Bernard Madoff's pyramid. Secrets of the Bernard Madoff case Bernard Madoff biography
Bernard Madoff himself
Bernard Madoff is a New York native. There, in 1938, a boy was born into a Jewish family, whose future would be as terrible as it was great. However, as a child, Bernard was not much different from his peers: he graduated from the prestigious Far Rockaway school without any special distinctions, then studied at Hofstra College and received a bachelor's degree in political science. Just as he once opened his own business with only a few hundred dollars in his pocket, Bernard Madoff started practically from scratch. While studying in college, he worked as a laborer and managed to save about $5,000. This money was enough for Bernard to open his own company, Madoff Investment Securities, where he then hired several of his relatives.
Bernard participated in the creation of the American stock exchange Nasdaq, which buys and sells securities for the benefit of investors. His company, Investment Securities, was one of the largest bidders on Nasdaq. By the early 1990s, Madoff was chairman of the board of directors of Nasdaq. Over time, Madoff Investment Securities has been recognized in America and throughout the world as the most reliable investment fund. It is worth noting that throughout its existence it has brought high profits - about 12-13% per annum.
2 businesses – double income – double bottom
The construction of a broker-dealer business and the organization of securities trading lasted more than 40 years. Madoff Investment Securities sold stocks, bonds and other securities profitably for itself and clients. Experts estimated Madoff's business income at $67 million in 2006. Net trading in 2006 brought in $72.5 million, and the company's expenses were only $30 million.
At the same time, in the skyscraper where the residence of the Madoff Investment Securities company was located, the great schemer managed to organize, as it were, two businesses: one - legitimate - representing a broker-dealer company, and the second - fraudulent - a hedge fund, which is not limited by regulatory regulation and is not available to the general public. circle of people. The first business was regulated by the Securities and Exchange Commission. Everything was subject to verification: brokerage books, statements, cash receipts, transactions. At least once every 2 years, auditors came there with inspections. In a word, a mosquito will not erode your nose.
But on the floor below in the offices other workers worked tirelessly. Unlike their “colleagues” brokers, they did not wear jackets, but came to work in casual clothes so as not to be conspicuous and stand out in the crowd. The entrance to the 17th floor (which is where the hedge fund was located) was classified and was a small, inconspicuous door to the left of the elevator.
Brokers demonstrated the activities of Madoff's empire, and the few employees on the 17th floor made his capital. Most broker-dealer employees were barred from the 17th floor.
What were they doing on this mysterious 17th floor? Madoff adhered to the following operating principle: a private investor opens a brokerage account. But in reality, this account is not such, because it is not connected with the brokerage part of the business at all. Madoff gets access to the client’s funds, but does not place them in a hedge fund, but spends some of them on his own needs, giving old investors money to new ones. This is the scheme of the traditional “pyramid”.
Bridge funds and friends and family are other sources of investment for Madoff. They received a certain percentage of the transaction by attracting other investors. By the way, it was on the 18th respectable floor that the campaigning of investor candidates took place. And then their funds were redirected to the floor below.
Exposure: “Pavlik Morozov” or crisis?
According to legend, on December 10, 2008, Madoff, in a frank conversation with his sons, admitted to them that his entire business was based on lies, and without thinking twice, they reported their father to the authorities. On December 11, Madoff was arrested, and on December 16, all his accounts were frozen. During the proceedings, it was found out that Bernard Madoff had not invested anywhere for 13 years.
According to a more truthful version, the reason for the collapse of the pyramid is the global financial crisis. When its first wave passed, some large investors decided to withdraw their invested funds and property in the amount of $7 billion. It is clear that Madoff did not have such funds.
In March 2009, Madoff pleaded guilty to all 11 charges, namely: perjury, fraud, money laundering, etc. And on June 29, 2009, Bernard Madoff was sentenced to 150 years in prison by the Manhattan District Court. According to one source, Madoff's company squandered $50 billion.
The consequences of the collapse of the financial pyramid were terrible. Large banks, financial and investment corporations, insurance and charitable organizations in various countries of Europe and the world suffered from it. Among them are Fairfield Sentry Ltd, Kingate Global Fund Ltd, the Spanish banking group Banco Santander, Royal Bank of Scotland and many others. etc.
Source http://www.warandpeace.ru/ru/analysis/view/31375/
On December 12, 2008, the White House and Congress argued until they were hoarse about whether to save the American auto industry. The price of the issue is $25 billion, which the Bush administration really wanted to put in the humbly outstretched palms of Ford, General Motors and Chrysler. The Congress resisted with all its might. Suddenly, the sad logic of events was disrupted by an emergency message that tore apart the global information space: seventy-year-old Bernard Madoff (admire his photo on the right), “father” and member of the board of directors of the Nasdaq electronic exchange, a cult trader, a sophisticated expert on the financial market and benefactor of the richest people on the planet, was arrested!
The funny thing is that the great “swindler,” whose existence 99.9% of market participants had no idea about the day before, was charged with embezzling $50 billion—an amount twice as high as the demands of the entire American auto industry!
In order for the public to become thoroughly hooked on the Madoff needle, they began to feed it daily and increasingly with absurd fables: it turns out that individual investors, banks, hedge funds and charitable organizations not only in America, but throughout the world. The line of “martyrs” is growing every hour and, at the time of this writing, includes the Spanish bank BBVA (“loss” of $400 million), the British management company Man Group (300 million), the British banks Royal Bank of Scotland (599.3 million) and HSBC (1 billion), French BNP Paribas (460 million), Japanese Nomura Holdings ($302 million), Spanish banking group Banco Santander (2.3 billion euros), Italian bank UniCredit (75 million) and French Societe Generale (10 million euros).
