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While you may have heard the name Bernie Madoff and might associate it with financial crimes of large proportions and extensive jail time, you may not be familiar with what actually happened. Bernie Madoff was sentenced to 150 years in prison due to his role in perpetrating the largest fraudulent financial scheme in the history of the U.S. Madoff was actually a well respected financier, which helped him get away with his crimes for a long time, until he was arrested in December 2008 on 11 counts of fraud, money laundering, perjury, and theft.
Bernie Madoff’s Ponzi Scheme
Bernie Madoff conned many high profile investors out of $65 million by using a Ponzi scheme. He lured the investors in as most Ponzi schemes do, with the promise of consistent, high returns regardless of market conditions. Madoff acted as the central operator of the Ponzi Scheme which used money from new investors to pay off the promised investment returns to the older investors. No actual profit was being realized, but it appeared as though it was because the older investors were receiving returns. The central operator of these schemes pockets the extra money involved in the operation.
Madoff’s scheme was centered around him setting up investor portfolios to look like he was matching the returns of the S&P 500. The returns made investment appealing while not requiring Madoff to pay out too much in returns to existing investors. The scheme was kept low key despite having many high net worth investors. With a quiet, elite group of investors, he stayed under the radar of the SEC. When the SEC did get notices regarding suspicions about Madoff’s scheme, Madoff’s solid reputation as a pillar of the financial community allowed him to get off the hook. Additionally, Madoff made sure to keep all of his paperwork up to date to prevent drawing any further attention.
As you may be able to tell, Ponzi schemes do not usually last for very long just because they are not sustainable. If new investor money stops coming in or investors start asking to cash out of the scheme, then the Ponzi scheme will quickly deteriorate. With Bernie Madoff’s Ponzi scheme, clients requested upwards of $7 billion back in returns. At the time, Madoff only had around $200 to $300 million to give them. He was borrowing money. Investors were anxious to cash out due to continually deteriorating market conditions. When Madoff realized his scheme was coming to an end, he talked to his sons, Mark and Andrew, who were partners in Bernard Madoff Securities. The sons turned Madoff into the FBI. Madoff entered a guilty plea in 2009. He was 70 years old at the time and sentenced to 150 years in prison.
New York White Collar Crime Attorneys
White collar crimes such as Ponzi schemes are not limited to the millionaires and billionaires of the world. After the high profile Madoff case, the federal government became particularly intense about the prosecution of Ponzi schemes and the associated federal crimes. You do not want to go up against the federal government on your own. Get skilled criminal defense representation on your side. CDH Law is here to fight for you. Contact us today.