlated to that index, the sale of [[out-of-the-money]] 'calls' on the index and the purchase of out-of-the-money 'puts' on the index. The sale of the 'calls' is designed to increase the [[rate of return]], while allowing upward movement of the stock portfolio to the [[strike price]] of the 'calls'. The 'puts', funded in large part by the sales of the 'calls', limit the portfolio's downside."
* [http://www.scribd.com/doc/8976754/Madoff-Trading-Statement-November-2008 Example of a Madoff Investment Securities LLC monthly statement]
In his 1992, "Avellino and Bienes" interview with ''[[The Wall Street Journal]]'', Madoff discussed his supposed methods: In the 1970s, he had placed invested funds in "convertible [[arbitrage]] positions in [[large-cap]] stocks, with promised investment returns of 18% to 20%",<ref name="Forbes12.23"/> and in 1982, he began using [[futures contracts]] on the stock index, and then placed [[put option]]s on futures during the [[1987 stock market crash]].<ref name="Forbes12.23" /> A few analysts performing [[due diligence]] had been unable to replicate the Madoff fund's past returns using historic price data for U.S. stocks and options on the indexes.<ref>[http://www.bloomberg.com/apps/news?pid=newsarchive&sid=asH1VRQ2SjIU Interview with Jim Voss] [[Bloomberg L.P.|Bloomberg]]</ref><ref name="Berenson">{{cite news |url=http://www.nytimes.com/2008/12/13/business/13fraud.html|work=[[The New York Times]]|title=Look at Wall St. Wizard Finds Magic Had Skeptics|accessdate=December 15, 2008|date=December 13, 2008}}</ref> ''Barron's'' raised the possibility that Madoff's returns were most likely due to [[front running]] his firm's brokerage clients.<ref name="Arvedlund"/>
Mitchell Zuckoff, professor of journalism at [[Boston University]] and author of ''Ponzi's Scheme: The True Story of a Financial Legend,'' says that "[[Private foundation (United States)#Minimum Payout rate|the 5% payout rule]]", a federal law requiring [[Private foundation (United States)|private foundations]] to pay out 5% of their funds each year, allowed Madoff's Ponzi scheme to go undetected for a long period since he managed money mainly for charities. Zuckoff notes, "For every $1 billion in foundation investment, Madoff was effectively on the hook for about $50 million in withdrawals a year. If he was not making real investments, at that rate the [[principal sum|principal]] would last 20 years. By targeting charities, Madoff could avoid the threat of sudden or unexpected withdrawals.<ref name="money.cnn.com">{{cite web|last=Zuckoff |first=Mitchell |url=http://money.cnn.com/2008/12/29/news/newsmakers/zuckoff_madoff.fortune/ |title=Were charities part of Madoff's secret formula? – Dec. 29, 2008 |publisher=Money.cnn.com |date=December 29, 2008 |accessdate=April 26, 2009}}</ref>
===Sales methods===
Rather than offer high returns to all comers, Madoff offered modest but steady returns to an exclusive clientele. The investment method was marketed as "too complicated for outsiders to understand". He was secretive about the firm’s business, and kept his [[financial statement]]s closely guarded.<ref>{{cite web |author=Janet Tavakoli |url=http://www.tavakolistructuredfinance.com/TSF11.html|title=Madoff Deserves Lots of Company |date=December 13, 2008 |date=March 9, 2009}}</ref>
The ''[[New York Post]]'' reported that Madoff "worked the so-called '[[Jew]]ish circuit' of well-heeled Jews he met at [[country club]]s on [[Long Island]] and in Palm Beach".<ref name="lukas">{{cite news|url=http://m.nypost.com/ms/p/nyp/nyp/view.m?id=23907&storyid=143966|title=Investor Furor Over '50B Scam'|date=December 14, 2008|publisher=[[New York Post]]|accessdate=December 17, 2008}}</ref> ''[[The New York Times]]'' reported that Madoff courted many prominent Jewish executives and organizations; according to the [[Associated Press]], they "trusted [Madoff] because he is Jewish".<ref name="AP 3.13.09"/> One of the most prominent promoters was [[J. Ezra Merkin]], whose fund Ascot Partners steered $1.8 billion towards Madoff's firm.<ref name="1219NYTmad">{{cite news |url=http://www.nytimes.com/2008/12/20/business/20madoff.html?pagewanted=1&_r=1&em |work=[[The New York Times]]|date=December 20, 2008 |title=Madoff Scheme Kept Rippling Outward, Across Borders |accessdate=December 22, 2008}}</ref> A scheme that targets members of a particular religious or ethnic community is a type of [[affinity fraud]], and a ''[[Newsweek]]'' article identified Madoff's scheme as "an affinity Ponzi".<ref>{{cite journal |last=Biggs |first=Barton | date=January 3, 2009 |title=The Affinity Ponzi Scheme |journal=Newsweek |url=http://www.newsweek.com/id/177679 |accessdate=March 9, 2009}}</ref>
Madoff was a "master marketer",<ref name="drove madoff">{{cite news |url=http://money.cnn.com/2008/12/26/news/companies/understanding_Madoff/?postversion=2008122608|title=What drove Bernie Madoff |publisher=CNN|accessdate=December 26, 2008|last=Chernoff|date=December 26, 2008}}</ref> and his fund was considered exclusive, giving the appearance of a "velvet rope".<ref name="1219NYTmad" /><ref name="drove madoff" /> He generally refused to meet directly with investors, which gave him an "[[Wizard of Oz (character)|Oz]]" aura and increased the allure of the investment.<ref name="nytimes 1.24.09"/> Some Madoff investors were wary of removing their money from his fund, in case they could not get back in later.<ref name="usa today" /> One New York real estate investor said she "literally begged" Madoff to take her money, and he refused.<ref name="mayfair" />
Madoff's [[annual return]]s were "unusually consistent",<ref name="l'affaire madoff">{{cite news | last =Schwartz | first =Nelson D. | title =Madoff Dealings Tarnish a Private Swiss Bank | work =[[The New York Times]] | date =December 24, 2008 | url =http://www.nytimes.com/2008/12/24/business/worldbusiness/24ubp.html?em | accessdate =December 23, 2008}}</ref> around 10%, and were a key factor in perpetuating the fraud.<ref>[http://blog.marketingdoctor.tv/2008/12/18/marketing-advisory-madoff-knew-his-target-market.aspx" "Marketing Advisory: Madoff Knew His Target Market"] Marketing Doctor Blog. December 18, 2008.</ref> Ponzi schemes typically pay returns of 20% or higher, and collapse quickly. One Madoff fund, which described its "strategy" as focusing on shares in the [[Standard & Poor]]'s 100-stock index, reported a 10.5% annual return during the previous 17 years. Even at the end of November 2008, amid a general market collapse, the same fund reported that it was up 5.6%, while the same year-to-date total return on the S&P 500-stock index had been negative 38%.<ref name="Appelbaum" /> An unnamed investor remarked, “The returns were just amazing and we trusted this guy for decades — if you wanted to take money out, you always got your check in a few days. That’s why we were all so stunned.” <ref>{{cite news |author=ALEX BERENSON |coauthors=DIANA B. HENRIQUES |url=http://www.nytimes.com/2008/12/13/business/13fraud.html?pagewanted=2 |title=Look at Wall St. Wizard Finds Magic Had Skeptics |date=December 12, 2008 |accessdate=March 9, 2009}}</ref>{{Clarify|date=March 2009|nytimes cite does not support this, is it misplaced?}}<ref>[http://www.nytimes.com/2008/12/12/business/12scheme.html?em "Prominent Trader Accused of Defrauding Clients", ''[[The New York Times]]'' December 12, 2008]</ref>
The Swiss bank, [[Union Bancaire Privée]], explained that because of Madoff's huge volume as a [[broker-dealer]], the bank believed he had a perceived edge on the market because his trades were timed well, suggesting they believed he was [[front running]].<ref name="financial times">{{cite news | last =Sender | first =Henry | title =Madoff had ‘perceived edge’ in the markets | work =[[Financial Times]] | date =December 21, 2008 | url =http://www.ft.com/cms/s/0/534b1998-cf92-11dd-abf9-000077b07658,dwp_uuid=b7a8d610-caaf-11dd-87d7-000077b07658.html?nclick_check=1 | accessdate =December 25, 2008}}</ref>
===Access to Washington===
The Madoff family gained unusual access to Washington's lawmakers and regulators through the industry's top trade group. The Madoff family has long-standing, high-level ties to the [[Securities Industry and Financial Markets Association]] (SIFMA), the primary securities industry organization.
Bernard Madoff sat on the Board of Directors of the Securities Industry Association, which merged with the Bond Market Association in 2006 to form SIFMA. Madoff's brother Peter then served two terms as a member of SIFMA’s Board of Directors.<ref name="Barlyn">{{cite news | last = Barlyn |first = Suzanne |title = Madoff Case Raises Compliance Questions | work = [[The Wall Street Journal]] |date = December 23, 2008 | url = http://www.careerjournal.com/article/SB123005903944830699.html |accessdate = March 1, 2008}}</ref><ref name="http">{{cite news |last = Williamson |first = Elizabeth |coauthors = Kara Scannell | title = Family Filled Posts at Industry Groups |work = [[The Wall Street Journal]] |date = December 18, 2008 | url = http://online.wsj.com/article/SB122956128953016563.html |accessdate = March 1, 2009}}</ref> Peter's resignation as the scandal broke in December 2008 came amid growing criticism of the Madoff firm’s links to Washington, and how those relationships may have contributed to the Madoff fraud.<ref name = "Lerer">{{cite web |last = Lerer |first = Lisa |title = Peter Madoff resigns |work = Politico |date = December 18, 2008 | url = http://www.politico.com/news/stories/1208/16694.html |accessdate = March 1, 2009}}</ref> Over the years 2000–08, the two Madoff brothers gave $56,000 to SIFMA,<ref name = "Lerer"/> and tens of thousands of dollars more to sponsor SIFMA industry meetings.<ref>{{cite news |last = Williamson |first = Elizabeth |title = Shana Madoff's Ties to Uncle Probed |work = [[The Wall Street Journal]] |date = December 22, 2008 |url = http://online.wsj.com/article/SB122991035662025577.html |accessdate = March 1, 2009}}</ref>
In addition, Bernard Madoff's niece Shana Madoff<ref>{{cite web |last = Javers |first = Eamon |coauthors = Lisa Lerer | title = Madoff bought influence in Washington |work = Politico |date = December 16, 2008 | url = http://www.politico.com/news/stories/1208/16608.html |accessdate = March 1, 2009}}</ref> was active on the Executive Committee of SIFMA's Compliance & Legal Division, but resigned her SIFMA position shortly after her uncle's arrest.<ref>{{cite web |last = Madoff |first = Shana |title = San Francisco Topical Breakfast | publisher = Compliance and Legal Division of the Securities Industry and Financial Markets Association |url = http://www.sifmacl.org/en/cms/505/ | accessdate = March 1, 2009}}</ref> She married an SEC compliance official, Eric Swanson, after an SEC investigation concluded in 2005. A spokesman for Swanson, who has left the SEC, said he "did not participate in any inquiry of Bernard Madoff Securities or its affiliates while involved in a relationship" with Shana Madoff.<ref>{{cite web|url=http://abcnews.go.com/Blotter/WallStreet/story?id=6471863&page=1 |title=SEC Official Married into Madoff Family – ABC News |publisher=Abcnews.go.com |date=December 16, 2008 |accessdate=April 26, 2009}}</ref>
==Previous investigations==
Madoff Securities LLC was investigated at least eight times over a 16-year period by the [[United States Securities and Exchange Commission]] (SEC) and other regulatory authorities.<ref name="wsj investigations">{{cite news | last =Scannell | first =Kara | title =Madoff Chasers Dug for Years, to No Avail | work =[[The Wall Street Journal]] |date =January 5, 2009 |url =http://online.wsj.com/article/SB123111743915052731.html?mod=googlenews_wsj |accessdate =January 5, 2009}}</ref>
===Avellino and Bienes===
In 1992, the SEC investigated one of Madoff's [[feeder fund]]s, Avellino & Bienes (principals Frank Avellino and Michael Bienes and his wife Dianne Bienes). Bienes began his career working as an accountant for Madoff's father-in-law, Sol Alpern. Then, he became a partner in the accounting firm Alpern, Avellino and Bienes. In 1962, the firm began advising its clients about investing all of their money with a mystery man, a highly successful and controversial figure on Wall Street,
but until this episode, not known as an ace money manager,
<ref name="WSJ-Smith-1992"/> Madoff. When Alpern retired at the end of 1974, the firm became Avellino and Bienes and continued to invest solely with Madoff.<ref name="Forbes12.23" /><ref name="flzmadoff1">{{cite web|last=Johnson |first=Harriet |url=http://www.sun-sentinel.com/business/sfl-flzmadoff0308pnmar08,0,5982371.story |title='''Sun Sentinel exclusive:''' Former Madoff associate Michael Bienes breaks his silence - South Florida Sun-Sentinel.com |publisher=Sun-sentinel.com |date=March 9, 2009 |accessdate=April 26, 2009}}</ref>
Represented by [[Ira Sorkin]], Madoff's present attorney, Avellino & Bienes were accused of selling unregistered securities, and in its report the SEC mentioned the fund's "curiously steady" yearly returns to investors of 13.5% to 20%. However, the SEC did not look any more deeply into the matter, and never publicly disclosed Madoff.<ref name="WSJ-Smith-1992"/><ref name="Forbes12.23" /> Through Sorkin, who once oversaw the SEC’s New York office, Avellino & Bienes agreed to return the money to investors, shut down their firm, undergo an audit, and pay a fine of $350,000. Avellino complained to the presiding Federal Judge, [[John E. Sprizzo]], that [[Price Waterhouse]] fees were excessive, but the judge ordered him to pay the bill of $428,679 in full. Madoff said that he did not realize the feeder fund was operating illegally, and that his own investment returns tracked the previous 10 years of the [[S&P 500]].<ref name="Forbes12.23" /> The SEC investigation came right in the middle of Madoff's three terms as the chairman of the [[NASDAQ]] stock market board.<ref name="flzmadoff1"/>