All this blatant heresy is relayed all over the world and is accompanied by epigraphs from irresponsible journalists from the “Golden Key”: “In the Country of Fools there is a magical field - it’s called the Field of Miracles... In this field, dig a hole, say three times: “Cracks, fex, pex” , put the gold in the hole, cover it with earth, sprinkle salt on top, water it well and go to sleep. The next morning a small tree will grow from the hole, and gold coins will hang on it instead of leaves.”
Yes, the crisis is driving the public consciousness to psychosis, forcing them to believe the most exaggerated rumors. However, the bacchanalia that is unfolding today around the “Bernard Madoff case” is sewn with such white threads that you wonder - where is the limit of gullibility and manipulation?!
This respectable building houses the apartments of Bernard Madoff, which seemed to investigators to be sufficient collateral to set the suspect free. What actually lies behind the grandiose hoax, which the press has already rushed to dub “the largest financial scam in world history”? Let's start with the main thing: all, absolutely all information - about the “Ponzi scheme”, and about “50 billion”, and about the “bankruptcy of Bernard L. Madoff Investment Securities LLC”, and about “deceiving investors” - comes from Madoff himself. From the first to the last word. The statement received by the Judicial Magistrate of the Southern District of New York, on the basis of which Madoff was arrested (and released on apartment bail the same day), was compiled by FBI special agent Theodore Cacioppi. It contains a single indictment: a hypothetical defrauding of investors to the tune of $50 billion, which Cacioppi learned from a conversation with two “senior employees” of Bernard L. Madoff Investment Securities LLC.
Almost simultaneously with Madoff’s arrest, the public learned that the “high-ranking employees” who allegedly “pledged” him to the FBI agent were Bernard’s sons, Mark and Andrew, and they received all the information about the “crimes” directly from their father’s lips. It was not difficult to guess about family ties, since all Bernard Madoff's companies are a classic family contract: sons, grandchildren, nieces, nieces' husbands and other relatives occupy key positions in all areas of the business.
So what do we have? On the one hand, there is the self-accusation of a 70-year-old trader of a monstrous financial crime. On the other hand, Bernard L. Madoff Investment Securities LLC, which for 48 years (!) enjoyed an impeccable reputation, demonstrated a stable, albeit modest (10-13% per year) income and successfully passed all inspections by third-party authorities.
Friends called Bernard Madoff the Jewish T-Bill: is it possible to come up with a higher assessment of the integrity of an investment? Today, SEC Chairman Christopher Cox hypocritically laments the alleged "oversight." It turns out that "the commission received reliable and specific signals indicating Mr. Madoff's wrongdoing, but did not respond to them in the vigorous manner that it should." You might think that today there is more than enough evidence of wrongdoing!
The problem, however, is that there is no trace of any evidence other than voluntary “filial libel”! No way! Alexander Vasilescu, a lawyer in the New York office of the Securities Commission who is overseeing the operation to examine and seize all records from the offices of Bernard Madoff, commented on the day of continuous work: “Our task is to find records and track the movement of capital. At the moment (on the night of Sunday to Monday, December 14-15 - S.G.), investigators have not been able to discover anything either regarding the crime itself or its scope. We don’t question his figure ($50 billion - S.G.), we just can’t understand how he came up with it.”
I bet you never will! Not because Madoff is so smart and so cunning, but because there was no 50 billion wasted client money and no Ponzi scheme!
Bernard L. Madoff Investment Securities LLC had $17.1 billion in trust for 11 clients, according to financial statements as of early 2008. Today, a multi-kilometer line of “debtors” voluntarily lining up to Bernard Madoff from all five continents is heart-rendingly trumpeting losses exceeding “tens of billions.” One can, of course, argue that not all clients are reflected in the statements; many entrusted money to Madoff without proper documentation. In this case, of course, one can only guess about the true scope of the “Ponzi scheme” and thank Madoff for the barium porridge that he cooked for the average person with his own confession: hidden channels and secret flows of “old European money” are now visible as if on an X-ray! But here’s the problem: the voluntary “exposure” of financial institutions in the “Madoff case” borders not even on “Crack, Fex, Pex,” but on idiocy: in the case of unregistered financial relations, there is no talk of any legal proceedings and claims for compensation for losses. Why then glow?!
And then, the whole story of Bernard Madoff, intentionally or stupidly turned upside down by the world media, with the right emphasis, appears to be a completely logical financial transaction, which is the main thing! - does not violate the logic of events either in the past (the impeccable reputation and reliability of Bernard L. Madoff Investment Securities LLC) or in the present (Bernard Madoff's motivation for self-incrimination).
I won’t annoy the reader with a sugary blurb about how 22-year-old beach lifeguard from Long Island Benya Madoff saved five thousand dollars and established an investment fund named after himself in 1960 on the basis that in an honest business “the owner’s name always hangs on the door.” This popular print also featured New York University's Hofstra College of Law, where Madoff never completed his studies. It is impossible to verify these legends now, and there is no need to: the sources of initial capital did not have any influence on the maintenance of Madoff’s business.
Why? Because Bernard Madoff was a textbook gisbar, just like Edmond Safra, already familiar to our readers. The only difference is that Safra specialized in bank deposits, and Madoff specialized in stock investments. In other words, Bernard Madoff's entire business, from its inception to this day, has been a completely closed and completely racialized investment channel. For obvious reasons, the media today are trying to portray the “Madoff affair” as an international scam in which the Japanese and Spanish, the British, the Swiss and the Austrians were involved. This is complete nonsense: if anyone suffered from the machinations of the great “macher,” it was the unlucky fellow tribesmen.
