Who pulled off the biggest scam in US history? How life is for the wife of the creator of the largest financial pyramid The story of Bernie Madoff

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 release the suspect. What is actually hidden 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 accents, 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 Spaniards, 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 or 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 is: 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” 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 from the state (and not only the state!) in the future 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

Talented people are talented in everything. This truth was once again confirmed by Bernie Madoff, the biggest fraudster in the history of Wall Street. He is currently serving a life sentence. Despite his advanced age (he will turn 79 in April), Bernie is full of energy and does not sit idle. So, he monopolized the chocolate trade in prison, from which he makes good money. Meanwhile, Madoff's revelations in conversations with American journalists show the helplessness of US financial regulators and the dishonesty of Wall Street.

Walked towards success

Bernard Madoff's career before his downfall is a classic example of the American dream. At the turn of the 50s and 60s of the last century, a young guy from a middle-class New York Jewish family opened a small investment company. He received his start-up capital by working as a lifeguard on the beach and as an installer of watering systems.

In the 60s and 70s, Madoff and his company were pioneers of innovation in the financial sector. He was one of the first to use information technology. Subsequently, his innovations formed the basis of the NASDAQ exchange, where securities of high-tech companies are traded. Bernie's influence on the trading floor was so great that he was elected chairman of the board of directors three years in a row.

Financial thriller

Madoff was widely known far beyond Wall Street. He donated hundreds of thousands of dollars to political campaigns. Was on short terms with many major officials (for example, with the former chairman of the Securities and Exchange Commission). It is not surprising that the largest institutional investors and the richest people in America calmly contributed money to his fund - Madoff was considered the epitome of reliability.

The investors were full of celebrities. For example, TV presenter, former head of L'Oreal, actor, former owner of the Philadelphia Eagles football club Norman Braman invested in the fund.

Moreover, investing in Madoff Securities was not so easy. The company became famous for its fundamental refusal to provide its clients with online access to accounts (information about their status was sent by email), as well as its refusal to disclose information about the results of its activities. In addition, almost every client was considered by Madoff personally. Many who wanted to invest in Madoff Securities never received Bernie's permission.

For those who were on the client lists, the fund brought decent income (on average 12-13 percent per annum). Everything worked like clockwork for decades.

Doubts about Madoff Securities arose in 1999. The analyst expressed them. He even sent warnings to the Securities and Exchange Commission that it was impossible to achieve such indicators legally. His requests were ignored for several years.

When Madoff's Ponzi scheme collapsed, Markopolos wrote Nobody's Listening: A True Financial Thriller, which became a bestseller in 2010.

To clean water

How could anything go wrong for such a reputable company? It was crippled by the global financial crisis of 2007-2008, which bankrupted other quite respectable companies. The number of people willing to trust their capital to Madoff had decreased, and there was nothing to return the money with - in November 2008, just weeks before the arrest, Bernie complained about a seven billion dollar hole in his balance sheet.

It is unknown how much longer the classic financial pyramid would have existed under the very nose of regulators (including), if in early December 2008 Bernie himself had not told his sons about the secret of the family business. A little later, he admitted this to his employees, estimating the future losses of Madoff Securities at $50 billion.

It is still unknown who exactly informed on Madoff - it is possible that one of his sons.

The court sorted out the case quite quickly and in the summer of 2009 sentenced Bernie to 150 years in prison. It turned out to be more difficult to return the funds that gullible investors gave to the swindler. Most of the money, billions of dollars, simply burned in the pyramid. Selling off the Madoff family's assets under the hammer didn't help anyone.

A few years later, pictures appeared in the tabloids of Ruth Madoff, Bernie's wife, accustomed to luxury, shopping for the middle class like a modest pensioner.

Bernie and the Chocolate Factory

Madoff, however, was not lost in places not so remote. Judging by the words of journalist Steve Fishman, who spent many years communicating with the investor-swindler - both in freedom and behind bars - the former head of Madoff Securities managed to gain the favor and authority of criminals in the Butner prison (North Carolina).

“Surprisingly, he seems to be comfortable in prison,” Fishman told MarketWatch. In the colony, Madoff is a real star. “He stole more money than anyone in history. For other thieves, he is a hero,” the reporter notes. According to Madoff himself, the streets of New York are now much more dangerous than in his cell.

Inmates regularly turn to him for advice on financial matters. For example, a prison neighbor asked Bernie to “settle” his dispute with a broker over the purchase of shares. But most importantly, the swindler serving his sentence finally went into business in the “real sector” - he began selling hot chocolate.

“He bought all the packages of Swiss Miss powder in the prison store and sold them at a markup in the exercise yard,” eyewitnesses said. Madoff arranged everything so that anyone who wanted to drink hot chocolate could purchase the drink only from him, that is, he became a monopolist in this, albeit very modest, market.