The size of the pools mushroomed by word-of-mouth, and investors grew to 3,200 in nine accounts with Madoff. Regulators feared it all might be just a huge scam. "We went into this thinking it could be a major catastrophe. They took in nearly a half a billion dollars in investor money, totally outside the system that we can monitor and regulate. That's pretty frightening." said Richard Walker, at the time, the SEC's New York regional administrator.<ref name="WSJ-Smith-1992"/>
Bienes, 72, recently discussed that he deposited $454 million of investors' money with Madoff, and until 2007, continued to invest several million dollars of his own money, saying, "Doubt Bernie Madoff? Doubt Bernie? No. You doubt God. You can doubt God, but you don't doubt Bernie. He had that aura about him."<ref name="flzmadoff1"/>
===Bernard L. Madoff Securities LLC: 1999, 2000, 2004, 2005, and 2006===
The SEC investigated Madoff in 1999 and 2000 about concerns that the firm was hiding its customers' orders from other traders, for which Madoff then took corrective measures.<ref name="wsj investigations" /> In 2001, an SEC official met with [[Harry Markopolos]] at their Boston regional office and reviewed his allegations of Madoff's fraudulent practices.<ref name="wsj investigations" /> The SEC claimed it conducted two other inquiries into Madoff in the last several years, but did not find any violations or major issues of concern.<ref name="Healy">{{cite news | url=http://www.boston.com/business/articles/2008/12/13/boston_donors_bilked_out_of_millions/|title=Boston donors bilked out of millions|work=[[Boston Globe]]|date=December 13, 2008|last=Healy|accessdate=March 13, 2009}}</ref>
In 2004, after published articles appeared accusing the firm of [[front running]], the SEC's Washington office cleared Madoff.<ref name="wsj investigations" /> The SEC detailed that inspectors had examined Madoff's brokerage operation in 2005,<ref name="wsj investigations" /> checking for three kinds of violations: the strategy he used for customer accounts; the requirement of brokers to obtain the best possible price for customer orders; and operating as an unregistered [[investment adviser]]. Madoff was registered as a [[broker-dealer]], but doing business as an [[Investment management|asset manager]].<ref name="spanarchives1">{{cite web |
url=http://www.c-spanarchives.org/library/includes/templates/library/flash_popup.php?pID=283836-1&clipStart=&clipStop= |
publisher=C-SPAN |
title=Madoff Fraud Investigations and Financial Markets Regulation |
author=House of Representatives Financial Services Committee |
year=2009
}}</ref> "The staff found no evidence of fraud". In September, 2005 Madoff agreed to register his business, but the SEC kept its findings confidential.<ref name="wsj investigations"/> During the 2005 investigation, Meaghan Cheung, a branch head of the SEC's New York's Enforcement Division, was the person responsible for the oversight and blunder, according to [[Harry Markopolos]],<ref name="independent1"/> who testified on February 4, 2009, at a hearing held by a [[United States House Financial Services Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises|House Financial Services Subcommittee on Capital Markets]]<ref name="wsj investigations"/><ref name="spanarchives1"/><ref>http://online.wsj.com/public/resources/documents/MarkopolosTestimony20090203.pdf</ref>
In 2007, SEC enforcement completed an investigation which began on January 6, 2006, into a Ponzi scheme allegation which resulted in neither a finding of fraud, nor a referral to the SEC Commissioners for legal action.<ref>[http://www.google.com/hostednews/ap/article/ALeqM5j7Z48WNHMUdlXqnrAJ7zwRWyEjagD951J3J00 Madoff fraud case raises questions about SEC]{{Dead link|date=March 2009}} [[Associated Press]].</ref><ref>{{cite web|last=Press |first=Associated |url=http://www.bostonherald.com/business/general/view/2009_02_03_Man_who_warned_about_Bernard_Madoff_to_testify/srvc=business&position=also |title=Man who warned about Bernard Madoff to testify - BostonHerald.com |publisher=BostonHerald.com<! |date=February 3, 2009 |accessdate=April 26, 2009}}</ref>
===FINRA===
In 2007, the [[Financial Industry Regulatory Authority]] (FINRA), the industry-run watchdog for brokerage firms, reported without explanation that parts of Madoff's firm had no customers. "At this point in time we are uncertain of the basis for FINRA's conclusion in this regard," SEC staff wrote shortly after Madoff was arrested.<ref name="wsj investigations"/>
As a result, the SEC's chairman [[Christopher Cox]] stated that an investigation will delve into "all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm".<ref name="forbes sec">{{cite news| url=http://www.forbes.com/intelligentinvesting/2008/12/20/intelligent-investing-madoff-sec-fraud-panelDec22.html?partner=contextstory|title=Love, Madoff And The SEC|publisher=[[Forbes]]|date=December 20, 2008|accessdate=December 24, 2008|last=Serchuk|first=David}}</ref> A former SEC compliance officer, Eric Swanson, married Madoff's niece Shana, a Madoff firm compliance attorney.<ref name="forbes sec" />
===Red flags===
Outside analysts raised concerns about Madoff's firm for years.<ref name="Appelbaum"/> Financial analyst and [[whistleblower]] [[Harry Markopolos]] complained to the SEC's Boston office in May 1999, telling the SEC staff they should investigate Madoff because it was impossible to legally make the profits Madoff claimed using the investment strategies that he claimed to use. In 2005, Markopolos sent a detailed 17-page memo to the SEC, entitled ''The World's Largest Hedge Fund is a Fraud.''<ref>{{cite web |last=Markopolos |first=Harry |authorlink=Harry Markopolos|format=PDF |url=http://online.wsj.com/documents/Madoff_SECdocs_20081217.pdf |
archiveurl=http://www.webcitation.org/query?url=http%3A%2F%2Flaw.du.edu%2Fdocuments%2Fcorporate-governance%2Flegislation%2FMarkopolos-Madoff-Complaint.pdf&date=2009-08-18 |
archivedate=August 18, 2009 |
title=The World's Largest Hedge Fund is a Fraud|date=November 7, 2005 |work=[[The Wall Street Journal|Wall Street Journal Online]] |accessdate=December 22, 2008}}</ref> He had also approached the ''Wall Street Journal'' about the existence of the Ponzi scheme in 2005, but its editors decided not to pursue the story.<ref>{{cite web|url=http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=1003938136|title=Whistleblower Claims He Tipped 'WSJ' to Madoff Fraud, Paper Failed to Act|author=E&P Staff|date=February 4, 2009}}</ref> The paper specified 29 numbered red flags. In part, the memo concluded: "Bernie Madoff is running the world's largest unregistered hedge fund. He's organized this business as a 'hedge [[fund of funds]] privately labeling their own hedge funds which Bernie Madoff secretly runs for them using a split-strike conversion strategy getting paid only trading commissions which are not disclosed.' If this is not a regulatory dodge, I do not know what is." Markopolos considered if Madoff's "unsophisticated [[investment management|portfolio management]]" was either a Ponzi scheme or [[front running]],<ref>{{cite news|last=Chew |first=Robert |url=http://www.time.com/time/business/article/0,8599,1877181,00.html |title=A Madoff Whistle-Blower Tells His Story |publisher=TIME |date=February 4, 2009 |accessdate=April 26, 2009}}</ref> placing the fund's orders before his brokerage clients' when placing them in the market, and concluded it was most likely a Ponzi scheme.<ref name="wsj investigations" />
In 2001, financial journalist [[Erin Arvedlund]] wrote an article for ''[[Barron's]]'' entitled ''Don't Ask, Don't Tell'',<ref name="Arvedlund">{{cite news|last=Arvedlund |first=Erin E. |authorlink=Erin Arvedlund |url=http://www.sec.gov/news/studies/2009/oig-509/exhibit-0156.pdf |title=Don't Ask, Don't Tell – ''Bernie Madoff is so secretive, he even asks investors to keep mum'' |publisher=[[Barron's]] |date=May 7, 2001 |accessdate=August 12, 2009 }}</ref> questioning Madoff's secrecy and wondering how he obtained such consistent returns. She reported that "Madoff's investors rave about his performance – even though they don't understand how he does it. 'Even knowledgeable people can't really tell you what he's doing,' one very satisfied investor told Barron's."<ref name="Arvedlund"/>
The ''Barron's'' article and one in ''[[MarHedge]]'' suggested Madoff was front-running to achieve his gains.<ref name="wsj investigations" /> Hedge funds investing with him were not permitted to name him as money manager in their marketing prospectus. When high volume investors who were considering participation wanted to review Madoff's records for purposes of [[due diligence]], he refused, convincing them of his desire that proprietary strategies remain confidential.<ref>{{cite web|url=http://www.counterpunch.org/velvel01212009.html |title=Lawrence R. Velvel: Investing with Madoff |publisher=Counterpunch.org |date= |accessdate=April 26, 2009}}</ref>
By selling its holdings for cash at the end of each period, Madoff avoided filing disclosures of its holdings with the SEC, an unusual tactic. Madoff rejected any call for an outside [[audit]] "for reasons of secrecy", claiming that was the exclusive responsibility of his brother, Peter, the company's [[Chief Compliance Officer]]".<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601109&sid=aG5kjYW2AR5A |
title=Madoff’s Brother Said to Audit Firm’s Investments}}</ref>
Markopolos later testified to [[United States Congress|Congress]] that to deliver 12% annual returns to the investor, Madoff needed to earn 16% gross, so as to distribute a 4% fee to the feeder fund managers, who would secure new victims, be "willfully blind, and not get too intrusive".<ref>[http://www.c-spanarchives.org/library/includes/templates/library/flash_popup.php?pID=283836-1&searchphrase=%20annual%20returns ]{{dead link|date=March 2010}}</ref> In 2007, hedge fund advisory fund firm Aksia LLC advised its clients not to invest with Madoff, because of the appearance of limited accounting service personnel.<ref name="AP1218">{{cite news | last =Fitzgerald | first =Jim | title =Madoff's financial empire audited by tiny firm: one guy | agency =Associated Press| publisher =Seattle Times | date =December 18, 2008 | url =http://seattletimes.nwsource.com/html/businesstechnology/2008533585_madoff18.html | accessdate =December 18, 2008}}</ref><ref name="bloomberg rockland">{{cite news |first =David | last =Voreacos |url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aAeIQnSSpJRQ|title=New York Prosecutor Drops Madoff Auditor Probe; Defers to U.S. |date=December 16, 2008|publisher=[[Bloomberg News]] |accessdate=December 24, 2008}}</ref>
Typically, hedge funds hold their portfolio at a securities firm (a major bank or brokerage) acting as the fund's [[prime broker]], which allows an outside investigator to verify their holdings. Madoff's firm was its own broker-dealer and allegedly processed all of its trades.<ref name="Berenson" />
Ironically, Madoff, a pioneer in [[electronic trading]], refused to provide his clients online access to their accounts.<ref name="Appelbaum" /> He sent out account statements by mail,<ref name="NYTblog">{{cite web | last =Kouwe | first =Zachery | editor =Andrew Ross Sorkin | title =A Look at Madoff Trading Records | work =Deal Book | publisher =The New York Times | date =December 15, 2008 | url =http://dealbook.blogs.nytimes.com/2008/12/15/a-look-at-madoffs-trading-records/ | accessdate =December 22, 2008}}</ref> unlike most hedge funds which [[email]] statements to be downloaded for convenience and investor personal analysis.<ref name=cnbc>{{cite news|url=http://www.cnbc.com/id/28198739|title=Wall Street Titan May Have Fooled Investors for Years|publisher=[[CNBC]]|accessdate=December 13, 2008}}{{Dead link|date=March 2009}}</ref>
Madoff operated as a broker-dealer who also ran an asset management division. In 2003, Joe Aaron, a hedge fund professional, also found the structure suspicious and warned a colleague to avoid investing in the fund, "Why would a good businessman work his magic for pennies on the dollar?" he concluded.<ref name="zuckerman">{{cite news|url=http://online.wsj.com/article/SB122910977401502369.html?mod=googlenews_wsj |title=Fees, Even Returns and Auditor All Raised Flags|last=Zuckerman|work=[[The Wall Street Journal]]}}</ref>
Charles Gradante, co-founder of hedge-fund research firm Hennessee Group, observed that Madoff "only had five down months since 1996",<ref>{{cite news |author=David B. Caruso |url=http://seattletimes.nwsource.com/html/businesstechnology/2008508111_invest13.html |title=A trusted man, $50B, a "giant Ponzi scheme" |agency=Associated Press |accessdate=March 9, 2009}}</ref> and commented on Madoff's investment performance: "You can't go 10 or 15 years with only three or four down months. It's just impossible."<ref name="latimes">{{cite news|url=http://www.latimes.com/business/investing/la-fi-madoff13-2008dec13,0,4756661.story|title=Madoff's reliable returns aroused doubts|last=Hamilton|publisher=[[LA Times]]|accessdate=December 13, 2008}}</ref>
In 2001, a story in ''MARHedge'' interviewed traders who were incredulous that Madoff had 72 consecutive gaining months, an unlikely possibility.<ref name="usa today" />
Clients such as [[Fairfield Greenwich Group]] and [[Union Bancaire Privée]] claimed that they had been given an "unusual degree of access" to evaluate and analyze Madoff's funds and found nothing unusual with his investment portfolio.<ref name="l'affaire madoff" />
==Final weeks==
The scheme began to unravel in December 2008, as the [[stock market]] continued to plunge. Subsequently, as the [[Global financial crisis of 2008|general market downturn]] accelerated, investors tried to withdraw $7 billion from the firm, and in the weeks prior to his arrest, Madoff struggled to keep the scheme afloat. To pay off those investors, Madoff needed new money from other investors.