All the talk about the imaginary shells of banks such as HSBC and Royal Bank of Scotland is a hoax for the uninitiated public: no banks were directly harmed by the activities of Bernard L. Madoff Investment Securities LLC (which, in fact, is what they mention in small italics in a distant press footnote). releases) - the only people who suffered (if, of course, they suffered at all - more on that later!) were Jewish hedge funds, charities and private clients whom the aforementioned banks lent to for subsequent investments - this time in Madoff's trust fund. And this is natural - no Japanese Nomura Holdings and Italian UniCredit were allowed directly into Madoff’s financial bins, since investment capital was attracted exclusively through closed channels - through Jewish religious organizations, educational institutions and elite golf clubs.
The prestige of investing in Madoff's fund was beyond imagination: people bought annual club memberships (Palm Beach Country Club in Florida, The Hamptons Golf on Long Island, Old Oaks Country Club in Purchase, New York) for several hundred thousand dollars just to be honored honor to be introduced to the great “macher”, who, by the way, refused almost every second applicant! We are talking, as you understand, not just about the rich, but about very rich citizens ($1 million is the minimum requirement for a trust account that a client could open with Madoff’s hedge fund).
As I carefully studied the list of individuals and organizations allegedly framed by Bernard Madoff, I became increasingly convinced of the absurdity of the accusations. Okay, there are multimillionaires Walter Noel, Jeffrey Katzenberg, owner of the Mets basketball team Fred Wilpon, Abraham and Carol Goldberg (Stop & Shop supermarket chain), real estate tycoon Mort Zuckerman. Money bags, after all, are created to deceive them. But director Steven Spielberg, Nobel laureate and Holocaust victim Elie Wiesel, the almost sacred Yeshiva University, the Robert Lappin charitable foundation, which sponsors trips for young American Jews to Israel to preserve national identity and fight interracial marriages - excuse me, they are not being deceived. In any case, people like Bernard Madoff, who has always been distinguished by his piety and reverent attitude towards orthodox religious and family traditions, are not deceiving.
So, the first paradoxical conclusion that has to be drawn: if Bernard Madoff cheated anyone, it was his like-minded people and co-religionists, that is, the people closest to him. I have serious doubts that such scoundrels are chosen for the role of gizbar.
Let's move on. For 48 years, Bernard L. Madoff Investment Securities LLC has demonstrated exceptional stability and consistent returns. Madoff's business is presented in four guises: independent exchange trading and investment activities (1), brokerage and dealer services (1), regulatory activities on the Nasdaq electronic exchange, that is, market-making (3), and trust capital management (4). All the horror stories about the “Ponzi scheme” and 50 billion dollars relate exclusively to the last, fourth, direction.
Candidate clients bought memberships to elite golf clubs for several hundred thousand dollars just to have the honor of being introduced to the great Madoff. The structure of Bernard L. Madoff Investment Securities LLC is completely self-sufficient, therefore it allows you to carry out the entire investment cycle without resorting to the services of third parties: the client transfers money to management, the company's analytical department selects the necessary instruments for investment, and the brokerage division places orders on the exchange, which are also executed on their own market-making terminals. Add to this the public activity of Bernard Madoff at Nasdaq - he was not only at the origins of the electronic exchange, but also served as a permanent member of its board, which he headed from 1990 to 1993 - and you get the ideal investment machine that has everything necessary for successful activities.
Every “Ponzi scheme” attracts customers with significantly higher returns compared to competitors. Madoff's hedge fund never posted returns of more than 13% per annum, a figure that is more than modest by any stock market standard. Today's talk that Madoff allegedly constantly aroused suspicion among other market participants with his amazing stability of income (his fund showed profits even in the most unfavorable years) is a fairy tale for the uninitiated. The average return of Bernard L. Madoff Investment Securities LLC over the past decade is 10.5%, a similar result is demonstrated by half of all corporate and municipal bonds with a reliability rating that does not fall into the junk category. In this situation, Madoff did not need any “Ponzi schemes” in sight: it was enough to place client money in diversified baskets of fixed-income securities and not worry about it.
Meanwhile, there is an officially stated trading strategy that Bernard Madoff allegedly used for his clients. This strategy, called collar (another name is Split-strike Conversion), is well known on the stock exchange and is used everywhere. Its meaning is as follows: a long position is opened on an ordinary share, and then hedged (= insured) from above and below. From above - by selling a call option, from below - by buying a put option. If the price of a stock falls sharply, then every dollar lost on its value will be won back by the dollar earned on the put option. It is significant that insurance in the form of a put option is almost free, since the cost of this contract is covered by the money received from the sale of the call option.
Madoff's hedge fund allegedly invested fiduciary capital in stocks that closely matched the volatility of the stock indexes in which they were included, and then hedged the positions with call and put options written on the index itself. The positions were held open for one fiscal quarter so that the hedge fund's assets were reduced entirely to liquid cash before each earnings report. Such unusual behavior was explained by the short-term nature of option contracts and the reduction of costs due to the abandonment of rolling forward - the transfer of options to longer expiration dates.
Aksia LLC, an independent agency that specializes in analyzing the investment activities of hedge funds, issued a letter in which it pointed out that Madoff's strategy was unrealistic in two respects: first, a check conducted on archived quotes over the past ten years did not confirm even close to the stated profitability; secondly, the average volume of Madoff's trading capital ($13 billion) did not fit into the historically recorded volumes of options trading. This means that the collar was never used by Bernard L. Madoff Investment Securities LLC in the declared volumes, and if it was used, it was only for cover. In any case, nothing could be verified, since all positions were closed before each financial statement, which included only cash.
