11 December 2008: Bernie Madoff arrested for $50bn fraud

Billionaire financier Bernie Madoff was arrested on this day six years ago, for running a $50bn Ponzi scheme. He was later sentenced to 150 years in prison.

After the collapse of Lehman Brothers, and in the midst of a crisis, the last thing the US financial sector needed was another scandal. But six years ago today, that's exactly what they got, when billionaire financier Bernard Bernie' Madoff was arrested in New York City.

Madoff was charged with masterminding a long-standing Ponzi scheme, which at its peak, was worth around $65bn, and is thought to be the largest financial fraud in US history.

The scam hit the headlines after its widespread effects were seen. Hedge funds, banks, universities, as well as personal friends of Madoff were affected. Numerous celebrities were found to have lost substantial sums of money. Among those to lose were actors Kevin Bacon and John Malkovich, as well as Steven Spielberg, whose Wunderkinder charitable foundation lost a significant portion of its value thanks to Madoff.

Madoff was born in Queens, New York in 1938, and founded Bernard L Madoff Investment Securities in 1960. The firm began trading penny stocks using around $5,000 that Madoff had earned doing casual work as a sprinkler fitter and lifeguard.

His firm became highly successful, which allowed Madoff to launch an investment advisory arm within the business. By the end of the 1990s, the Ponzi scheme in which investors are paid returns from the investments of other investors, rather than any real profits had become extremely lucrative, and new investors clamoured to be involved.

Eventually, the scam was exposed, when during the financial crisis clients in Madoff's firm began withdrawing money faster than he could bring in new funds. In December 2010, Madoff was forced to admit to his sons and brother (all of whom worked for the legitimate arm of Bernard L Madoff Investment Securities) that he was running a Ponzi scheme.

His sons immediately turned their father in to the authorities, who arrested him the next day. Madoff was tried, and, in early 2009, he pleaded guilty to all 11 charges brought against him. In June that year he was sentenced to 150 years in prison. He is currently incarcerated in the Butner Federal Correctional Complex in North Carolina.

Recommended

What changes to the pensions charge cap mean for you
Pensions

What changes to the pensions charge cap mean for you

The government could raise the pensions charge cap – the amount you can be charged in your workplace's default pension fund. Saloni Sardana explains w…
27 Sep 2022
The best student bank accounts
Personal finance

The best student bank accounts

As we approach the start of an academic year, Ruth Jackson-Kirby rounds up what you should look for when choosing a student bank account and outlines …
27 Sep 2022
Earn 4.1% from the best savings accounts
Savings

Earn 4.1% from the best savings accounts

With inflation topping 10%, your savings won't keep pace with the rising cost of living. But you can at least slow the rate at which your money is los…
27 Sep 2022
The best offers for switching banks – earn up to £175
Personal finance

The best offers for switching banks – earn up to £175

You can earn up to £175 by switching your current account. Here are the best offers on the market today.
27 Sep 2022

Most Popular

Beating inflation takes more luck than skill – but are we about to get lucky?
Inflation

Beating inflation takes more luck than skill – but are we about to get lucky?

The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank…
26 Sep 2022
The pick of this year's best-performing investment trusts
Investment trusts

The pick of this year's best-performing investment trusts

Market conditions haven’t been easy, but these investment trusts have delivered strong growth, says David Stevenson.
23 Sep 2022
Share tips of the week – 23 September
Share tips

Share tips of the week – 23 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
23 Sep 2022