In November 2008, Madoff Securities International (MSIL) in London, made two fund transfers to Bernard Madoff Investment Securities of approximately $164 million. MSIL had neither customers nor clients, and there is no evidence that it conducted any trades on behalf of third parties.<ref>{{cite web|url=http://uk.reuters.com/article/businessNews/idUKTRE51Q3WF20090227 |title=Receiver says Madoff moved $164 million from UK firm to U.S. | Reuters |publisher=Uk.reuters.com |date=February 27, 2009 |accessdate=April 26, 2009}}</ref>
Madoff received $250 million around December 1 from [[Carl J. Shapiro]], a 95-year-old Boston [[philanthropist]] and entrepreneur who was one of Madoff's oldest friends and biggest financial backers. On December 5, he accepted $10 million from Martin Rosenman, president of Rosenman Family LLC, who wanted to recover a never-invested $10 million, deposited in a Madoff account at [[JPMorgan]], wired six days before Madoff's arrest. Bankruptcy Judge Lifland ruled that Rosenman was "indistinguishable" from any other Madoff client, so there was no basis for giving him special treatment to recover funds.<ref name="googlenews1">{{cite web|url=http://www.google.com/url?q=http://online.wsj.com/article/SB123549830385261453.html |title=Investor's Suit Is Dismissed - WSJ.com |publisher=Online.wsj.com |date=February 25, 2009 |accessdate=April 26, 2009}}</ref> The judge separately declined to dismiss a lawsuit brought by Hadleigh Holdings, which claims it entrusted $1 million to the Madoff firm three days before his arrest.<ref name="googlenews1"/>
Madoff asked others for money in the final weeks before his arrest, including Wall Street financier [[Kenneth Langone]], whose office was sent a 19-page pitch book, allegedly created by the staff at the [[Fairfield Greenwich Group]]. Madoff said he was raising money for a new [[investment vehicle]], between $500 million and $1 billion for exclusive clients, was moving quickly on the venture, and wanted an answer by the following week. Langone declined.<ref name=smartmoney>{{cite web |url=http://www.smartmoney.com/breaking-news/smw/?story=20090107105536 |title=Madoff Sought, Got Cash in Days Before Arrest |date=January 9, 2009 |accessdate=January 29, 2009 |publisher=[[SmartMoney]]}}</ref>
On December 10, 2008, he suggested to his sons, Mark and Andrew, that the firm pay out several million dollars in bonuses two months ahead of schedule, from $200 million in assets that the firm still had.<ref name="usa today" /> According to the complaint, Mark and Andrew, reportedly unaware of the firm's pending [[insolvency]], confronted their father, asking him how the firm could pay bonuses to employees if it could not pay investors. Madoff then admitted that he was "finished", and that the asset management arm of the firm was in fact a Ponzi scheme. Mark and Andrew then reported him to the authorities.<ref name="Appelbaum"/>
==Investigation into involvement of others==
{{Main|Participants in the Madoff investment scandal}}
Investigators are looking for others involved in the scheme, despite Madoff's assertion that he alone was responsible for the large-scale operation.<ref name="AP1218a"/> Harry Susman, an attorney representing several clients of the firm, stated that "someone had to create the appearance that there were returns", and further suggested that there must have been a team buying and selling stocks, forging books, and filing reports.<ref name="AP1218a" /> James Ratley, president of the [[Association of Certified Fraud Examiners]] said, “In order for him to have done this by himself, he would have had to have been at work night and day, no vacation and no time off. He would have had to nurture the Ponzi scheme daily. What happened when he was gone? Who handled it when somebody called in while he was on vacation and said, ‘I need access to money’?” <ref name="bloomberg2">{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aggq1e88xMPU&refer=us |title=Madoff Must Have Had Help, Lawyers Say, Citing Trustee Report - Bloomberg.com |publisher=Bloomberg.com<! |date=February 24, 2009 |accessdate=April 26, 2009}}</ref>
“Simply from an administrative perspective, the act of putting together the various account statements, which did show trading activity, has to involve a number of people. ... You would need office and support personnel, people who actually knew what the [[market price]]s were for the securities that were being traded. You would need accountants so that the internal documents reconcile with the documents being sent to customers at least on a superficial basis,” said Tom Dewey, a securities lawyer.<ref name="bloomberg2"/>
# [[Cohmad Securities]] Corp. of which Madoff shares 10–20% ownership stakes. The brokerage firm lists its address as Madoff's firm's address in New York City. Its chairman, Maurice J. Cohn, his daughter and COO Marcia Beth Cohn, and [[Robert Jaffe (stockbroker)|Robert M. Jaffe]], a broker at the firm, are accused by the SEC of 4 counts of civil [[fraud]], "knowingly or recklessly disregarding facts indicating that Madoff was operating a fraud".<ref name="NYT062209">{{cite news | last =Henriques | first =Diana B. | title =Brokerage Firm and 4 Others Sued in Madoff Case | work =[[The New York Times]] | date =June 22, 2009 | url =http://www.nytimes.com/2009/06/23/business/23madoff.html?hp | accessdate =June 22, 2009 }}</ref> Another lawsuit filed by bankruptcy trustee [[Irving Picard]] is seeking funds for Madoff victims. Jaffe has requested the Court dismiss the charges in both cases.<ref>{{cite web|author=Jonathan Stempel |url=http://www.reuters.com/article/domesticNews/idUSTRE57K5E420090821 |title=Madoff friend wants SEC, trustee charges dismissed |publisher=Reuters |date= |accessdate=March 16, 2010}}</ref>
# [[Stanley Chais]], of the Brighton Company. On May 1, 2009, Picard filed a lawsuit against Stanley Chais, 82. The complaint alleges he "knew or should have known" he was involved in a Ponzi scheme when his family investments with Madoff averaged 40% return. It also claims Chais was a primary beneficiary of the scheme for at least 30 years, allowing his family to withdraw more than $1 billion from their accounts since 1995. The SEC filed a similar civil suit mirroring these claims.<ref name="NYT062209"/><ref>{{cite news|
url=http://www.nydailynews.com/news/2009/05/02/2009-05-02_los_angeles_investment_manager_stanley_chais_sued_for_funneling_cash_to_bernie_m.html |title=Los Angeles investment manager Stanley Chais sued for funneling cash to Bernie Madoff fund|
author=Standora, Leo |
publisher=New York Daily News |
date=May 2, 2009}}</ref> On September 22, 2009 Chais was sued by [[California]] [[Attorney General]] [[Jerry Brown]] seeking $25 million in penalties as well as restitution for victims, saying the Beverly Hills investment manager was a 'middleman' in Madoff's Ponzi scheme.<ref>{{cite web|url=http://www.latimes.com/business/la-fi-chais23-2009sep23,0,3042092.story |title=Financial advisor Stanley Chais sued in Bernie Madoff scheme - Los Angeles Times |publisher=Latimes.com |date=September 23, 2009 |accessdate=March 16, 2010}}</ref>
# Madoff Securities International Ltd. in London.
# [[Carl J. Shapiro]], women's clothing entrepreneur, self-made millionaire and philanthropist, and one of Madoff's oldest friends and biggest financial backers, who helped him start his investment firm in 1960. He was never in the finance business. In 1971, Mr. Shapiro sold his business , Kay Windsor, Inc. for $20 million. Investing most with Madoff, that sum grew to hundreds of millions of dollars and possibly to more than $1 billion. Shapiro personally lost about $400 million, $250 million of which he gave to Madoff 10 days before his arrest. His foundation lost more than $100 million.<ref name="online.wsj.com">{{cite web|last=Efrati |first=Amir |url=http://www.google.com/url?q=http://online.wsj.com/article/SB124261271530929129.html |title=Madoff Victims Investigated - WSJ.com |publisher=Online.wsj.com |date=May 18, 2009 |accessdate=March 16, 2010}}</ref>
# [[David G. Friehling]], 49, the sole practitioner at Friehling & Horowitz CPAs, waived indictment and pleaded not guilty to criminal charges on July 10, 2009. He agreed to proceed without having the evidence in the criminal case against him reviewed by a grand jury at a hearing before U.S. District Judge Alvin Hellerstein in Manhattan. Friehling was charged on March 18, 2009, with [[securities fraud]], aiding and abetting [[investment adviser]] fraud, and four counts of filing false audit reports with the Securities and Exchange Commission.<ref>{{cite web|last=Bray |first=Chad |url=http://www.google.com/url?q=http://online.wsj.com/article/SB124784585862258641.html |title=Madoff Ex-Auditor Friehling Enters a Plea of Not Guilty - WSJ.com |publisher=Online.wsj.com |date=July 18, 2009 |accessdate=March 16, 2010}}</ref> On November 3, 2009, [[David Friehling]], Madoff's accounting front man plead guilty to the charges.<ref name="nbcnewyork.com">{{cite web|last=Dienst |first=Jonathan |url=http://www.nbcnewyork.com/news/local-beat/Madoff-Accountant-Set-to-Make-a-Deal-67600587.html |title=Madoff Accountant Set to Make a Deal |publisher=NBC New York |date=October 30, 2009 |accessdate=March 16, 2010}}</ref>
# Peter B. Madoff 63, Chief Compliance Officer, worked with his brother Bernie for more than 40 years, and ran the daily operations for the past 20 years. He helped create the computerized trading system.