What does it mean? Only one thing: Madoff’s hedge fund made money not from options trading, but somewhere else. In which? Since we did not hold a candle, we can only guess, relying on indirect sayings. For example, these: large investors close to Wall Street were always convinced that Madoff was making money on insider information, and therefore dreamed of getting into the clients of Bernard L. Madoff Investment Securities LLC by hook or by crook! There is no need to blame investors, since only insider trading provides truly stable and high income on a modern stock exchange.
Ultimately, it does not matter at all what Bernard Madoff earned 10.5% for his clients on the stock exchange: on the collar strategy, on inside trading, or on corporate and municipal bonds. Another thing is important: Madoff did not need any “Ponzi scheme”. Not to mention the fact that not a single financial pyramid known to history could last more than two or three years (Charles Ponzi himself promoted his brands for five months). Bernard Madoff's business demonstrated stable and profitable activity for 48 years.
What then happened to Bernard L. Madoff Investment Securities LLC? Exactly the same as with hundreds of other hedge funds - a banal run, that is, a panicky withdrawal of entrusted capital by clients! Bernard Madoff's self-exposure and subsequent surrender by his (alleged) sons to FBI agents occurred amid frantic attempts to find seven billion dollars to urgently return the money to an unknown client (or clients).
There is, however, a huge difference between Madoff's office and ordinary hedge funds. What did conventional hedge funds do? That's right: they announced a temporary ban on clients withdrawing money from their accounts (the so-called redemption halt), on average in America - until March-April 2009. In other words, they abandoned their faceless, nameless clientele without a twinge of conscience, until better times for now. For a gizbar, such behavior is unthinkable. Sorry, they don’t abandon their own people.
Bernard Madoff, due to the universal financial crisis, suddenly found himself in a situation where he was physically unable to return the money to his clients. What happened next? My hypothesis is this: Bernard Madoff - either on his own or at the wise prompting - sacrificed himself by taking on debt obligations many times greater than the hedge fund's actual debt!
It is for this reason that there is such a colossal discrepancy between the real and recorded in the financial statements assets of Bernard L. Madoff Investment Securities LLC and the mythological figure of 50 billion dollars, which outside banks and financial institutions are frantically trying to “catch up” with today! For what? But this is a rhetorical question: then, in order to officially record non-existent losses, blaming them on Bernard Madoff! I will not tell readers how and how much hidden profit can be diverted in the future from the state (and not only the state!) under the pretext of already recorded imaginary losses.
Could I be wrong with my hypothesis about money laundering through the announcement of fictitious losses? Certainly can! Only one circumstance is beyond doubt: the average person today is being fed exactly the version that Bernard Madoff needs! 50 Billion Dollars and a “Ponzi Scheme” is not a naively silly “crex, fex, pex”, but a well thought out, calculated and clever piece of disinformation.
Big shot, important person (Yiddish).
Vasily Sychev, "The Great Combinator".
My book “What is the name of your god?”, ed., opens with the story of Charles Ponzi, the “father” of world scams. "Bestseller", Moscow, 2004.
“The owner’s name is on the door” is the informal slogan of Bernard L. Madoff Investment Securities LLC, which until recently adorned the company’s website.
Treasure Keeper (Hebrew).
See “The Secret of the Gizbar”, “Business Magazine” No. 16, 2008
Bernard Lawrence Madoff (born 1938) is the creator of the largest pyramid scheme in American history.
You can rob in broad daylight, absolutely openly. There are many tools for this - a personal computer, an officially registered company, etc. But the main weapons of the “daytime thieves” were and remain their own brains and knowledge of human psychology. 2009 - Bernard Madoff, one of the most famous US businessmen and part-time builder of the largest financial pyramid in American history, was convicted in America. Madoff faces 150 years in prison. This is how the United States takes revenge on a person who did not live up to its hopes.
The message that Bernard Madoff is a fraudster, the founder of a financial pyramid, which during the time it existed attracted a huge amount of $50 billion, plunged the United States into shock. It’s as if it suddenly turned out that a certain beloved singer was always singing along with a soundtrack in someone else’s voice. Or if it were discovered that a famous scientist, academician, laureate of Lenin and State Prizes constantly shamelessly reprinted the works of his students under his own name, without even bothering to change a word in them.
Since the mid-60s of the last century, the name Madoff has been synonymous with scrupulous honesty and nobility, innovation and, of course, success. This is what helped him deceive his clients for decades. The irony lies in the fact that his reputation as an honest, noble innovator was well deserved. And Madoff was forced to create a large-scale scheme to deceive everyone - from his own children to the US government - by the exorbitant faith of those around him in his abilities and, of course, pride.
Boy from a good school
Bernard Lawrence Madoff was born on April 29, 1938 into a simple family in Laurelton, New York (Queens), where at that time representatives of the Jewish middle class preferred to settle. His parents, Ralph and Sylvia Madoff, were engaged in business. Now no one knows which one. Bernard himself did not talk about his parents, and he had practically no childhood friends left. Although, one of his classmates once remarked that Ralph Madoff was “something like a broker,” and is already in the magazine Fortune it was reported that the brokerage office Gibraltar Securities was registered under Sylvia Madoff, the address of which coincided with the address where the Madoffs lived. The American Securities and Exchange Commission closed the office due to a reporting problem.
