BIZ HISTORY Madoff: A Decade Later

Via thierry ehrmann, flickr

Today marks exactly ten years since the feds arrested Bernie Madoff in a financial fraud case that rocked Wall Street to its core. And since the fraud occured in ‘08 (before email was cool and the Brew ever graced your inbox), let's revisit what made the Madoff scandal so...well, fit for Hollywood. You don't see fraud this size every day Madoff orchestrated a $65 billion Ponzi scheme (aka fraud in which someone pays early investors using funds obtained from more recent investors instead of actual profit). It was the largest-ever financial fraud in U.S. history. Want a comparison? Madoff's scheme eclipses not only Zuck's net worth but also the GDP of Croatia. Via Yahoo Finance So...what's come of the close to 4,800 client accounts affected when Madoff's company went belly up a decade ago? So far, about $13.3 billion—or 70% of approved claims—has been recouped. That's a lot. Ponzi scheme recoveries typically only range from about 5% to 30%...and many victims never see a penny, per Bloomberg. FYI, victims included nonprofits (Hadassah), pension funds (the Massachusetts Pension Reserve), and celebrities (Steven Spielberg, Kyra Sedgwick, and Kevin Bacon), just to name a few. What does it mean today? Madoff turned 80 in a North Carolina correctional facility in 2018 while serving year 10 of a 150-year sentence. But his legacy extends beyond just his prison time. It's paved a new path for whistleblowers. Before Madoff's arrest, forensic accountant Harry Markopolos had been alerting authorities for years about the fraud...but no one listened. Now, the SEC has a cash-for-tips program designed to keep history from repeating itself. The Office of the Whistleblower has paid upwards of $326 million to 59 whistleblowers in seven years. Bottom line: Neither Wall Street nor the world has seen anything in the last decade come close to Madoff's astounding deceit. And if the SEC's crew follows through, Madoff's scheme will be the only one of its kind in your kids' business history books.