# Ruth Madoff, Bernard's wife, agreed as part of Bernie's sentencing issues, to keep $2.5 million of her claim of more than $80 million in assets and to give up all of her possessions. The money is not protected from civil legal actions pursued by a court-appointed trustee liquidating Madoff's assets or by investor lawsuits.<ref>{{cite web|url=http://www.foxnews.com/story/0,2933,529858,00.html |title=Ruth Madoff Asks to Keep Her Fur Coat as U.S. Marshals Seize Penthouse - Local News | News Articles | National News | US News |publisher=FOXNews.com |date=July 2, 2009 |accessdate=March 16, 2010}}</ref> On July 29, 2009, she was sued by trustee Picard for $45 million, which supported her "life of splendor". According to court filings, she received more than $3 million from the business over the last six years to pay personal expenses charged to her [[American Express]] card, and $2 million in payments to a business called PetCare RX. “Ruth Madoff was never an employee of BLMIS yet millions of dollars belonging to BLMIS and its customers found their way into her personal accounts and investments without any legitimate business purpose or any value to BLMIS, simply because of her relationship with Bernard Madoff.” She is also required to itemize any expenditures over $100.<ref>{{cite web|url=http://www.nydailynews.com/money/2009/08/04/2009-08-04_buybuy_to_madoff_wifes_free_spending.html |title=Bernie Madoff's wife, Ruth, agrees to account for monthly spending |publisher=Nydailynews.com |date=August 4, 2009 |accessdate=March 16, 2010}}</ref> The case is Picard v. Madoff, 1:09-ap-1391, U.S. Bankruptcy Court, Southern District of New York (Manhattan).<ref>{{cite web|author=E-mail This |url=http://dealbook.blogs.nytimes.com/2009/07/29/trustee-sues-ruth-madoff-for-448-million/?hpw |title=Trustee Sues Ruth Madoff for $44.8 Million - DealBook Blog - NYTimes.com |publisher=Dealbook.blogs.nytimes.com |date=July 29, 2009 |accessdate=March 16, 2010}}</ref><ref>{{cite web|last=Fitzgerald |first=Patrick |url=http://www.google.com/url?q=http://online.wsj.com/article/SB124889554637990959.html |title=Trustee Sues Ruth Madoff for More Than $44 Million - WSJ.com |publisher=Online.wsj.com |date=July 30, 2009 |accessdate=March 16, 2010}}</ref><ref>{{cite web|url=http://www.scribd.com/doc/17780712/Lawsuit-Against-Ruth-Madoff-Irving-Picard |title=Lawsuit Against Ruth Madoff (Irving Picard) |publisher=Scribd.com |date=March 1, 2009 |accessdate=March 16, 2010}}</ref> On November 25, 2008, she withdrew $5.5 million and $10 million on December 10, 2008, from her brokerage account at Cohmad, a feeder fund which had an office in Madoff’s headquarters and was part-owned by him.<ref name="marketsnews1">{{cite web|url=http://www.reuters.com/article/marketsNews/idUSLC60093820090212 |title=Medici's Kohn says did not get Madoff payments | Markets | Markets News | Reuters |publisher=Reuters |date=February 12, 2009 |accessdate=April 26, 2009}}</ref><ref name="business1">{{cite web|url=http://www.boston.com/business/ticker/2009/02/galvin_seeks_to.html |title=Galvin seeks to shut down firm with Madoff ties – Daily Business Update – The Boston Globe |publisher=Boston.com |date=February 11, 2009 |accessdate=April 26, 2009}}</ref> In November, she also received $2 million from her husband's London office, Madoff Securities International Ltd.<ref>{{cite web|url=http://www.cnbc.com/id/29911053 |title=Madoff's Wife Got $2 Million from UK Unit – Financials * Europe * News * Story |publisher=CNBC.com |date=March 27, 2009 |accessdate=April 26, 2009}}</ref><ref name="bloomberg4">{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601102&sid=azeCkQIOM0L8&refer=uk |title=Madoff Fraud Charges Could Be Filed in U.K. This Year (Update4) |publisher=Bloomberg.com |date=March 27, 2009 |accessdate=April 26, 2009}}</ref> She has not been charged with any crime, and has not been questioned by prosecutors.<ref>[http://www.nytimes.com/2009/06/14/fashion/14ruth.html?pagewanted=1&ref=fashion "The Loneliest Woman in New York"] by Lynnley Browning, ''[[The New York Times]]'', June 12, 2009 (6/14/09 p. ST1 of the NY ed.). Retrieved 6/14/09.</ref> She has been seen riding the N.Y. subway and did not attend her husband's sentencing.<ref name="washingtonpost.com">{{cite web|url=http://www.washingtonpost.com/wp-dyn/content/article/2009/06/26/AR2009062604652.html |title=Madoff to Forfeit $170 Billion In Assets Ahead of Sentencing |publisher=washingtonpost.com |date= |accessdate=March 16, 2010}}</ref><ref name="ReferenceA">{{cite web|last=Efrati |first=Amir |url=http://www.google.com/url?q=http://online.wsj.com/article/SB124612092335264949.html |title=Madoff's Wife Cedes Asset Claim - WSJ.com |publisher=Online.wsj.com |date=June 28, 2009 |accessdate=March 16, 2010}}</ref>
# Madoff's sons – Mark, 45, and Andrew, 42, worked in the trading arm in the New York office, but also raised money marketing the Madoff funds.<ref>{{cite web|author=Mike Greenlar / The Post Standard |url=http://www.syracuse.com/news/index.ssf/2009/03/how_warning_signs_eluded_berna.html |title=How warning signs eluded Bernard Madoff's man in Syracuse |publisher=Syracuse.com |date= |accessdate=April 26, 2009}}</ref> Their assets were frozen on March 31, 2009.<ref>{{cite web|last=Efrati |first=Amir |url=http://www.google.com/url?q=http://online.wsj.com/article/SB123851832507274247.html |title=Judge Freezes Assets of Madoff's Family - WSJ.com |publisher=Online.wsj.com |date=April 1, 2009 |accessdate=April 26, 2009}}</ref> The two have been estranged from their father, since December 10, 2008, and haven't spoken with their mother<ref name="ReferenceA"/> in the wake of the fraud, but some contend that was a charade in order to protect their assets from litigation.<ref name='vfairmargolick'>{{cite news | first=David | last=Margolick | coauthors= |authorlink= David Margolick | title=The Madoff Chronicles, Part III: Did the Sons Know | date=July 2009 | publisher= | url =http://www.vanityfair.com/politics/features/2009/07/madoff200907 | work =Vanity Fair | pages = | accessdate = June 25, 2009 | language = }}</ref> On October 2, 2009 a civil lawsuit was filed against them by trustee Picard for a judgment in the aggregate amount of at least $198,743,299. Peter Madoff and daughter, Shana are also defendants.<ref>{{cite web|last=Lucchetti |first=Aaron |url=http://www.google.com/url?q=http://online.wsj.com/article/SB125451222667260197.html |title=Madoff Trustee Sues Swindler's Family - WSJ.com |publisher=Online.wsj.com |date=October 3, 2009 |accessdate=March 16, 2010}}</ref><ref>http://abcnews.go.com/images/Blotter/Complaint.pdf</ref> On March 15, 2010, they filed a motion to dismiss.<ref>http://online.wsj.com/article/SB10001424052748703734504575126013209903810.html?mod=googlenews_wsj</ref>
# [[Frank DiPascali]], 52, who referred to himself as "director of [[option]]s trading" and as "[[chief financial officer]]" at Madoff Securities pled guilty on August 11, 2009, to 10 counts:<ref>http://www.abcnews.go.com/images/Blotter/DiPascali,%20Frank%20Charges%20Chart.pdf</ref> [[conspiracy (crime)|conspiracy]], [[securities fraud]], investment advisor [[fraud]], [[mail fraud]], [[wire fraud]], [[perjury]], [[income tax evasion]], international [[money laundering]], falsifying books and records of a broker-dealer, and an investment advisor. He has agreed to connect the dots and to name names, with sentencing in May, 2010.<ref>{{cite web|url=http://www.abcnews.go.com/Blotter/Madoff/story?id=8304447&page=1 |title=Frank DiPascali Pleads Guilty, Bernard Madoff's Accomplice - ABC News |publisher=Abcnews.go.com |date=August 11, 2009 |accessdate=March 16, 2010}}</ref> He is awaiting bail.<ref name="nbcnewyork.com"/> Prosecutors are seeking more than $170 billion in forfeiture, the same amount sought from Madoff, which represents funds deposited by investors and later disbursed to other investors. The same day, a [[Securities and Exchange Commission]] civil complaint<ref>http://online.wsj.com/public/resources/documents/SEC2009-182.pdf</ref> was filed against DiPascali.<ref>{{cite web|last=Bray |first=Chad |url=http://www.google.com/url?q=http://online.wsj.com/article/SB124999709846222617.html |title='All Fake': Key Madoff Executive Admits Guilt - WSJ.com |publisher=Online.wsj.com |date=August 12, 2009 |accessdate=March 16, 2010}}</ref>
# Enrica Cotellessa-Pitz, [[controller]] Bernard L. Madoff Investment Securities LLC, but NOT a licensed [[certified public accountant]]. Her signature is on checks from BMIS to [[Cohmad Securities]] Corp. representing commission payments. She was the liaison between the SEC and BLMIS regarding the firm's financial statements. The SEC has removed the statements off its website.<ref>{{cite web|author=May 11, 2009, 10:10PM |url=http://tpmcafe.talkingpointsmemo.com/talk/blogs/mrs_panstreppon/2009/05/bernie-madoff-why-is-enrica-co.php?ref=reccafe |title=Bernie Madoff: Why Is Bernie's Controller, Enrica Cotellessa-Pitz, Getting A Pass In The Press? | Mrs Panstreppon's Blog |publisher=Tpmcafe.talkingpointsmemo.com |date=May 11, 2009 |accessdate=March 16, 2010}}</ref>
# [[Fairfield Greenwich Group]], based in [[Greenwich, Connecticut]], had a "Fairfield Sentry" fund which was one of many feeder funds that gave investors portals to Madoff. On April 1, 2009, the [[Commonwealth of Massachusetts]] filed a civil action charging Fairfield Greenwich with fraud, breaching its fiduciary duty to clients by failing to provide promised due diligence on its investments. The complaint seeks a fine and restitution to Massachusetts investors for losses and disgorgement of performance fees paid to Fairfield by those investors. It alleges that in 2005 Mr. Madoff coached Fairfield staff about ways to answer questions from SEC attorneys who were looking into [[Harry Markopolos]]' complaint about Madoff's operations.<ref>{{cite web|url=http://www.sec.state.ma.us/sct/sctfairfield/fairfieldidx.htm |title=Securities: Fairfield Greenwich |publisher=Sec.state.ma.us |date=April 1, 2009 |accessdate=April 26, 2009}}</ref><ref>{{cite web|url=http://www.google.com/url?q=http://online.wsj.com/article/SB123859307450378115.html |title=Madoff Feeder Is Charged in Fraud - WSJ.com |publisher=Online.wsj.com |date=April 2, 2009 |accessdate=April 26, 2009}}</ref> The Secretary of State has no plans to settle the lawsuit in spite of the fact that Fairfield Greenwich has offered to repay all Massachusetts investors, and is expected to force Fairfield to explain [[e-mails]] and other evidence he has uncovered that appear to show company officials knew about potential problems with Madoff but failed to disclose them to clients.<ref>{{cite web|url=http://www.boston.com/business/articles/2009/08/14/galvin_wont_settle_madoff_case/ |title=Galvin won’t settle Madoff case - The Boston Globe |publisher=Boston.com |date=August 14, 2009 |accessdate=March 16, 2010}}</ref><ref>{{cite web|author=Svea Herbst-Bayliss |url=http://www.reuters.com/article/domesticNews/idUSTRE57D3X820090814 |title=Mass. regulator will not settle Madoff feeder suit |publisher=Reuters |date= |accessdate=March 16, 2010}}</ref> On May 18, 2009, the hedge fund was sued by trustee Picard, seeking a return of $3.2 billion during the period from 2002 – Madoff's arrest in December, 2008.<ref>http://www.nytimes.com/2009/05/19/business/19madoff.html?ref=nyregion</ref> However, the money may already be in the hands of Fairfield’s own clients, who are likely off-limits to Picard, since they weren’t direct investors with Madoff.<ref>{{cite web|last=Jones |first=Ashby |url=http://blogs.wsj.com/law/2009/05/19/picards-latest-a-huge-lawsuit-against-fairfield-greenwich/ |title=Picard’s Latest: A Huge Lawsuit Against Fairfield Greenwich - Law Blog - WSJ |publisher=Blogs.wsj.com |date=May 19, 2009 |accessdate=March 16, 2010}}</ref>
# [[J. Ezra Merkin]], a prominent [[investment advisor]] and philanthropist, has been sued for his role in running a "feeder fund" for Madoff.<ref name="cnndowj">{{cite news |first =Chad | last =Bray|url=http://money.cnn.com/news/newsfeeds/articles/djf500/200812162136DOWJONESDJONLINE000783_FORTUNE5.htm |title=3rd UPDATE: Merkin, Ascot Fund Sued Over Madoff Investments|date=December 16, 2008|publisher=[[Dow Jones Newswires]]|work =[[CNN]] |accessdate=December 23, 2008}}</ref> On April 6, 2009, New York [[Attorney General]] [[Andrew Cuomo]] filed civil [[fraud]] charges<ref>http://online.wsj.com/public/resources/documents/WSJ-20090406-MerkinComplaint.pdf</ref> against J. Ezra Merkin alleging he "betrayed hundreds of investors" by moving $2.4 billion of clients' money to Bernard Madoff without their knowledge. The complaint states, he lied about putting the money with Madoff, failed to disclose conflicts of interest, and collected over $470 million in fees for his three hedge funds, Ascot Partners LP with Ascot Fund Ltd., Gabriel Capital Corp. and Ariel Fund Ltd. He promised he would actively manage the money, but instead, he misguided investors about his Madoff investments in quarterly reports, in investor presentations, and in conversations with investors. "Merkin held himself out to investors as an investing guru...In reality, Merkin was but a master marketer."<ref name=civilfraud1>{{cite news |publisher=Reuters |title=Fund operator Merkin charged with civil fraud |url=http://www.reuters.com/article/businessNews/idUSTRE53548420090406 |author=Graybow, Martha |date=April 6, 2009}}</ref><ref>http://online.wsj.com/public/resources/documents/Merkin.exhibitsone0407.pdf</ref><ref>http://online.wsj.com/public/resources/documents/Merkinexhibitstwo0407.pdf</ref><ref>http://online.wsj.com/public/resources/documents/Merkinexhibits30407.pdf</ref>
# [[Jeffry Picower]] and his wife, Barbara, of Palm Beach, Florida, and Manhattan, had two dozen accounts. He was a lawyer, accountant, and investor who led buyouts of health-care and technology companies. Mr. Picower's foundation stated its investment portfolio with Madoff was valued at nearly $1 billion at one time.<ref name="online.wsj.com"/> On October 25, 2009, Picower, 67 was found dead of a massive [[heart attack]] at the bottom of his [[Palm Beach]] swimming pool. He was buried on October 27, 2009 in Mount Ararat Cemetery in [[Farmingdale, New York]], Section 60, Range C, Lot 15.<ref>{{cite web|url=http://www.page2live.com/2009/10/29/madoff-investor-jeffry-picower-laid-to-rest-on-long-island/ |title=Madoff pal Jeffry Picower laid to rest on Long Island | Jose Lambiet’s |publisher=Page2live.com |date= |accessdate=March 16, 2010}}</ref>
# [[Tremont]] Group Holdings started its first Madoff-only fund in 1997. That group managed several funds marketed under the Re Select Broad Market Fund.<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aCT_aoIRYqRg&refer=home |title=Tremont Group Funds Invested $3.3 Billion With Madoff (Update1) |publisher=Bloomberg.com |date=December 15, 2008 |accessdate=April 26, 2009}}</ref>
# The Maxam fund invested through Tremont. Sandra L. Manzke, founder of Maxam Capital, had her assets temporarily frozen by the same Connecticut court.<ref>{{cite web|url=http://www.forbes.com/2009/03/31/madoff-connecticut-ponzi-personal-finance_fairfield.html |title=Judge Freezes Madoff Assets |publisher=Forbes.com |date=March 31, 2009 |accessdate=April 26, 2009}}</ref>
#Daniel Bonventre, former operations director for Bernard Madoff Investment Securities.<ref>{{cite web|url=http://www.latimes.com/business/la-fi-madoff26-2010feb26,0,601172.story|title=
Former Madoff operations exec arrested |publisher=latimes.com |date=February 25, 2010 |accessdate=February 25, 2010}}</ref><ref>{{cite web|url=http://www.tradersmagazine.com/news/madoff-operations-director-arrested-105266-1.html|title=
Madoff's Director of Operations Arrested |publisher=Traders Magazine Online News |date=February 25, 2010 |accessdate=February 25, 2010}}</ref><ref>{{cite web|url=http://www.justice.gov/usao/nys/pressreleases/February10/bonventredanielarrestpr.pdf|title=Press Release: Manhattan U.S. Attorney Charges Daniel Bonventre, Former Director Of Operations For Bernard L. Madoff Investment Securities, Llc, With Conspiracy, Securities Fraud, And Tax Crimes|publisher=US DOJ United States Attorney Southern District of New York |date=February 25, 2010 |accessdate=Mar 4, 2010}}</ref>
==Charges and Sentencing==
The criminal case is U.S.A. v. Madoff, 1:08-mJ-02735.