However, Bernard himself did not take any part in the affairs of the parent company. He studied. Fortunately, the public school - Far Rockaway High School - was extremely good. Among its graduates are three Nobel Prize laureates (in medicine and physics), another half a dozen world-famous scientists, several famous athletes, a congressman, prominent journalists and, in the end, two of the world’s most famous businessmen - Carl Aiken and, of course, himself Bernard Madoff.
He studied, as can be seen from the documents in the school archives, very well. 1956 - after graduating from school, he entered the University of Alabama, and then transferred to one of the private New York universities, where he received a degree in political science. Bernard tried to continue his education at the Brooklyn Graduate School of Law, but dropped out after a year. He wanted to work and earn money.
Innovator
Madoff opened his business in 1960. In his company, in which, as they say, his wife Ruth also worked, he invested all his savings - $ 5,000, which he saved by working as a lifeguard on the beach and installing watering equipment in the gardens of more successful (at that time) New Yorkers. Madoff was one of hundreds, if not thousands, of brokers who dealt in so-called penny stocks - shares of small or newly formed companies that cost less than $5 and were traded on the over-the-counter market rather than on an exchange.
The business was not very profitable, but it allowed the Madoffs to live quite decently. As his then acquaintances now recall, new clients were supplied to the financier by his father-in-law, an accountant. Over time, the clientele expanded, and it became increasingly difficult for Madoff to work almost alone.
Madoff came up with the idea of using computer technology to distribute data on quotes, receive orders, etc. In fact, it was a challenge to the New York Stock Exchange. What he came up with soon became a computer-based over-the-counter securities trading platform created with the participation and support of the National Association of Stock Dealers (NASD) and called NASDAQ. Madoff was not only one of the most active participants in the association, but in fact the father of NASDAQ and at one time the main player on this trading platform.
The NASDAQ platform became a real gold mine for Madoff. It didn't just compete with the New York Stock Exchange, it competed unusually well.
“While Bernard became the real king and god of NASDAQ, many promising high-tech companies emerged in the United States. For a variety of reasons, they could not enter the stock market; they did not at that time meet the requirements necessary to be listed on the New York Stock Exchange.
But these companies were successfully traded on the over-the-counter market, says New York expert Ron Gilman. - The risks in the over-the-counter market were much higher, but the risk was compensated by the opportunity to make money relatively quickly. This also attracted gamblers to the market. As a result, it quite naturally happened that the shares of the most high-tech companies were traded on NASDAQ. Suffice it to name three: Microsoft, Dell, Apple. Whatever happens now, for decades they have all been associated with success, rapid growth and novelty.”
Proud swindler
NASDAQ, which Madoff led for many years, helped him become not only a billionaire, but also a true Wall Street legend. Bernard's investment companies never lacked clients. It seemed that everything he touched turned to gold. His influence in the business world was almost absolute. He served on the board of directors of the Securities Industry Association of America, the premier professional association for fund managers. Thanks to this, Bernard had almost unlimited access to the top officials of the state. “He was not only welcome in Washington, he was welcome,” says one expert. “If Bernard said that he couldn’t do something, it should have been understood that no one could do it.”
Actually, the financier himself now claims (he honestly spoke about this in his testimony at the trial), this feeling of omnipotence was what destroyed him. The idea to create a financial pyramid came to him after in the early 1990s, several investors, frightened by the confusion that reigned in the market at that time, turned to him with a simple and understandable request to accept their funds and increase them. After all, it’s clear that if Bernard couldn’t do it, no one could do it. The investors were not individual, but institutional. Madoff did not name them, but we are most likely talking about large banks or financial corporations.
“I understood that these clients, like all professional investors in the market, expected their investments to outperform the market average. And although I never promised any of my clients any specific degree of profitability, I felt obligated to meet my clients' expectations at any cost,” stated Bernard.
The only way to do this under those conditions was deception. The famous investor announced that he had come up with a certain special investment system based on the analysis and tracking of stock indices, a verified game in various directions - up and down, which makes it possible not only to protect investors' investments from unpredictable changes in quotes, but also to increase in any case attachments. If it had been anyone else in Madoff's place, he would have been called a charlatan. But Madoff’s authority as a visionary, innovator and investor was unquestionable, and the businessman was immediately believed.
At first, Bernard believed that his Bernard L. Madoff Investment Securities pyramid scheme was a temporary phenomenon: he would wait until the market calmed down, invest the money entrusted to him in real stocks, and everything would go as before. But as it turned out, the pyramid is an extremely profitable business, and it is almost impossible to get out of it.
He periodically told his clients and regulators that he was investing in stocks and other exchange-traded instruments, when in reality he simply deposited all the money into an account he opened at Chase Manhattan Bank, and as needed, when it came time to pay “dividends” or when clients decided to withdraw their money, issued it from the same account.
The account was replenished from funds from new clients, from whom the financier had no end. According to one British newspaper, investors literally lined up to give him money. When, after the arrest of the swindler, the authorities published a list of all clients of his pyramid, it read like the table of contents of a directory “Who's Who in the World of Finance.” In addition to many simply very rich people (one of them later said that he entrusted Bernard with $11 million, that is, 95% of his total capital), the list included several dozen large charitable foundations (including, for example, Steven Spielberg’s charitable foundation) and the world's leading banks.
