- Madoff died in federal prison at the age of 82, The Associated Press reported Wednesday.
- He died from apparent natural causes, a source told the AP.
- Madoff carried out the biggest Ponzi scheme in US history before going to prison in 2009.
- See more stories on Insider's business page.
Bernie Madoff, the Wall Street financier turned Ponzi scheme kingpin, has died, The Associated Press reported Wednesday.
He was 82. Madoff apparently died of natural causes in federal prison, according to an AP source. He is survived by his wife, Ruth Madoff.
Born in New York City in 1938, Madoff founded a stock brokerage in 1960 that eventually became Bernard L. Madoff Investment Securities. The firm specialized in over-the-counter penny stocks, using pink-sheet quotes to make markets for traders. Madoff's brokerage then moved on to computerized trades, employing information technology to organize quotes. The digital market-making service went on to underpin the Nasdaq exchange.
The brokerage bypassed traditional exchange firms to allow traders to order directly from retail brokers and at one point served as the largest market maker at the Nasdaq. Madoff served as a Nasdaq director for three single-year terms.
The financier developed close friendships with major players in the financial sector and used his network to spark what became the largest case of financial fraud in US history. Madoff signed on numerous wealthy friends as investors in his firm, offered hefty compensation, and garnered recommendations on other investors to fold into the venture. He also warmed up to financial-industry regulators, building up the brokerage as a prestigious and respected firm in the lucrative sector. Wealthier and wealthier financiers were drawn into the business seeking the prestige that Madoff's firm offered.
That new capital kicked off Madoff's Ponzi scheme. New investments would pay off those having already joined, and new clients were encouraged to attract more investors. The scheme granted major profits to those who joined the firm early and eventually drove billions of dollars in losses for the majority of clients who worked with Madoff's business later on.
No major Wall Street firms invested with Madoff, as they suspected his operations were not legitimate. Others pointed to Madoff's three-person team as proof that the firm couldn't pull in the massive gains that it posted.
Investigators estimated that Madoff's scheme began in the early 1980s. The Securities and Exchange Commission conducted several investigations into the business but failed to find any evidence of malpractice. The Central Bank of Ireland missed warning signs when Madoff's multibillion-dollar fraud began using Irish funds to pad returns.
Madoff was arrested in New York in December 2008 after a whistleblower — who was later identified as one of his sons — said the financier was failing to pay off $7 billion to his clients. Many of Madoff's business partners looked to pull their funds from the business in December as the global financial crisis prompted mass fear around the financial industry's validity. Madoff sought to pay out $173 million in bonuses to his closest partners, but when his sons caught wind of the rewards and confronted their father, he admitted that the entire firm was "just one big lie" and "basically, a giant Ponzi scheme."
Madoff's sons reported their father to federal authorities, and the disgraced financier was arrested and charged with securities fraud on December 11, 2008. He pleaded guilty to 11 federal felonies on March 12, 2009, including securities fraud, wire fraud, money laundering, and perjury.
Then-District Judge Denny Chin sentenced Madoff to 150 years in federal prison on June 29, 2009. Madoff's lawyers asked the judge to shorten the sentence to seven, and later 12, years due to his limited life expectancy, but Chin ruled the sentence was appropriate, calling Madoff's crimes "extraordinarily evil."
Madoff requested compassionate release from prison last year, telling a judge he had only 18 months to live due to end-stage kidney disease and other "chronic, serious medical conditions."
A judge denied his request in June 2020.
The size of Madoff's fraud varies from estimate to estimate. Early investigators pegged the fraud's total value at $65 billion, while Irving Picard, the trustee of assets seized, estimated the amount owed to victims was roughly $57 billion. Former SEC chairman Harvey Pitt noted that the fraud likely involved between $10 billion and $17 billion.
Picard was tasked with recovering funds lost in the scheme and returning them to investors. He and his team have already recovered more than $13 billion in lost funds, roughly three-quarters of approved claims, by suing those who profited from Madoff's scheme.
The US government announced in November 2017 it would begin paying out $772.5 million to more than 24,000 victims of Madoff's scheme.