The SEC case is ''Securities and Exchange Commission v. Madoff'', 1:08-cv- 10791, both U.S. District Court, Southern District of New York (Manhattan).<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601213&sid=a6JDlygKnj8k&refer=home |title=Madoff Trustee Picard May Take Five Years to Pay Back Investors - Bloomberg.com |publisher=Bloomberg.com<! |date=January 21, 2009 |accessdate=April 26, 2009}}</ref> The cases against [[Fairfield Greenwich Group]] et al. are consolidated as 09-118 in U.S. District Court for the Southern District of New York (Manhattan).<ref name="reuters.com">[http://www.reuters.com/article/companyNewsAndPR/idUSN2253863920090122 Fairfield fund wins order in Madoff-related suit | Reuters<!-- Bot generated title -->]</ref>
While awaiting sentencing, Madoff has met with the SEC's [[Inspector General]], [[H. David Kotz]], who is conducting an investigation into how regulators failed to detect the fraud despite numerous red flags.<ref>{{cite web|author=E-mail This |url=http://dealbook.blogs.nytimes.com/2009/06/23/madoff-lawyers-seek-leniency-in-sentencing/?ref=business |title=Madoff Lawyers Seek Leniency in Sentencing - DealBook Blog - NYTimes.com |publisher=Dealbook.blogs.nytimes.com |date=June 23, 2009 |accessdate=March 16, 2010}}</ref> Former SEC Chairman [[Harvey Pitt]] estimated the actual net fraud to be between $10 and $17 billion, because it does not include the fictional returns credited to the Madoff's customer accounts.<ref name="APMarch6">{{cite news |last =Hays |first =Tom |coauthors =Larry Neumeister, Shlomo Shamir |title =Extent of Madoff fraud now estimated at far below $50b |agency =Associated Press|publisher=[[Haaretz]] | date =March 6, 2009 |url = http://www.haaretz.com/hasen/spages/1069457.html |accessdate =March 7, 2009 }}</ref>
===Criminal complaint===
''U.S. v. Madoff, 08-MAG-02735''.<ref name="Bloom1">{{cite news | last =Glovin |first =Dan | coauthor = Bradley Keoun |title =Madoff Charged in $50 Billion Fraud at Investment Advisory Firm | work =[[Bloomberg News]] |date =December 11, 2008 | url =http://www.bloomberg.com/apps/news?pid=20601087&sid=a8EVy7KVpBaA&refer=home | accessdate =December 11, 2008}}</ref><ref name="madoff2">{{cite web|url=http://www.usdoj.gov/usao/nys/madoff.html |title=The United States Department of Justice – United States Attorney's Office |publisher=Usdoj.gov |date= |accessdate=April 26, 2009}}</ref>
The original criminal complaint estimated that investors lost $50 billion through the scheme,<ref name="Times1">{{cite news | last =Henriques | first =Diana | coauthor = Zachery Kouwe | title =Prominent Trader Accused of Defrauding Clients | work =[[The New York Times]] | date =December 11, 2008 | url =http://www.nytimes.com/2008/12/12/business/12scheme.html?ref=business
| accessdate =December 11, 2008}}</ref> though ''[[The Wall Street Journal]]'' reports "that figure includes the alleged false profits that Mr. Madoff's firm reported to its customers for decades. It is unclear exactly how much investors deposited into the firm."<ref name="1223WsjA">{{cite news | last =Efrati | first =Amir | coauthors =Aaron Lucchetti and Tom Lauricella | title =Probe Eyes Audit Files, Role of Aide To Madoff | work =[[The Wall Street Journal]] | publisher =[[Dow Jones]] | date =December 23, 2008 | url =http://online.wsj.com/article/SB122999256957528605.html?mod=googlenews_wsj | accessdate =December 23, 2008}}</ref> He was originally charged with a single count of securities fraud and faced up to 20 years in prison, and a fine of $5 million if convicted.
Court papers indicate that Madoff's firm had about 4,800 investment client accounts as of November 30, 2008, and issued statements for that month reporting that client accounts held a total balance of about $65 billion, but actually "held only a small fraction" of that balance for clients.
<ref>[http://www.reuters.com/article/topNews/idUSN1046349920090311?pageNumber=2&virtualBrandChannel=0 Madoff faces life in prison on 11 criminal charges | Reuters<!-- Bot generated title -->]</ref>
Madoff was arrested by the [[Federal Bureau of Investigation]] (FBI) on December 11, 2008, on a [[criminal charge]] of [[securities fraud]].<ref name="madoff2"/> According to the criminal complaint, the previous day<ref>This date has been contested in two lawsuits against Madoff's sons. {{cite news | title =Madoff Securities Employees Sue Madoff Sons, Allege Fraud | work =[[The Wall Street Journal]] | date =June 16, 2009 | url =http://online.wsj.com/article/BT-CO-20090616-717211.html | accessdate =July 27, 2009}}</ref> he had told his sons that his business was "a giant [[Ponzi scheme]]".<ref name="AP1">{{cite news | last =Neumeister | first =Larry | title =Ex-Nasdaq chair arrested on fraud charge | agency =Associated Press | date =December 11, 2008 | url =}} Yahoo-Finance document http://biz.yahoo.com/ap/081211/wall_street_arrest.html accessed December 11, 2008 has expired.</ref><ref name="WSJ1">{{cite news | title =Top Broker Accused of Fraud; Madoff, Money Manager for the Wealthy, Said to Have Run '$50 Billion Ponzi Scheme' | work =[[The Wall Street Journal]] | date =December 11, 2008 | url =http://online.wsj.com/article/SB122903010173099377.html?mod=googlenews_wsj | accessdate =December 11, 2008}}</ref> They called a friend for advice, Martin Flumenbaum, a lawyer, who called federal prosecutors and the SEC on their behalf. FBI Agent Theodore Cacioppi made a house call. "We are here to find out if there is an innocent explanation," Cacioppi said quietly. The 70-year-old [[financier]] paused, then said: "There is no innocent explanation."<ref name="independent1"/><ref name="Times1" /> He had "paid investors with money that was not there".<ref name="Times121208">{{cite web | last =Honan | first =Edith | coauthor = Dan Wilchins | title =Former Nasdaq chair arrested over alleged £33 billion fraud | work =[[International Herald Tribune]] | date =December 12, 2008 | url =http://www.iht.com/articles/reuters/2008/12/12/business/OUKBS-UK-MADOFF-ARREST.php | accessdate =December 12, 2008}}</ref> Madoff was released on the same day of his arrest after posting $10 million [[bail]].<ref name="AP1" /> Madoff and his wife surrendered their passports, and he was subject to travel restrictions, a 7 p.m. [[curfew]] at his co-op, and [[electronic monitoring]] as a condition of bail. Although Madoff only had two co-signers for his $10 million bail, his wife and his brother Peter, rather than the four required, a judge allowed him free on bail but ordered him confined to his apartment.<ref name="nydn1">{{cite news | last =Rush | first =George | coauthors = Thomas Zambito, Phyllis Furman and Greg B. Smith | title =Bernard Madoff housebound after failing to get enough co-signers for bail bond in $50B ponzi scheme | work =[[New York Daily News]] | date =December 18, 2008 | url =http://www.nydailynews.com/news/ny_crime/2008/12/17/2008-12-17_bernard_madoff_housebound_after_failing_.html | accessdate =December 26, 2008}}</ref> Madoff has reportedly received [[death threat]]s that have been referred to the FBI, and the SEC referred to fears of "harm or flight" in its request for Madoff to be confined to his Upper East Side apartment.<ref name="nydn1" /><ref name="nydn2">{{cite news | last =Zambito | first =Thomas | coauthor = Corky Siemaszko | title =Feds confine Bernie Madoff to his $7 million penthouse until trial | work =[[New York Daily News]] | date =December 20, 2008 | url =http://www.nydailynews.com/news/ny_crime/2008/12/20/2008-12-20_feds_confine_bernie_madoff_to_his_7_mill.html | accessdate =December 26, 2008}}</ref> Cameras monitored his apartment's doors, its communication devices sent signals to the FBI, and his wife was required to pay for additional security.<ref name="nydn2" />
Apart from 'Bernard L. Madoff' and 'Bernard L. Madoff Investment Securities LLC ("BMIS")', the order to freeze all activities<ref>http://www.sec.gov/news/press/2008/2008-293-order-2.pdf SIPC page 7, VII [[United States Securities and Exchange Commission]].</ref> also forbade trading from the companies Madoff Securities International Ltd. ("Madoff International") and Madoff Ltd.
On January 5, 2009, prosecutors had requested that the Court revoke his bail, after Madoff and his wife allegedly violated the court-ordered asset freeze by mailing jewelry worth up to $1 million to relatives, including their sons and Madoff's brother. It was also noted that $173 million in signed checks had been found in Madoff's office desk after he had been arrested.<ref name="Bloom1609">{{cite news | last =Glovin | first =David | title =Madoff Sons Reported Jewelry Violations to U.S., Lawyer Says | publisher =Bloomberg.com | date =January 6, 2009 | url =http://www.bloomberg.com/apps/news?pid=20601103&sid=aRLjsVfmRQ64&refer=us | accessdate =January 6, 2009 }}</ref><ref name="nytimes revoke">{{cite news | last =Berenson | first =Alex | title =Bid to Revoke Madoff’s Bail Cites His Gifts | publisher =The New York Times | date =January 6, 2009 | url =http://www.nytimes.com/2009/01/06/business/06madoff.html?em |accessdate =January 6, 2009 }}</ref> His sons reported the mailings to prosecutors. Previously, Madoff was thought to be cooperating with prosecutors.<ref name="nytimes revoke"/> The following week, Judge Ellis refused the government's request to revoke Madoff's bail, but required as a condition of bail that Madoff make an inventory of personal items and that his mail be searched.<ref name="nytimes11209">{{cite news | last =Henrique | first =Diana | title =Judge Rules Madoff Can Remain Free on Bail | publisher =The New York Times | date =January 12, 2009 | url=http://www.nytimes.com/2009/01/13/business/13bail.html?_r=1 |accessdate =January 12, 2009 }}</ref>
On March 10, 2009, the [[United States Attorney for the Southern District of New York]] filed an 11-count criminal information, or complaint,<ref>[http://www.usdoj.gov/usao/nys/madoff/20090310criminalinfo.pdf (PDF)]</ref> charging Madoff
<ref>{{citenews|url=http://news.findlaw.com/hdocs/docs/madoff/criminal-information-plea31009.html|title=Criminal Information (U.S. v. Bernard Madoff|date=March 10, 2009|publisher=FindLaw|accessdate=March 10, 2009}}</ref> with 11 felonies: [[securities fraud]], [[investment adviser]] fraud, [[mail fraud]], [[wire fraud]], three counts of [[money laundering]], [[false statements]], [[perjury]], making false filings with the SEC, and theft from an [[Pension#Benefits|employee benefit plan]].<ref name="madoff2"/><ref name="pimentelletter1">http://www.usdoj.gov/usao/nys/madoff/20090310pimentelletter.pdf</ref> The complaint stated that Madoff had defrauded his clients of almost $65 billion—thus spelling out the largest [[Ponzi scheme]] in history, as well as the largest investor fraud committed by a single person.
Madoff pled guilty to three counts of [[money laundering]]. Prosecutors allege that he used the London Office, Madoff Securities International Ltd. to launder more than $250 million of client money by transferring client money from the investment-advisory business in New York to London and then back to the U.S. to support the U.S. trading operation of Bernard L. Madoff Investment Securities LLC. Madoff gave the appearance that he was trading in Europe for his clients.<ref name="article3">{{cite web|last=Lauricella |first=Tom |url=http://online.wsj.com/article/SB123681392137901653.html |title=Madoff Used U.K. Office in Cash Ploy, Filing Says - WSJ.com |publisher=Online.wsj.com |date=March 12, 2009 |accessdate=April 26, 2009}}</ref>
===Plea proceeding===
On March 12, 2009, Madoff appeared in court in a plea proceeding, and pled guilty to all charges.<ref name="MadoffAllocution"/> There was no [[plea agreement]] between the government and Madoff; he simply pleaded guilty and signed a [[waiver]] of [[indictment]]. The charges carried a maximum sentence of 150 years in prison, as well as mandatory [[restitution]] and [[fine (penalty)|fines]] up to twice the gross gain or loss derived from the offenses. If the government's estimate is correct, Madoff will have to pay $170 billion in restitution.<ref name="madoff2"/><ref name="pimentelletter1">[http://www.usdoj.gov/usao/nys/madoff/20090310pimentelletter.pdf Pimental letter]</ref>
In his pleading [[allocution]], Madoff admitted to running a [[Ponzi scheme]], and expressed regret for his "criminal acts".<ref name="NewsdayMarch7" /> He stated that he had begun his scheme some time in the early 1990s. He wished to satisfy his clients' expectations of high returns he had promised, even though it was during an [[Early 1990s recession|economic recession]]. He admitted that he hadn't invested any of his clients' money since the inception of his scheme. Instead, he merely deposited the money into his business account at [[Chase Manhattan Bank]]. He admitted to false trading activities masked by foreign transfers and false SEC returns. When clients requested account withdrawals, he paid them from the Chase account, claiming the profits were the result of his own unique "split-strike conversion strategy". He said he had every intention of terminating the scheme, but it proved "difficult, and ultimately impossible" to extricate himself. He eventually reconciled himself to being exposed as a fraud.<ref name="MadoffAllocution"/>
Only two of at least 25 victims who had requested to be heard at the hearing spoke [[in open court]] against accepting Madoff's plea of guilt.