Victim of denunciation
It cannot be said that Bernard’s activities, which were too successful compared to others, did not raise any questions. Once it even came to a scandal. A certain meticulous expert publicly stated that the results of his foundation’s activities announced by Madoff contradict not only common sense, but also the laws of mathematics: “Such results are impossible even theoretically.” But no one began to listen to him. “The word of an ordinary expert against the word of a Wall Street legend. No one began to think about which of them to believe,” one of the experts now says.
However, after this incident Bernard became more careful. He was no longer just writing out fake reports. Having opened several accounts, including in Britain, in a branch of one of his companies, the swindler of the century began to transfer money from account to account, feigning business activity.
"Unbelievable but true. Absolutely everyone believed him. His own sons, who were not involved in this business, believed him, even his third son, who participated in the activities of Bernard L. Madoff Investment Securities, believed him, says expert Michael Donnelly. “And it seemed like there was an unlimited limit of trust.” He had several thousand clients who transferred funds totaling $50 billion to him.
According to Madoff, from the very beginning of his scam, he knew that he would have to answer for the crime. “When I started this scam, I knew that what I was doing was wrong, criminal... Over time, I realized that my arrest and this day were inevitable,” he said in court minutes before the judge sent him away to jail. Nevertheless, many experts say, the level of trust in Madoff was so great that he could continue to build a pyramid for the rest of his life. If it weren't for the financial crisis that broke out.
The flight of investors from the stock markets did not spare Bernard L. Madoff Investment Securities. This was not a sign of distrust of Madoff, it was simply that for a while he ceased to be the greatest. “After the collapse of several investment banks, it was no longer a question of trust. Investors just wanted to quickly withdraw their money from investment funds,” said Ron Gilman.
At the beginning of December 2008, the pressure on Bernard from investors became quite serious, he realized that it would not be possible to keep the story secret, and tried to save at least part of his fortune. “Bernard, of course, realized that when the case was revealed, investors would take away everything he had left by that time,” says one of the experts. “He did what he thought was the smart thing to do: he tried to give the money to his loved ones and thereby get them out of harm’s way.”
The financier told his sons Mark and Andrew, who worked in his other legitimate companies, that he intended to pay New Year's bonuses of several hundred million dollars ahead of schedule. Suspecting something was wrong, Mark and Andrew came to their father’s house and demanded an explanation. He told the truth: while Mark and Andrew were engaged in a completely honest and profitable (before the crisis, of course) business, he, Bernard L. Madoff, was building a financial pyramid; The collapse of the pyramid in a crisis is inevitable, and he hopes that he will be able to save at least part of the funds before this time. Then he is ready to declare bankruptcy.
From Bernard Madoff's residence, his sons went to see their lawyer. The conversation was short: the lawyer was instructed to immediately contact the authorities and hand over Bernard Madoff to them.
Bernard was arrested on December 11, 2008. It took several months to prepare the case for trial, find all the victims of the pyramid scheme of the swindler of the century and, in the end, bring the case to trial. All this time the businessman was under house arrest. Already in the courtroom, having made an official confession, the swindler learned that the house arrest order had been canceled.
The court decided that now that the accused has confessed to everything, taking into account the huge sentence facing him, his advanced age and, of course, his remaining opportunities, he can try to escape from justice in order to spend the rest of his days in freedom. To the applause of those present, the financier was taken into custody right in the courtroom and, after the end of the hearing, he was taken to a temporary detention center, where he remained the entire time until the verdict was pronounced - no longer as Bernard L. Madoff, but as prisoner No. 61727054.
Madoff pleaded guilty to 11 counts and was sentenced to up to 150 years in prison.
Section 1. Biography of Bernard Madoff.
Bernard Madoff is an American businessman and former chairman of the board of directors of the Nasdaq Composite stock market.
Biography Bernard Madoff
In 1960, he founded Bernard L. Madoff Investment Negotiable Paper LLC on Wall Street and headed it until December 11, 2008, when he was accused of creating perhaps the largest financial pyramid scheme in history. On June 29, 2009, Bernard Madoff was sentenced by a New York court to 150 years in prison for his scam.
Bernard Madoff was born on April 29, 1938 in New York City into a Jewish family. In 1956 he graduated from the prestigious Far Rockaway School, where he was not considered an outstanding student. He was fond of swimming. He graduated from Hofstra College in New York in 1960 with a bachelor's degree in political science. While studying, he worked as a lifeguard on the beach and as an installer of garden irrigation systems and managed to save 5 thousand dollars. On these in 1960 he founded his organization Madoff Investment negotiable paper.
Ten years later, he brought his brother Peter into the business, and subsequently his nephews Roger and Shana, and both of his sons: Mark and Andrew.
Madoff took part in the creation of the American stock market Nasdaq Composite engaged in the purchase and sale valuable papers in the interests of investors.
Madoff Investment negotiable paper was one of the 25 largest participants in trading on this exchange, its creator was called a pillar Wall Street and a pioneer of electronic stock trading: he was one of the first in New York to completely computerize the document flow of his companies.
Madoff served on the board of directors Nasdaq Composite and was its chairman in the early 1990s. In addition, Madoff was the head of the board of directors of the hedge fund Madoff negotiable paper International, founded in 1983, whose headquarters were located in London. Also in 1985, he was one of the founders and a member of the board of directors of the International Negotiable Paper Clearing Corporation, which was engaged in financial clearing and non-cash payments between companies and states.
Madoff was known for his philanthropic work: after the death of his nephew Roger from leukemia in 2006, he regularly donated to research into treatments for cancer and diabetes. Together with his wife, he founded the Madoff Family Foundation, which donated millions dollars to theaters, museums, educational institutions and Jewish charities. In addition, Madoff served as Treasurer of the Board of Trustees of Yeshiva University School of Business and a member of the Board of Trustees of Hofstra University. In addition, Madoff made donations to the election campaigns of American politicians, mainly members of the Democratic Party.