Madoff doesn't have much regret about his machinations. But he says he would like to be discovered and go to prison sooner. This might have saved his family. Both of Madoff's adult sons have passed away in the past six years. Mark committed suicide a year after the scam was uncovered, and Andrew died of lymphoma.

Bernie says that his family is the main victim in this story. At the same time, it turned out that the largest organizations in the US financial industry are not victims. For a long time they were actual accomplices of the fraudster. For years they made millions of dollars in profits from Madoff's schemes, but only cried out about the theft when it was discovered. By accident, and not thanks to the clear actions of regulators and law enforcement.

Scam of the century. The biggest fraud in history. Bernard Madoff (Bernard Lawrence Madoff) - the ruler of the financial pyramid. Such headlines in American newspapers, magazines and television news accompanied the investigation and trial of the largest case of financial fraud in the history of the United States, and perhaps the world.

The name of American financier Bernard Madoff seems to have already become a household name. He managed to deceive millions of citizens of the United States, including very wealthy and influential ones. And the amount of damage from his scam is estimated by some experts at $50 billion.

By the time of his arrest in December 2008, Madoff had earned a reputation as one of Wall Street's most powerful and successful financiers. Bernie, as his friends and journalists called him, was considered one of the founding fathers of the modern financial market, says TNO Capital asset manager Alexandra Lozovaya:

“The key success of the scheme that Bernard Madoff built was his reputation. The man had an excellent education. More than 50 years ago he organized his own investment company, which was registered on Wall Street, had connections with the business elite and the richest people in the United States “His whole lifestyle demonstrated this approach: I managed to make money for myself, I can make money for you too.” This was the basis of his success.

MMM: mountains of samovar goldIn the early nineties of the twentieth century, financial organizations began to appear in large numbers that attracted deposits from citizens at high interest rates. In fact, many of them turned out to be financial pyramids. MMM was among them.

By 2008, the future symbol of greed, deception and stupidity had worked as a trader, investment advisor, and also held positions on the board of directors of one of the largest US exchanges, Nasdaq, and International Securities Clearing Corporation. The latter was responsible for non-cash payments between private companies and even states.

But Bernie Madoff's life's work was his own corporation - the investment hedge fund Madoff Investment Securities. He founded it back in the 1960s of the last century with honestly earned 5 thousand dollars. But then, with the growth of the stock market and the introduction of computer technology, the fund turned into one of the leading players in the investment industry. In 2008, the company ranked 6th on Wall Street in terms of transaction volume.

But it turned out that all this was just an appearance. An impressively created image that covered up a banal financial pyramid. According to Igor Nikolaev, director of the Strategic Analysis Department at FBK, Madoff’s activities were not much different from the activities of Sergei Mavrodi:

“The reason for the success of Madoff’s company, like Mavrodi’s company, was a simple thing - people are gullible, they do not learn from mistakes. They want to earn money quickly and a lot. And what is the difference - well, after all, Mavrodi acted on a larger scale, millions of people were involved And Madoff has a narrower circle of people, more acquaintances and more wealthy. But from the point of view of human motivation, both the wealthy and the poor have the same thing: they want to make money quickly, get it cheap. pyramid, and the result is a completely logical end: it collapses, and their organizers end up in prison."

Madoff's company promised its clients 10-12% annual guaranteed income. It was believed that Madoff and his subordinates were successfully playing the stock market. But everything turned out to be simpler: according to the principle of a financial pyramid, payments to old clients were made at the expense of newly attracted investors. Moreover, the matter was put on stream. And the fraud itself resembled a family contract: Madoff hired his sons, brother and niece to work.

It is noteworthy that the exact amount of damage is unknown to this day. According to the most negative estimates, the total size of Bernie's financial pyramid could reach $65 billion. However, most experts and government officials agree on a more modest estimate of $20 billion. In total, between 1992 and 2008, the Madoff empire was checked at least six times, but nothing suspicious was found. However, many researchers are confident that Madoff had powerful patrons.

It is interesting that the entire fraudulent scheme was discovered almost by accident. According to the official version, in December 2008, Madoff himself admitted to his sons that all of his work and the fund were “one big lie” and that the company was operating under a pyramid scheme. Peter and Mark immediately went to the FBI and “turned in” daddy. The next day Madoff was arrested. The trial of the former financier took two years. Bernie received the maximum possible sentence - 150 years in prison. And he has no right to early release.

Prosecutors and lawyers for the fraudster's victims did everything possible to bring his relatives to justice. Madoff's wife had to give up all luxury items, apartments, cars and bank accounts. All the money went into a compensation fund. Bernie himself is now whileing out his days in a cell in a regular prison. He even tried to organize investment courses there. But the authorities did not appreciate the idea and banned it. One of his sons, Peter, was sentenced to 10 years in prison, and the second, Mark, committed suicide in 2010.