<ref name="madoff2"/><ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aaJGQYRxpLr8&refer=us |title=Madoff Lawyer Ira Sorkin Invested $18,860 With Madoff (Update2) - Bloomberg.com |publisher=Bloomberg.com<! |date=March 10, 2009 |accessdate=April 26, 2009}}</ref>
Judge [[Denny Chin]] accepted his guilty plea and remanded him to incarceration at the [[Metropolitan Correctional Center, New York|Manhattan Metropolitan Correctional Center]] until sentencing. Chin said that Madoff was now a substantial flight risk given his age, wealth and the possibility of spending the rest of his life in prison.<ref name="DOJ3">[http://www.usdoj.gov/usao/nys/madoff/madoffhearing031209.pdf DOJ Madoff hearing]</ref>
Madoff's attorney, [[Ira Sorkin]] filed an [[appeal]], to return him back to his "penthouse arrest", await sentencing, and to reinstate his bail conditions, declaring he would be more amenable to cooperate with the government's investigation,
<ref>{{cite web|url=http://www.reuters.com/article/newsOne/idUSTRE52C57L20090313 |title=Madoff to appeal bail, net worth revealed | U.S. |publisher=Reuters |date=March 13, 2009 |accessdate=April 26, 2009}}</ref> and prosecutors filed a notice in opposition.<ref name="usdoj.gov">http://www.usdoj.gov/usao/nys/madoff/madoffbailpendingsentencing.pdf</ref><ref>{{cite web|url=http://www.nydailynews.com/money/2009/03/17/2009-03-17_bernard_madoffs_sons_andrew_and_mark_lat.html |title=Bernard Madoff's sons, Andrew and Mark, latest targets of feds' efforts to seize ill-gotten loot |publisher=Nydailynews.com |date=March 17, 2009 |accessdate=April 26, 2009}}</ref> On March 20, 2009, the appellate court denied his request.<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aUhqoVZyCMRY&refer=us |title=Bernard Madoff’s Bid for Freedom Denied by U.S. Court (Update5) |publisher=Bloomberg.com |date=March 20, 2009 |accessdate=April 26, 2009}}</ref>
On June 26, 2009, Chin ordered Madoff to forfeit $170 million in assets. His wife Ruth will relinquish her claim to $80 million worth of assets, leaving her with $2.5 million in cash.<ref name="washingtonpost.com"/> The settlement does not prevent the SEC and Picard to continue making claims against Mrs. Madoff's funds in the future.<ref name="ReferenceA"/> Madoff had earlier requested to shield $70 million in assets for Ruth, arguing that it was unconnected to the fraud scheme.
===Sentencing and prison life===
Prosecutors recommended a maximum prison sentence of 150 years, and informed Chin that [[Irving Picard]], bankruptcy trustee has indicated that "Mr. Madoff has not provided meaningful cooperation or assistance."<ref>[http://www.usdoj.gov/usao/nys/madoff/20090626sentencingmemorandumfiled.pdf Prosecutors' sentencing recommendation]</ref><ref>Henriques, Dana. [http://www.nytimes.com/2009/06/27/business/27madoff.html Prosecutors propose 150-year sentence for Madoff]. [[The New York Times]], 2009-06-26.</ref> The Bureau of US Prisons had recommended 50 years, while defense lawyer [[Ira Sorkin]] had recommended 12 years, arguing that Madoff had confessed. The judge granted Madoff permission to wear his personal clothing at sentencing.<ref name="ReferenceA"/>
U.S. District Judge [[Denny Chin]] sentenced Madoff to 150 years in prison, as recommended by the prosecution. Chin said he had not received any mitigating letters from friends or family testifying to Madoff's good deeds, describing that "the absence of such support is telling".<ref>{{cite web|url=http://www.nydailynews.com/money/2009/06/29/2009-06-29_madoff_gets_max.html#ixzz0JqLKSxSX&D |title=Bye, Bye Bernie: Ponzi king Madoff sentenced to 150 years |publisher=Nydailynews.com |date=June 29, 2009 |accessdate=March 16, 2010}}</ref> Commentators noted that this was in contrast to other high-profile white collar trials such as that of [[Andrew Fastow]], [[Jeffrey Skilling]], and [[Bernard Ebbers]] who were known for their philanthropy and/or cooperation to help victims; however Madoff's victims included several charities and foundations, and the only person that pleaded for mercy was defense lawyer Ira Sorkin.<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601039&sid=a5CWiR2gIqbE |title=Madoff Lacks What Skilling, Ebbers, Fastow Had: Ann Woolner |publisher=Bloomberg.com |date=July 1, 2009 |accessdate=March 16, 2010}}</ref> Chin called the fraud "unprecedented" and "staggering", and stated that the sentence would deter others from committing similar frauds. "Here the message must be sent that Mr. Madoff's crimes were extraordinarily evil." Many victims, some of whom had lost their life savings, applauded the sentence.<ref>{{cite web|last=Frank |first=Robert |url=http://online.wsj.com/article/SB124604151653862301.html |title=Bernard Madoff, Convicted Ponzi-Scheme Operator, Sentenced to 150 Years - WSJ.com |publisher=Online.wsj.com |date=June 30, 2009 |accessdate=March 16, 2010}}</ref>
Chin said "I have a sense Mr. Madoff has not done all that he could do or told all that he knows," noting that Madoff failed to identify accomplices, making it more difficult for prosecutors to build cases against others. Chin dismissed Sorkin's plea for leniency, stating that Madoff made substantial loans to family members and moved $15 million from the firm to his wife's account shortly before confessing.<ref>[http://www.washingtonpost.com/wp-dyn/content/article/2009/06/30/AR2009063000421_pf.html ]{{dead link|date=March 2010}}</ref> The court-appointed receiver of Bernard L. Madoff Investment Securities L.L.C., [[Irving Picard]], has also said that Madoff had not provided substantial assistance, complicating efforts to locate assets. A former federal prosecutor suggested Madoff would have had the possibility of a sentence with parole if he fully cooperated with investigators, but Madoff's silence implied that there were other accomplices in the fraud which led the judge to impose the maximum sentence.<ref>[http://www.philly.com/inquirer/business/20090630_Madoff_gets_maximum__150_years.html ]{{dead link|date=March 2010}}</ref><ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601110&sid=aRNSvzgqdhgg |title=Madoff’s Failure to Name Accomplices Cripples His Leniency Bid |publisher=Bloomberg.com |date=June 26, 2009 |accessdate=March 16, 2010}}</ref>
"I have left a legacy of shame, as some of my victims have pointed out, to my family and my grandchildren. This is something I will live in for the rest of my life. I'm sorry," he said simply. "I know that doesn't help you," Madoff said, after his victims recommended to the judge that he rot in jail.<ref>{{cite web|url=http://www.nydailynews.com/money/2009/06/29/2009-06-29_madoff_gets_max.html#ixzz0JqMnnVJB&D |title=Bye, Bye Bernie: Ponzi king Madoff sentenced to 150 years |publisher=Nydailynews.com |date=June 29, 2009 |accessdate=March 16, 2010}}</ref>
On June 29, 2009, inmate number #61727-054, Bernard Madoff was sentenced to 150 years imprisonment at the [[Metropolitan Correctional Center, New York City|Metropolitan Correctional Center]] in [[New York]], and ordered to pay $170 billion in restitution.<ref>{{cite news
|url=http://www.cbc.ca/money/story/2009/06/29/madoff-ponzi-fraud-sentence564.html
|title=Bernard Madoff gets 150 years behind bars for fraud scheme
|date=June 29, 2009
|accessdate=June 29, 2009
|publisher=CBC News}}</ref><ref>{{cite news |title=Madoff Sentenced to 150 Years for Ponzi Scheme |url=http://www.nytimes.com/2009/06/30/business/30madoff.html?_r=1&hp |first=Jack |last=Healy |publisher=The New York Times |date=June 29, 2009 |accessdate=June 29, 2009}}</ref><ref>{{cite news|url=http://news.bbc.co.uk/2/hi/business/8124838.stm|title= Fraudster Madoff gets 150 years |date=June 29, 2009|work=BBC News|accessdate=June 29, 2009}}</ref>
Madoff was incarcerated at [[Butner Federal Correctional Complex]] in [[North Carolina]].<ref>{{cite news|url=http://online.wsj.com/article/SB124752771713635527.html|title=Madoff is Moved to A Prison in Butner N.C.
|date=July 13, 2009}}</ref>
On July 28, 2009, he gave his first jailhouse interview to Joseph Cotchett and Nancy Fineman, attorneys from San Francisco, because they threatened to sue his wife, Ruth, on behalf of several investors who lost fortunes. During the 4 and 1/2 hour session, he was described as arrogant and cocky, and upon query, apologized to all his clients.<ref>[http://www.theaustralian.news.com.au/business/story/0,28124,25858299-5001942,00.html ]{{dead link|date=March 2010}}</ref>
==Recovery of funds==
{{Main|Recovery of funds from the Madoff investment scandal}}
Madoff's combined assets are about $826 million and have been frozen. Madoff provided a confidential list of his and his firm's assets to the SEC on December 31, which was subsequently disclosed on March 13, 2009 in a court filing. Madoff had no [[IRA]]s, no [[401(k)]], no [[Keogh plan]], no other [[pension plan]] and no [[annuity (finance theory)|annuities]]. He owned less than a combined $200,000 in securities in [[Lehman Brothers]], [[Morgan Stanley]], [[Fidelity]], [[Bear Stearns]], and [[M&T]]. No offshore or [[Swiss Bank]] accounts were listed.<ref>[http://www.nypost.com/seven/03132009/news/regionalnews/031309madofffinance.pdf ]{{dead link|date=March 2010}}</ref><ref name="newsday.com">[http://www.newsday.com/services/newspaper/printedition/saturday/news/ny-bzasse146068689mar14,0,1570341,full.story Madoff assets worth more than $820 million – Newsday.com]{{Dead link|date=April 2009}}</ref>
{{Wikinews|Madoff prosecutors want assets from wife and children}}On March 17, 2009, prosecutor filed a document listing more assets including $2.6 million in jewelry and about 35 sets of watches and cufflinks, more than $30 million in loans owed to the couple by their sons, and Ruth Madoff's interest in real estate funds sponsored by [[Sterling Equities]], whose partners include [[Wilpon]]. Ruth Madoff, and Peter Madoff, invested as “passive limited partners” in real estate funds sponsored by the company, as well as other venture investments. Assets also include the Madoffs' interest in Hoboken Radiology LLC. in Hoboken, New Jersey; Delivery Concepts LLC, an online food ordering service in midtown Manhattan that operates as "delivery.com"; an interest in Madoff La Brea LLC; an interest in the restaurant, PJ Clarke’s on the Hudson LLC; and [[Boca Raton]], Florida-based Viager II LLC.<ref>{{cite web|url=http://dealbook.blogs.nytimes.com/2009/03/17/prosecutors-seek-more-forfeitures-from-madoffs/?hp |title=Prosecutors Seek to Claim More Madoff Assets - DealBook Blog - NYTimes.com |publisher=Dealbook.blogs.nytimes.com |date=March 17, 2009 |accessdate=April 26, 2009}}</ref><ref name="bloomberg6">{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aj6f7pk8l_00&refer=home |title=Madoff Prosecutors Seek to Take Businesses, Loans (Update1) |publisher=Bloomberg.com |date=March 17, 2009 |accessdate=April 26, 2009}}</ref>
On March 2, 2009, Judge [[Louis Stanton]] modified an existing freeze order to surrender assets Madoff owns: his securities firm, real estate, artwork, and entertainment tickets, and granted a request by prosecutors that the existing freeze remain in place for the Manhattan apartment, and vacation homes in [[Montauk]], New York, and [[Palm Beach, Florida]]. He has also agreed to surrender his interest in [[Primex]] Holdings LLC, a [[joint venture]] between Madoff Securities and several large brokerages, designed to replicate the auction process on the [[New York Stock Exchange]].<ref name="bloomberg1">{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aWVQJMrRh7Qc&refer=home |title=Ruth Madoff Says Her $62 Million ‘Unrelated’ to Fraud (Update2) - Bloomberg.com |publisher=Bloomberg.com<! |date=March 2, 2009 |accessdate=April 26, 2009}}</ref> Madoff's April 14, 2009 opening day [[New York Mets]] tickets were sold for $7,500 on [[ebay]].<ref>{{cite web|url=http://www.nydailynews.com/money/2009/04/12/2009-04-12_now_thats_a_decent_return_madoffs_opening_day_mets_tickets_sell_for_7500_on_ebay.html |title=Now that's a decent return! Madoff's opening day Mets tickets sell for $7,500 on eBay |publisher=Nydailynews.com |date=April 12, 2009 |accessdate=April 26, 2009}}</ref>
On April 13, 2009, a Connecticut judge dissolved the temporary asset freeze from March 30, 2009, and issued an order for [[Fairfield Greenwich Group]] executive Walter Noel to post property pledges of $10 million against his Greenwich home and $2 million against Jeffrey Tucker's.<ref>{{cite web|url=http://www.zwire.com/site/news.cfm?BRD=1653&dept_id=686445&newsid=20299234&PAG=461&rfi=9 |title=Minuteman News Center |publisher=Zwire.com |date= |accessdate=March 16, 2010}}</ref> Noel agreed to the attachment on his house "with no findings, including no finding of liability or wrongdoing". Andres Piedrahita's assets continue to remain temporarily frozen because he was never served with the complaint. The principals are all involved in a lawsuit filed by the town of [[Fairfield]]'s pension funds, which lost $42 million. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport).<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=apLMJ4p8DYyY&refer=home |title=Madoff-Linked Asset Freeze Lifted in Connecticut Suit (Update1) |publisher=Bloomberg.com |date= |accessdate=March 16, 2010}}</ref>
<ref>{{cite web|url=http://www.reuters.com/article/domesticNews/idUSN3150504420090331 |title=Judge freezes assets of Madoff sons, executives |publisher=Reuters |date= |accessdate=March 16, 2010}}</ref><ref>{{cite web|url=http://www.scribd.com/doc/12872951/Town-of-Fairfield-suit-against-NEPC-and-KPMG |title=Town of Fairfield suit against NEPC and KPMG |publisher=Scribd.com |date= |accessdate=March 16, 2010}}</ref> Maxam Capital and other firms that allegedly fed Madoff's fund, which could allow Fairfield to recover up to $75 million were also part of the dissolution and terms.<ref>{{cite web|author=March 31, 2009 |url=http://www.newsday.com/news/local/wire/connecticut/ny-bc-ct--madoff-fairfield0331mar31,0,3368851.story |title=Town sues Madoff, hedge funds over losses |publisher=Newsday.com |date=March 31, 2009 |accessdate=April 26, 2009}}</ref><ref>{{cite web|url=http://www.wtnh.com/dpp/news/news_wtnh_fairfield_gets_freeze_on_madoff_assets_200903310552 |title=Fairfield gets freeze on Madoff assets |publisher=Wtnh.com |date= |accessdate=April 26, 2009}}</ref>
