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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
-
Pension warning: one in five don’t know how much is going into their pensionHow to check your pension contributions and why it matters
-
50,000 power of attorney applications rejected – how to avoid common mistakesA freedom of information request shows that thousands of lasting power of attorney (LPA) applications are rejected due to errors. We explain how to avoid mistakes and reveal tips to make the process as straightforward as possible
-
31 August 1957: the Federation of Malaya declares independence from the UKFeatures On this day in 1957, after ten years of preparation, the Federation of Malaya became an independent nation.
-
13 April 1960: the first satellite navigation system is launchedFeatures On this day in 1960, Nasa sent the Transit 1B satellite into orbit to provide positioning for the US Navy’s fleet of Polaris ballistic missile submarines.
-
9 April 1838: National Gallery opens in Trafalgar Square
Features On this day in 1838, William Wilkins’ new National Gallery building in Trafalgar Square opened to the public.
-
3 March 1962: British Antarctic Territory is created
Features On this day in 1962, Britain formed the British Antarctic Territory administered from the Falkland Islands.
-
10 March 2000: the dotcom bubble peaks
Features Tech mania fanned by the dawning of the internet age inflated the dotcom bubble to maximum extent, on this day in 2000.
-
9 March 1776: Adam Smith publishes 'The Wealth of Nations'
Features On this day in 1776, Adam Smith, the “father of modern economics”, published his hugely influential book The Wealth of Nations.
-
8 March 1817: the New York Stock Exchange is formed
Features On this day in 1817, a group of brokers moved out of a New York coffee house to form what would become the biggest stock exchange in the world.
-
7 March 1969: Queen Elizabeth II officially opens the Victoria Line
Features On this day in 1969, Queen Elizabeth II took only her second trip on the tube to officially open the underground’s newest line – the Victoria Line.