Madoff lived “in grand style” - he was a member of several elite ski and golf clubs, owned apartments in Manhattan, houses in Palm Beach and in France. He had his own yacht in the Bahamas.
In 2008, he was accused of creating the largest financial pyramid in history. On June 29, 2009, Madoff was sentenced by a New York court to 150 years in prison for his scam.
Mark Madoff, one of Bernard Madoff's sons, was found hanged in his New York City home on December 11, 2010. According to preliminary data, he committed suicide. Mark was a witness in his father's case and was not charged as an accomplice. But in 2009, he was charged with illegally purchasing luxury housing in New York and Connecticut, worth a total of $66 million.
Bernard Madoff scam
The creator of the world's largest financial pyramid, Bernard Madoff, who is serving a 150-year prison sentence in North Carolina, sent a "Christmas" letter to CNBC, saying that insider trading will exist "forever." Business Insider reports this.
"Someone is led to believe that with the recent wave of persecution... insider trade became something new. It's a lie. It has always existed, but it has rarely been brought to justice,” the letter says.
He said the market "lacks transparency" and as a result there is a growing number of so-called dark pools - events held outside share markets that allow parties to trade shares privately and only then reveal details. agreements.
"Institutions have always tried to protect sales information... Of course, they have a right to confidentiality. As the saying goes, the more secret it is, the more valuable it is to whoever wants to receive it," Madoff writes.
He also believes that the increase in the number hedge funds pushes speculators to market take high risks to have a decent .
As a result of the collapse of the financial pyramid, large and medium-sized banks, financial and investment firms, insurance and charitable funds suffered. USA, France, Spain, Italy, the Netherlands, Switzerland. The losses of the most famous of them are:
Hedge fund Fairfield Sentry Ltd - $7.3 billion
Kingate Global Fund Ltd - 2.8 billion
"Tremont Holdings Inc's Rye Investment management" - about 3 billion
Banking group "Banco Santander" () - 3.1 billion
" " - 600 million
Bank BNP Paribas () - 460 million
Boston's Robert I. Lappin Charitable Foundation goes bankrupt
Bank South Korea - 63 million
Taking into account depositors of large banks and investment funds, the number of victims is several million people.
As for the sons, Mark and Andrew, today the most common version is that it was they who “surrendered” their dad to the FBI. This looks plausible - on the evening of December 11, 2008, he admitted to them that all the activities of the fund, in which they, by the way, also worked, - financial Pyramide according to the “Ponzi scheme”, which money there is no payment to clients, but the organization is about $50 billion; and on December 12 he was arrested by FBI officers. True, they are almost immediately released on the security of a debt of $10 million, which a few days before Ruth Madoff prudently and very timely withdrew from the company’s accounts - literally 5 days later the accounts were seized.
Spanish banking group Banco Santander and BBVA, British Royal bank of Scotland, Italian UniCredit, French BNP Paribas and Bank Societe Generale, a banking group HSBC, the Japanese bank Nomura Holding, the Swiss bank Credit Suisse and others were on the list of victims of the Madoff pyramid.
Among the victims are the richest woman in the world - heiress of the L'Oreal cosmetics empire Liliane Betancourt, American media tycoon Mortimer Zuckerman, actor John Malkovich and famous CNN TV presenter Larry King.
One gets the feeling that Bernard Madoff knew what he was getting into. Only, perhaps, I did not suspect that events would develop so rapidly. And in general, if it weren’t for the crisis... When depositors in the fall of 2008 demanded the return of 7 billion at once, it became impossible to put on a good face when the game was bad.
I readily believe that Madoff was relieved after the confession and even after the arrest - to hold such a colossus on his shoulders for so many years and understand that it could collapse at any moment! There are only two “buts”: firstly, my brother and niece were also present during the conversation; secondly, it’s unlikely authorities would immediately arrest such a respected person, without having previously collected materials and evidence.
Be that as it may, the machine of justice began to spin very, very quickly. On March 12, Bernard Madoff fully admitted his guilt in federal court in Manhattan. A New York court immediately appointed a temporary fund manager, Irving Picard, who began searching around the world for and returning the fund's funds to pay investors. Money in accounts and proceeds from sales Madoff's assets collected about 1 billion. Not only yachts and boats were sold, but even his baseball game tickets. Today Ruth Madoff must report to authorities for any spending over $100.
Madoff's sons and relatives were not affected by the charges, but they were extremely upset by what was happening. The eldest son, Mark, even planned to change his last name, worried about the safety of the family. Further events developed dramatically - 43-year-old Mark was found hanged in his New York apartment on December 11 last year. The main version is suicide, although investigators noted that he was wearing a suit, as if he was going out somewhere. According to American publications, Mark has not spoken to his parents for the last two years.
Bernard Madoff is
Mark Madoff is not the only victim of the collapsed pyramid. December 23, 2010 committed suicide founder American consulting organization Access International 65-year-old Thierry de la Villuchet, who could not come to terms with the loss of 1.5 billion invested in the collapsed pyramid.
The case came to an end on June 29, 2009. Bernard Madoff was sentenced by a New York court to 150 years in prison. The severity of the punishment is most likely due to the exemplary nature of the process, because the financier’s lawyers asked for 12 years in prison for their client and expected a maximum of 20. The aforementioned Carlo Ponzi received 5 years in prison, of which he served 11 months.