Professor [[John C. Coffee|John Coffee]], of [[Columbia University Law School]], said that much of Madoff's money may be in [[offshore fund]]s. The SEC believed keeping the assets secret would prevent them from being seized by foreign regulators and foreign creditors.<ref>{{cite web|url=http://abcnews.go.com/TheLaw/Business/story?id=6554322&page=1 |title=ABC News: Madoff Set to Disclose List of Holdings |publisher=Abcnews.go.com |date=December 17, 2008 |accessdate=April 26, 2009}}</ref><ref>{{cite web|url=http://business.smh.com.au/business/madoffs-assets-to-be-kept-secret-20090101-78f7.html |title=Madoff's assets to be kept secret |publisher=Business.smh.com.au |date=January 2, 2009 |accessdate=April 26, 2009}}</ref>
The [[Montreal Gazette]] reported on January 12, 2010 that there are unrecovered Madoff assets in Canada.<ref>[http://www.montrealgazette.com/news/Madoff+trustee+finds+assets+Canada/2432583/story.html Madoff trustee finds assets in Canada], [[Montreal Gazette]], January 12, 2010</ref>
==Affected clients==
{{Main|List of investors in Bernard L. Madoff Securities}}
On February 4, 2009, the U.S. Bankruptcy Court in Manhattan released a 162-page client list with at least 13,500 different accounts,<ref>{{cite news|last=Fleury |first=Michelle |url=http://news.bbc.co.uk/1/hi/business/7898874.stm |title=Business | Madoff victims count their losses |publisher=BBC News |date=February 19, 2009 |accessdate=April 26, 2009}}</ref> but without listing the amounts invested.<ref>{{cite web|url=http://online.wsj.com/public/resources/documents/madoffclientlist020409.pdf|title=WSJ: Madoff Client List|format=PDF}}</ref> Individual investors who invested through [[Fairfield Greenwich Group]], Ascot Partners, and Chais Investments were not included on the list.<ref>{{cite news|last=Chew |first=Robert |url=http://www.time.com/time/business/article/0,8599,1877414,00.html |title=The Bernie Madoff Client List Is Made Public |publisher=TIME |date=February 5, 2009 |accessdate=April 26, 2009}}</ref>
Clients included banks, hedge funds, charities, universities, and wealthy individuals who have disclosed about $41 billion invested with Bernard L. Madoff Investment Securities LLC, according to a ''[[Bloomberg News]]'' tally, which may include double counting of investors in feeder funds.<ref name="bloomberg.com">{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=ax319OmN67Pg&refer=home |title=Madoff’s Firm Owed $600 Million in Stock, SIPC Says (Update1) - Bloomberg.com |publisher=Bloomberg.com<! |date=January 27, 2009 |accessdate=April 26, 2009}}</ref>
Although Madoff filed a report with the SEC in 2008 stating that his advisory business had only 11–25 clients and about $17.1 billion in assets,<ref>{{cite news | url = http://www.cnn.com/2008/BUSINESS/12/15/madoff.arrest.exposure/index.html | publisher = CNN | title = Banks face huge losses from $50B ‘scam’|date=December 15, 2008}}</ref> thousands of investors have reported losses, and Madoff estimated the fund's assets at $50 billion.
Other notable clients included former [[Salomon Brothers]] economist [[Henry Kaufman]], [[Steven Spielberg]], [[Jeffrey Katzenberg]], actors [[Kevin Bacon]], [[Kyra Sedgwick]], [[John Malkovich]], and [[Zsa Zsa Gabor]], [[Mortimer Zuckerman]],<ref>{{cite web|url=http://www.nypost.com/seven/12142008/news/regionalnews/daily_news_owner_mort_zuckerman_madoff_v_144237.htm|title="Zuckerman Sounds Off on Madoff", ''New York Daily News'' (December 14, 2008)}}</ref> [[Baseball Hall of Fame]] pitcher [[Sandy Koufax]], broadcaster [[Larry King]], [[World Trade Center]] developer [[Larry Silverstein]], and The [[Elie Wiesel]] Foundation for Humanity lost $15.2 million, and Wiesel and his wife, Marion, lost their life savings.<ref>[http://www.nytimes.com/2009/02/27/business/27madoff.html Out Millions, Elie Wiesel Vents About Madoff – NYTimes.com<!-- Bot generated title -->]</ref>
===Largest stake-holders===
According to ''[[The Wall Street Journal]]''<ref name="WSJvics">{{cite news | title =Madoff’s Victims | work =[[The Wall Street Journal]] | date =December 16, 2008 | url =http://s.wsj.net/public/resources/documents/st_madoff_victims_20081215.html | accessdate =December 17, 2008}}</ref> the investors with the largest potential losses, including feeder funds, are:
{{colbegin}}
*[[Fairfield Greenwich Group]], $7.50 billion
*Tremont Capital Management, $3.30 billion
*[[Banco Santander]], $2.87 billion
*[[Bank Medici]], $2.10 billion
*Ascot Partners, $1.80 billion
*Access International Advisors, $1.40 billion
*[[Fortis-ABN AMRO|Fortis]], $1.35 billion
*[[HSBC]], $1 billion
{{colend}}
The potential losses of these eight investors total $21.32 billion.
Eleven investors had potential losses between $100 million and $1 billion:
{{colbegin|3}}
*[[Natixis]] SA
*[[Carl J. Shapiro]] (a 95-year-old Boston philanthropist)
*[[Royal Bank of Scotland Group]] PLC
*[[BNP Paribas]]
*[[BBVA]]
*[[Man Group]] PLC
*Reichmuth & Co.
*[[Nomura Holdings]]
*Maxam Capital Management
*EIM SA
*[[Union Bancaire Privée]]
{{colend}}
Twenty-three investors with potential losses of $500,000 to $100 million were also listed, with a total potential loss of $540 million. The grand total potential loss in the ''Wall Street Journal'' table is $26.9 billion.
Some investors have amended their initial estimates of losses to include only their original investment, since the profits Madoff reported to them which they were including were most likely fraudulent. [[Yeshiva University]], for instance, said its actual incurred loss was its invested $14.5 million, not the $110 million initially estimated, which included falsified profits reported to the university by Madoff.
====IRS penalties====
It is estimated the potential tax penalties for foundations invested with Madoff are $1 billion.
Although foundations are exempt from [[federal income tax]]es, they are subject to an [[excise tax]], for failing to vet Madoff's proposed investments properly, to heed red flags, or to diversify prudently. Penalties may range from 10% of the amount invested during a tax year, to 25% if they fail to try to recover the funds. The foundation’s officers, directors, and trustees face up to a 15% penalty, with up to $20,000 fines for individual managers, per investment.<ref>[http://www.nytimes.com/2009/02/12/business/12tax.html?ref=business Foundations Could Be Fined for Madoff Investments – NYTimes.com<!-- Bot generated title -->]</ref>
==Impact and aftermath==
===Criminal charges Aurelia Finance===
Criminal charges against five directors will proceed against Swiss wealth manager [[Aurelia Finance]], which lost an alleged $800 million of client money. The directors' assets have been frozen.<ref>{{cite web|url=http://uk.reuters.com/article/businessNews/idUKTRE53N4BF20090424 |title=Swiss judge allows charges in Madoff losses case | Reuters |publisher=Uk.reuters.com |date=February 9, 2009 |accessdate=April 26, 2009}}</ref><ref>{{cite web|url=http://uk.reuters.com/article/usTopNews/idUKTRE53R2QY20090428 |title=Aurelia managers sought safety in Madoff: report | Reuters |publisher=Uk.reuters.com |date=April 28, 2009 |accessdate=March 16, 2010}}</ref>
===Grupo Santander===
Clients primarily located in [[South America]] who invested with Madoff through the Spanish bank [[Grupo Santander]], filed a class action against Santander in Miami. Santander proposed a settlement that would give the clients $2 billion worth of [[preferred stock]] in Santander based on each client's original investment. The shares pay a 2% dividend.<ref>{{cite news |url=http://seekingalpha.com/article/121829-clients-lose-again-with-santander-s-madoff-compensation-barron-s|title=Clients Lose Again with Santander's Madoff Compensation – Barron's|work=Barron's|first=Rachael |last=Granby|date=February 22, 2009|accessdate=March 13, 2009}}</ref> Seventy percent of the Madoff/Santander investors accepted the offer.<ref>{{cite news |url=http://www.nytimes.com/2009/02/20/business/worldbusiness/20madoff.html|title=70% of Santander Clients Take Madoff Settlement|author=Reuters|work=The New York Times|date=February 19, 2009|accessdate=March 13, 2009}}</ref>
===Union Bancaire Privee===
[[Union Bancaire Privée]], invested less than $1.08 billion (of its $124.5 billion in assets) in Madoff funds.<ref>{{cite web|last=Mollenkamp |first=Carrick |url=http://online.wsj.com/article/SB122947686926212703.html |title=Fairfield Group Forced to Confront Its Madoff Ties - WSJ.com |publisher=Online.wsj.com |date=December 17, 2008 |accessdate=March 16, 2010}}</ref><ref>{{cite web|url=http://projects.nytimes.com/creditcrisis/madoff_clients/table |title=Madoff's Clients - The New York Times |publisher=Projects.nytimes.com |date=June 24, 2009 |accessdate=March 16, 2010}}</ref>
In March 2009, Geneva-based wealth manager, [[Union Bancaire Privée]], offered to partially compensate investors 50% of the money they initially invested with Madoff if they agree to stay with the bank for the next five years and promise not to sue.<ref>{{cite web|last=Bryan |first=Cassell |url=http://online.wsj.com/article/SB123776596117909221.html |title=Madoff-Stung Union Bancaire Regroups - WSJ.com |publisher=Online.wsj.com |date=March 23, 2009 |accessdate=April 26, 2009}}</ref>
On May 8, 2009, a lawsuit was filed against the bank on behalf of New York investor Andrea Barron in the [[United States District Court for the Southern District of New York]]. The lawsuit is seeking [[class-action]] status for investors in UBP Funds as of December 11, 2008, and damages, including the return of management fees.<ref>[http://online.wsj.com/article/BT-CO-20090511-714664.html ]{{dead link|date=March 2010}}</ref>
===Notz Stucki===
[[Geneva]]-based wealth manager, [[Notz Stucki|Notz Stucki's]] Plaza Fund, will compensate up to $103.2 million to those clients who did not specifically request access to Madoff. Compensation would be with an issue of a note payable over five years, which would be held by a separate legal entity.<ref>{{cite web|url=http://uk.reuters.com/article/marketsNewsUS/idUKLN64260120090423 |title=UPDATE 2-Notz Stucki to partially reimburse Madoff clients | Markets | US Markets | Reuters |publisher=Uk.reuters.com |date=February 9, 2009 |accessdate=April 26, 2009}}</ref>
===Bank Medici===
[[Bank Medici]] is an [[Austria]]n bank founded by [[Sonja Kohn]], who met Madoff in 1985 while living in New York.<ref name="Espinoza2009-02-01">{{cite news | last = Espinoza | first = Javier | date = February 1, 2009 | title = Austria Takes Control Of Madoff-Tainted Bank | work = Forbes | url = http://www.forbes.com/2009/01/02/medici-madoff-austria-markets-equity-cx_je_0102markets05.html | accessdate = February 24, 2010 }}</ref> Ninety percent of the bank's income was generated from Madoff investments.<ref>{{cite news |url=http://www.securitiesdocket.com/2009/01/21/austria-madoff-exposed-bank-medici-reportedly-on-brink-of-collapse-class-action-may-be-in-works/|title=Austria: Madoff-Exposed Bank Medici Reportedly on Brink of Collapse, Class Action May Be in Works|date=January 21, 2009|work=Securities Docket|accessdate=March 13, 2009}}</ref> In December 2008, Medici reported that two of its funds—Herald USA Fund and Herald Luxemburg Fund—were exposed to Madoff losses. On January 2, 2009, FMA, the Austria banking regulator, took control of Bank Medici and appointed a supervisor to control the bank.<ref>{{cite news |url=http://edition.cnn.com/2009/CRIME/01/03/bernard.madoff.austria.bank/index.html|title=Austria takes over bank hit by Madoff case|date=January 3, 2009|fwork=CNN|accessdate=March 13, 2009}}</ref> Bank Medici, and its Austrian banking license is now for sale and has been sued by its customers both in the United States and in Austria.<ref>{{cite news|url=http://www.reuters.com/article/mergersNews/idUSLB12236820090312?feedType=RSS&feedName=mergersNews|title=Austria's Madoff-hit Bank Medici seeks buyers|work=Reuters|date=March 12, 2009|first=Boris |last=Groendahl|accessdate=March 13, 2009}}</ref> The Vienna State Prosecutor has launched a criminal investigation of Bank Medici and Kohn, who had invested an estimated $2.1 billion with Madoff.<ref>{{cite news |url=http://www.businessinsider.com/madoff-feeder-bank-medici-probed-criminally-in-vienna-2009-3|title=Madoff Feeder Bank Medici Probed Criminally In Vienna|work=Business Insider|first=Henry |last=Blodget|date=March 1, 2009|accessdate=March 13, 2009}}</ref> On May 28, 2009, Bank Medici lost its Austrian banking license. Kohn and the Bank are under investigation.<ref>{{cite web|last=Hansen |first=Flemming E. |url=http://online.wsj.com/article/SB124351941925862619.html |title=Madoff-Hit Bank Medici Loses License - WSJ.com |publisher=Online.wsj.com |date=May 28, 2009 |accessdate=March 16, 2010}}</ref>
===The Innocence Project===
The [[Innocence Project]] was partly funded by the JEHT Foundation, a private charity backed by a wealthy couple, Ken and Jeanne Levy-Church, financed with Madoff's mythical money. Jeanne Levy-Church's losses forced her to shut down her Foundation, and her parents’ foundation, the Betty and Norman F. Levy Foundation, lost $244 million. JEH helped the less fortunate, especially ex-convicts.<ref>http://www.nytimes.com/2009/03/12/business/12accountants.html</ref><ref name="thedailybeast1">{{cite web|url=http://www.thedailybeast.com/blogs-and-stories/2009-04-23/madoffs-london-money-laundering-scam/ |title=Was Madoff 'Victim' and Best Friend an Accomplice? – Page 1 |publisher=The Daily Beast |date= |accessdate=April 26, 2009}}</ref> (''See'' [[Participants in the Madoff investment scandal]]: Norman F. Levy) Madoff's corruption has deprived it of necessary funds to secure the release of others. The organization uses the latest [[DNA]] techniques to prove the innocence of the wrongfully imprisoned. On November 25, 2008, Steven Barnes was set free from jail with the evidence gained from the DNA tests, after serving 20 years for crimes he did not commit (rape and murder).
