Bernie Madoff

Bernie Madoff $50 Billion Ponzi Scheme

Bernard Lawrence Madoff was born April 29, 1938 in Queens, New York. After attending University of Alabama for one year, he transferred to and graduated from Hofstra University in 1960. Upon graduation he started the Wall Street firm Bernard L. Madoff Investment Securities LLC and was chairman of the company. It started very small with only $37,000 (present day value) and grew due to help from his father-in-law and accountant Saul Alpern. To compete with other firms on the New York Stock Exchange his firm used new computer information technology which is known today as the NASDAQ. The company acted as a third market provider which allowed the absence of exchange specialist firms in trades by executing orders over the counter from retail brokers. Madoff started the “legal kickback” which is when a dealer pays a broker for the right to execute a customer’s order to influence how the broker routes client orders. Some viewed these payments as unethical business practice, but Bernie claimed they did not affect the customers outcome and they were apart of normal business practice. The success of the firm led to the Madoff making contributions to federal candidates, parties, and committees. They also had strong ties to the SIFMA (Securities Industry and Financial Markets Association) as Bernie’s brother Peter served two terms as a member of the Board of Directors.

Concerns about the firm raised in 1999 when the SEC (Securities and Exchange Commission) was informed that it was legally and mathematically impossible to achieve the gains the firm claimed to deliver. For almost a ten year period reports came but were not fully pursued by the SEC. Despite the fact that the business grew into a multi-billion-dollar operation no major derivative firms traded with him and neither did any major Wall Street firms invest in him because they had suspicion of false numbers. In the first week of December 2008 Madoff said he was...