And then, according to all the laws of the genre, the tragedy began to turn into a farce. Madoff's page collapsed due to the number of people wanting to visit it. Various products with the Madoff Investment negotiable paper logo are gaining popularity at the online auction. So, for $20 eBay You can buy T-shirts with the fund's logo, a picnic bag with its logo is available for $18, and for about the same amount you can buy an umbrella that once belonged to an employee of the Nasdaq Composite exchange.
In August 2010, Cheryl Weinstein's book, Madoff's Other Secret: Love, Bernie and Me, was published. Cheryl served as the chief financier of the women's charity Hadassah and was one of the witnesses in the case. Their affair with Madoff, Weinstein claims, lasted more than 20 years, despite the fact that they were both married.
And Hollywood would not be Hollywood if it had not taken revenge on Madoff for its losses in the usual way: by making the movie “Madoff: Made Off With America” (a play on words, translated as “Madoff: Ending America”).
Madoff himself was known in prison as a hero and almost Robin Hood. “To hell with my victims - I ran around with them for 20 years,” “People just threw money at me. Some guy wanted to invest, and what if I turned him down? He would have asked why he didn’t please me,” statements like these earned Madoff respect among inmates at Butner Prison in North Carolina. “Hero,” says lifer Robert Rosso. “He is definitely the greatest con man in history.”
Bernard Madoff is
Here I would like to express righteous indignation, and again “but”... Bernard Madoff did not spend the six months between his first arrest and the court verdict in vain - he took a special course on surviving in prison. And his current bravado and authority in the eyes of criminals may simply be a way to survive. After all, he refused to appeal to reduce his prison term. And during the trial, he repeatedly asked his depositors for forgiveness.
Sources
Wikipedia - The Free Encyclopedia, WikiPedia
vesti.ru - Vesti
migdal.ru - Migdal
jewish.ru - Global online center
Investor Encyclopedia. 2013 .
Nowadays, it is difficult to deceive businessmen, and even to drag ordinary people into any dubious deal. But several decades ago, financial pyramids were very successfully created, because of which millions of people suffered. Some lost only part of their savings, while others lost a fortune. A striking example of such a ruinous scheme is the Bernard Madoff scam. It affected not only American society, but also the largest foreign companies.
Biographical information
Probably many have heard that there was such a swindler Bernard Madoff. Who is this, where is he from and where did he study? He was born and raised in a Jewish family. In the late 50s of the last century, he graduated from school, after which he decided to pursue higher education at Hofstra College, which is located in New York. Upon completion of his studies, he received a bachelor's degree in politics. During his student years, Madoff did not waste time and worked part-time in several places. As a result, he collected an amount of five thousand dollars, which was used to create his own company called Madoff Investment Securities. Later, when the business was successful, the businessman invited his brother Peter to work together, and then two nephews and two of his sons.
What did Madoff do?
Bernard Madoff participated in the creation and operation of one of the American stock exchanges - NASDAQ. Its main task was the purchase and sale of shares and various securities, which was supposed to bring profit to investors.
Interestingly, Madoff's company was one of the 25 largest participants in trading operations on this exchange. In addition, he is rightfully considered a pioneer of electronic trading. After all, the first person to transfer all document flow to electronic mode was Bernard Madoff. Who is he if not an innovator? After him, other companies gradually began to use computerization.
Career rise
In the 90s, the company of a successful businessman began to noticeably go up. At this time, he managed to take the post of chairman of the board of directors of the exchange, and also headed the board of directors (BoD) of the hedge fund Madoff Securities International, which was founded in 1983. Madoff's high positions do not end there - in 1985 he participated in the founding and was a member of the board of directors of International Securities Clearing. The latter was known for its financial clearing operations, settlements between firms and even countries on a non-cash basis.
Charity
In addition to commerce, Bernard Madoff was involved in charity work. He took this path after one of his nephews died of leukemia in the early 2000s. Since then, Madoff has often donated large sums of money to medical research to combat cancer. Together with his legal wife, the businessman founded his own foundation, which allocated donations to various Jewish charitable events, events, educational institutions, theaters, etc.
Considerable sums were also invested in the election campaigns of some American politicians. So, for various reasons, Bernard Madoff financially supported representatives of the Democratic Party. In addition, he served as the treasury director for the Board of Trustees of Yeshiva University's business school.
World famous scam
In the early 2000s, the swindler Bernard Madoff, whose pyramid is considered the largest in history, became known to the whole world. Statistics show that there are up to three million affected people, and several hundred financial organizations. In total, damage was estimated at almost $65 billion.
How did it all begin? The Madoff Investment Securities fund was a safe and profitable investment, as its investors received decent and stable returns of about 13 percent per year. The fund's clients included both individuals and various organizations, banking institutions, corporations, etc. At that time, Madoff's company, according to experts, was considered one of the best market makers on the stock market, so no one had any suspicions.
The revelation came in 2008, when Madoff admitted to his sons that his investment fund was a huge lie. They told the authorities everything, and soon the founder of the scam was arrested. As it turned out, the investments entrusted to him had not been used for their intended purpose for the last thirteen years. And the police found out that the fund did not make transactions on the stock exchange at all, since there was no data about them anywhere. What also led to the collapse of the entire scheme was the request of large investors to return the invested funds in the amount of seven billion dollars, but there was no such money in the fund.
The businessman was accused of creating a financial pyramid in 2008, and the following year Bernard Madoff was sentenced by the court to 150 years in prison. The list of indictments included perjury, money laundering, fraud, etc.
Many believe that the businessman had accomplices, since he could not do such a thing alone.