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Home > Blog > Lawmakers To Examine Bernie Madoff Swindle On Jan. 5

Lawmakers To Examine Bernie Madoff Swindle On Jan. 5

One of the first tasks greeting lawmakers in the new year will be to examine Bernard (Bernie) Madoff’s alleged $50 billion Ponzi scheme and why the Securities and Exchange Commission (SEC) appeared to be asleep at the wheel before detecting the fraud. On Jan. 5, members of the House Financial Services Committee plan to hold a lengthy discussion on the Madoff scandal as part of an effort to radically reform the impaired U.S. regulatory structure that oversees banks and financial service firms. 

On Dec. 11, federal agents arrested Madoff at his luxury Manhattan apartment on charges of securities fraud. The 70-year-old hedge fund manager is accused of running a massive Ponzi scheme – a rob-Peter-to-pay-Paul scam in which early investors are paid off with money from newer investors. The nickname of “Ponzi” is coined after Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s.  

Investors scammed in Madoff’s modern-day Ponzi scheme include numerous foundations and charities, universities, some of the world’s biggest banks, actors Kevin Bacon and Kyra, director Steven Spielberg, Dreamworks chief Jeffrey Katzenberg Sedgwick, former Salomon Brothers Chief Economist Henry Kaufman and countless others. 

Flushed with investors’ cash, Madoff built a massive financial empire for himself over the years, with mansions in Manhattan, the Hamptons and Palm Beach, Florida. Many of the clients Madoff later duped were recruited from the country clubs that the money manager belonged to.   

The allure of exclusivity may have, in part, allowed Madoff to keep his scam undetected for so long. A client had to “know” someone to get a meeting with Madoff.  Even in the face of too-good-to-be-true financial results and lack of account transparency, people still clamored to get on board with Madoff.  

Now, after having lost their life savings, many of those investors are wishing they had jumped ship long ago.   

On Dec. 30, the trustee placed in charge of Madoff’s money management firm, Bernard L. Madoff Investment Securities LLC, obtained court approval to use $28.1 million out of its accounts as it begins the liquidation process.  

Shortly before his arrest, Madoff told employees that his own financial worth had deteriorated from billions to approximately $200 million to $300 million. Madoff has until midnight Dec. 31 to provide the SEC with a detailed list of his assets. 

Only a few months ago, Madoff’s firm ranked as the 23rd-largest market maker on Nasdaq, handling an average of about 50 million shares a day. Now, instead of taking orders for some of the largest companies in the United States, Madoff faces the likely prospect of spending the rest of his life behind bars. 

For Madoff’s investors who have lost everything because of the decades-long fraud swindle, it’s a fitting end for the so-called legend of Wall Street. 

Our securities lawyers are actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses. 

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