<ref>{{cite web|last=Coomarasamy |first=James |url=http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/8063604.stm |title=Programmes | From Our Own Correspondent | Bernard Madoff's hidden victims |publisher=BBC News |date=May 23, 2009 |accessdate=March 16, 2010}}</ref>
===Suicide of clients===
====René-Thierry Magon de la Villehuchet====
On December 23, 2008, one of the founders of Access International Advisors LLC, [[René-Thierry Magon de la Villehuchet]], was found dead in his company office on [[Madison Avenue]] in New York City. His left wrist was slit<ref name="Quest">[http://www.nytimes.com/2009/01/02/business/02madoff.html?_r=1 "Madoff Investor’s Suicide Leaves Questions"] by Alex Berenson and Matthew Saltmarsh, ''[[The New York Times]]'', January 2, 2009, p. B1 New York edition</ref> and de la Villehuchet had taken [[sleeping pill]]s, in what appeared to be [[suicide]].<ref name="suicide">{{cite web|title=Police: Madoff Investor Found Dead of Suicide| work = [[Associated Press|AP Newswire]] |publisher=[[1010 WINS]]| format = text and audio | url=http://www.1010wins.com/pages/3547010.php| accessdate=December 23, 2008}}</ref><ref name="nydn villehuchet">{{cite news|url=http://www.nydailynews.com/money/2008/12/25/2008-12-25_bernie_madoff_should_rot_with_rats_victi.html|title=Bernie Madoff should rot with rats, victim's pal says|accessdate=December 26, 2008|work=[[New York Daily News]]|date=December 25, 2008}}</ref>
He lived in [[New Rochelle, New York]] and came from a very prominent [[France|French]] family. Although no [[suicide note]] was found at the scene, his brother Bertrand in France received a note shortly after his death in which he expressed remorse and a feeling of responsibility.<ref name="Quest" /> The [[Federal Bureau of Investigation|FBI]] and SEC do not believe de la Villehuchet was involved in the fraud.<ref name="nydn villehuchet" />
[[Harry Markopolos]] said he met de La Villehuchet several years before, and warned him that Madoff might be breaking the law.<ref>{{cite web|url=http://www.google.com/url?sa=D&q=http://online.wsj.com/article/SB123361899636241467.html&usg=AFQjCNFXIc6HhLulK9yO2Za3pKV6PHHK0g |title=A Lonely Lament From a Whistle-Blower - WSJ.com |publisher=Online.wsj.com |date=February 3, 2009 |accessdate=April 26, 2009}}</ref> In 2002, Access invested about 45% of its $1.2 billion under management with Madoff. By 2008, it managed $3 billion and raised the proportion of funds with Madoff to about 75%. De la Villehuchet had also invested all of his wealth and 20% of his brother, Bertrand's, with Madoff.<ref>{{cite web|url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a8Pw8wT2dhH4&refer=us |title=U.K.’s Prince Charles Targeted by Madoff Marketer, Witness Says - Bloomberg.com |publisher=Bloomberg.com<! |date=February 6, 2009 |accessdate=April 26, 2009}}</ref> Bertrand said that René-Thierry did not know Madoff but the connection was through René-Thierry's partner in AIA, French banker, [[Patrick Littaye]].<ref>[http://www.nytimes.com/2009/01/02/business/02madoff.html?_r=1 "Madoff Investor’s Suicide Leaves Questions"] by Alex Berenson and Matthew Saltmarsh, ''[[The New York Times]]'', 2009-01-02, p. B1 [[New York|NY]] edition.</ref>
====William Foxton====
On February 10, 2009, highly-decorated British soldier William Foxton, OBE,<ref>{{cite web|url=http://www.telegraph.co.uk/news/uknews/5503929/Bernard-Madoff-fraud-victim-committed-suicide-to-avoid-bankruptcy-shame.html | title = Bernard Madoff fraud victim committed suicide to avoid bankruptcy shame |date=June 11, 2009 |work=[[telegraph.co.uk]] |accessdate=June 28, 2009 }}</ref> 65, shot himself in a park in [[Southampton, England]], having lost all of his family's savings. He had invested in the Herald USA Fund and Herald Luxembourg Fund,<ref name="Thompsonfeb2009">{{cite web|url=http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5720211.ece |title=Bernard Madoff has 'blood on his hands' over William Foxton suicide |publisher=Business.timesonline.co.uk |date= |accessdate=April 26, 2009}}</ref><ref name="littlefeb2009">{{cite news|url=http://news.bbc.co.uk/2/hi/uk_news/7886894.stm|title=Banking crisis killed my father|last=Little|publisher=BBC|accessdate=February 13, 2009}}</ref> [[feeder fund]]s for Madoff from [[Bank Medici]] in Austria.<ref>
{{cite news |url=http://www.romandie.com/infos/news2/081216185742.ad2u67r4.asp |title=Madoff : la banque autrichienne Medici impliquée avec 2,1 milliards de dollars |date=December 16, 2008 |work=[[Romandie News]] |language=French |accessdate=March 13, 2009 |author=[[Agence France-Presse|AFP]]}}</ref>
===Securities and Exchange Commission===
Following the Madoff investment scandal, the [[Securities and Exchange Commission]]'s inspector general conducted an internal investigation into the agency's failures to uncover the scheme despite a series of red flags and tips. In September 2009, the SEC released a 477-page report<ref>[http://www.sec.gov/news/studies/2009/oig-509.pdf Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme]. US Securities and Exchange Commission, Office of Investigations, August 31, 2009</ref> on how the SEC missed these red flags and identifies repeated opportunities for SEC examiners to find the fraud and how ineffective their efforts were.<ref>[http://online.wsj.com/article/SB125210039740087421.html Madoff Report Reveals Extent of Bungling]. ''[[The Wall Street Journal]]'', September 5, 2009</ref>
==See also==
*[[Financial crisis of 2007-2010]]
*[[Pyramid scheme]]
*[[Stanford Financial Group]]
*[[Federal Reserve Bank]]
==References==
{{reflist|2}}
==External links==
{{external links|date=September 2009}}
*[http://www.usdoj.gov/usao/nys/madoff.html Criminal complaint, transcripts of hearings and other documents from the [[United States Department of Justice]]]
*[http://graphics8.nytimes.com/images/blogs/dealbook/madoff_victims_impact.PDF 113 Victim Impact Statements: Letters urging Justice] June 12, 2009
*[http://www.scribd.com/doc/16699848/MCadoff-Letter-Seeking-Leniency, Defense Attorney pre-sentencing request for leniency letter], June 22, 2009
*[http://online.wsj.com/public/resources/documents/madoffclientlist020409.pdf Madoff Client List] February 4, 2009
*[http://www.bernardmadoffvictims.org Bernard Madoff Victim Support and Advocacy Group]
*[http://www.sec.gov/litigation/complaints/2008/comp-madoff121108.pdf SEC civil complaint]
*[http://sec.gov/news/press/2008/2008-293.htm SEC press release] and [http://sec.gov/news/press/2008/2008-293-update.htm update for investors]
*[http://www.madoff.com/ Bernard L. Madoff Investment Securities] The front page is now a placeholder for information on the case. ([http://web.archive.org/web/20070822055219/http://www.madoff.com/ Archive])
*{{cite web|url=http://www.madoff.com/dis/display.asp?id=203&mode=1&home=1#owner |title=The Owner's Name is on the Door |archiveurl=http://www.webcitation.org/5d4ZNZhKv |archivedate=December 14, 2008}}{{Dead link|date=March 2009}}
*[http://news.bbc.co.uk/2/hi/7792284.stm Jewish charities hit by Madoff scandal] BBC
*[http://www.ft.com/cms/s/b7a8d610-caaf-11dd-87d7-000077b07658.htm Madoff Scandal] ongoing coverage from the [[Financial Times]]
*[http://www.rightpundits.com/?p=3299 Ruth Madoff Biography and photos]
*[http://www.guardian.co.uk/business/2009/mar/27/serious-fraud-office-bernard-madoff-feeder-funds Serious Fraud Office broadens investigation to Madoff feeders] ''[[The Guardian]]'', March 27, 2009, British government's investigation into the London activities of certain feeder funds that channeled investments to Madoff
*[http://online.wsj.com/public/resources/documents/Merkin.exhibitsone0407.pdf# Deposition of J. Ezra Merkin]: Madoff Charities Investigation, State of New York (January 30, 2009)
*[http://online.wsj.com/public/resources/documents/WSJ-20090406-MerkinComplaint.pdf Merkin Civil Fraud Complaint] State of New York (April 6, 2009)
*[http://online.wsj.com/public/resources/documents/Merkinexhibitstwo0407.pdf Merkin Exhibits, Civil Fraud Complaint]
*[http://online.wsj.com/public/resources/documents/Merkinexhibits30407.pdf# continued Merkin Exhibits, Civil Fraud Complaint] State of New York, (April 6, 2009)
*[http://documents.nytimes.com/bernard-madoff-complaint-against-jp-morgan-chase#p=1 Complaint against J P Morgan Chase] (April 23, 2009)
*[http://graphics8.nytimes.com/packages/pdf/business/0507madoff_Complaint.pdf Complaint against J. Ezra Merkin] (May 7, 2009)
*[http://www.scribd.com/doc/15274382/Madoff-Trustee-Suit-Against-Harley Complaint against Harley International (Cayman) Limited] (May 12, 2009)
*[http://www.sec.state.ma.us/sct/sctcohmad/cohmad_complaint.pdf, Commonwealth of Massachusett Secretary of State Complaint] (January 14, 2009)
*[http://www.nylj.com/nylawyer/adgifs/decisions/062309cohmad.pdf, Picard v. Cohmad Securities Corp. 09-AP-1305] (June 22, 2009)
*[http://online.wsj.com/public/resources/documents/cohmadcomplaint20090622.pdf, SEC v. Cohmad Securities Corp., 09 Civ. 5680] (June 22, 2009)
*[http://documents.nytimes.com/madoff-lawsuit-againt-stanley-chais#p=1 Picard v. Chais et al. 08-01789] (May 1, 2009)
*[http://online.wsj.com/public/resources/documents/chaiscomplaint20090622.pdf SEC v. Stanley Chais, 09 CIV 5681] (June 22, 2009)
*[http://www.scribd.com/doc/17780712/Lawsuit-Against-Ruth-Madoff-Irving-Picard, Picard v. Ruth Madoff, 1:09-ap-1391] (July 29, 2009)
{{Madoff investment scandal}}
{{2008 economic crisis}}
{{Confidence Tricks}}
[[Category:2008 in economics]]
[[Category:Pyramid and Ponzi schemes]]
[[ar:فضيحة مادوف]]
[[bg:Афера Бърнард Мейдоф]]
[[ka:მეიდოფის საინვესტიციო აფიორა]]
[[pl:Piramida Madoffa]]
[[ru:Афера Бернарда Мейдоффа]]
[[uk:Афера Бернарда Мейдоффа]]
[[vi:Vụ lường gạt giới đầu tư của Madoff]]'
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