Bernard Madoff, born on April 29, 1939, was once an outstanding person on Wall Street. He was practically a legend at one point of his career. He founded Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest on December 11, 2008. His firm was a third-market proveder, which in order to compete with firms trading on New York Stock Exchange floor developed an innovative computer information technology that in the future became the NASDAQ.
Madoff started his fraudulent activities in 1991, and has not been caught for 16 years up until his arrest in December 2008. Madoff used a technique that is publicly known as Ponzi Scheme, first used utilized by Charlez Ponzi in 1920. Simply put, the scheme involves putting investors’ money in a huge pool and distributing returns out of it – a pyramid of sorts. In order to attract investors, Madoff promised extraordinarily high returns, even during period of crisis. We could just wonder, how over the course of 16 years no one has noticed the Madoff’s fraud. In fact, If Madoff had not faced $7 billion in redemptions, this Ponzi scheme might not have been discovered. In addition, it is important to note that ones, who reported Bernard to federal authorities, were his sons, after he himself admitted in front of them that his business was “just one big lie” and “basically, a giant Ponzi .
After his arrest in December 2008, Madoff was sentenced to 150 years in prison. When faced with such harsh punishment, his attorney asked for 12 years, since Bernard Madoff was only expected to live for another 13 years. However, prosecutors insisted on inflicting the strictest degree of punishment. In the end judge ruled against perpetrator’s request. In my opinion, 150 years is quite excessive, since Madoff was a little over 70 at the moment of trial. Considering that male life expectancy in United States up to date is 78 years old, it would have been sufficient to give him 10 years – almost lifetime sentence. The excessive sentence just indicates the degree, to which Madoff managed to upset the world.
Today Madoff spends his leisure time in prison. Occasionally, he answers different questions on interviews or by email. He had pleaded guilty to most of fraud counts. He took all responsibility upon himself. However, it is just unreasonable to think that he was the only one responsible for such enormous and durable Ponzi pyramid. During an interview in February 2011, Madoff told New York Times that major parties involved, such as banks, “Had to know” of Fraud. “I am saying that the banks and funds were complicity in one form or another” – said Madoff. It is indeed hard to believe that banks, specifically JP Morgan Chase that held the account with dirty money, did not notice anything suspicious. Madoff pointed to “willful blindness” of various banks and hedge funds and failure to examine discrepancies between his regulatory filings and other information available.
As we see in case of Bernard Madoff, greed by itself does not necessarily lead to disastrous consequences. Even dishonesty and deceit of just Bernard Madoff was not nearly enough to pull such ginormous Ponzi scheme. Ignorance of the “sophisticated” investors and bankers played the most significant role in sustaining the Ponzi pyramid. “Willingful blindness”, as Madoff calls it, in combination with greed was what caused over $50 billion to evaporate.
On that note, is it possible to have a fraudulent activity not considered a fraud? There is one: Social Security. Practically Social Security program is Ponzi scheme. How is it not considered a fraud? Perhaps, SS is not a fraud due lack of greed involved. Or, perhaps, it is because Social Security is a compulsory project
Bernard Madoff started the largest investor fraud in history. He was the only one responsible and deserves the 150 years of prison. Ironically, Madoff mentioned that he tried to quit much earlier, but it was just simply impossible. There is basically no going back. In some sense, you could say that he did not know what he was doing…he just did it.
“I’m like a dog chasing cars, I wouldn’t know what to do if I caught one, you know, I’d just do…things.” – Joker (Dark Knight, 2008).