Every morning, the petite blonde strolls from her nondescript apartment to Upper Crust Bagel Company on Sound Beach Avenue, the main street in this picturesque Old Greenwich, New England village of 6,600 people.

Almost everyone who lives here knows that Ruth Madoff is in exile, and they mostly leave her alone.

They know the basic story of her downfall - how her privileged world came crashing down in December 2008 after her husband Bernie confessed to the biggest Ponzi scheme in history. The fraud was estimated at $18 billion, for which he is serving a 150-year sentence in prison.

Ruth, in turn, lost everything: money, social status, husband and two sons. Eldest son Mark committed suicide in 2010, and Andrew died of cancer in 2014.

Ruth turns 76 this week, two days before the release of HBO's Master of Lies, a dramatic retelling of the fall of the Madoff family. Starring Robert De Niro and Michelle Pfeiffer.

Although Ruth lives an hour's train ride from Manhattan, it's a far cry from the world Ruth once belonged to, living in an Upper East Side apartment and vacationing in a mansion in Palm Beach and Montauk.

After her husband's trial, Ruth was forced to give up her luxurious residence. In addition, her friends from high society were no longer happy to see her. Donald Trump, who denounced Bernie as a “disgusting scoundrel with no principles,” refused to rent Ruth an apartment in any of his Manhattan buildings while the woman desperately tried to find a place to live.

Before trial in 2009, her husband Bernie struck a deal with prosecutors in exchange for giving up most of their assets: valuable mansions, jewelry, cars and $80 million in art. Ruth was allowed to take $2.5 million.

She then lived briefly in an exclusive condo in Boca Raton, Florida, and moved to Old Greenwich in 2012 to be closer to her three grandchildren who live nearby. For two years, she lived at 57 Thomas Ave., in a historic home built in 1905 owned by her son Andrew and his ex-wife Deborah West, according to public records.

"She was a very good neighbor, that's all I can say," said Mike Worden, who lived across the street from Madoff's house.

Two months after son Andrew died of a rare form of lymphoma, Ruth moved out of his home. The house was sold two years later and was recently demolished to make way for a new building.

Ruth moved into a townhouse in a condominium complex The Gables, where he lives now. A one-bedroom unit is listed as renting for $3,100 per month.

It was here that Pfeiffer, who played Ruth in the movie Master of Lies, sat in the kitchen chatting with Ruth. “She sat in the kitchen and studied it,” the source said.

“I don't think it's appropriate to say that Ruth is collaborating with the film. Michelle just spent some time talking to Ruth. I don't think they spent much time on the script. They just met,” Levinson told the publication Page Six.

Neighbors say that Ruth is constantly walking.

She walks every morning to buy a bun from a certain bakery, but avoids other bakeries in town. She is uncommunicative due to the fact that many people lost their money because of Bernie.

Now her new friends are a group of women who attend church and don't wear their hair or nails, said a neighbor who saw Ruth.

"If they didn't live in Old Greenwich, you'd think these ladies were homeless," she said Post. — Ruth spends a lot of time with them. She always wears the same jeans."

Last Christmas, a friend helped Ruth sell church crafts at a local market, another neighbor said. “It was a spectacle to watch Ruth Madoff pull out crafts from under her desk and get paid for it,” he added.

Other neighbors saw her on her morning walk at a nearby beach on Long Island. She walked up and down the main street of the city, stopped at Anna Banana's store, a store that sells children's clothing, and also visited a beauty salon.

“Why can’t she just live in peace?” asked the woman, who left the salon to prevent the photographer from taking pictures. “She has the right to privacy.”

The salon's friendly attitude stands in stark contrast to the Pierre Michel salon in Manhattan, where Ruth has been going to for more than 10 years for treatments.

The owners of Pierre Michel banned Ruth from the salon after Bernie's arrest in 2008, and she remains an unwelcome guest to this day.

“Unfortunately, many of Pierre Michel’s clients have been victims of Bernie Madoff,” a salon spokesperson told the publication. The Post.

Instead of the $400 she paid for hair coloring at Pierre Michel, she now pays $175 or more at Old Greenwich.

Although Ruth was not charged with crimes, the family was shunned, mainly because many of the elite had invested in Bernie's project and lost their savings. Holocaust survivor Elie Wiesel, who died last year, called Bernie a "scoundrel" and said his charity lost $15.2 million to Madoff and he lost all his savings.

The couple's sons refused to talk to their mother after their father's arrest. They claimed they were never part of the scheme, but questioned why she continued to support her husband, living with him in their Manhattan penthouse for 3 months while he was under house arrest between 2008 and 2009.

Ruth Alpern met Bernie Madoff when she was 16 and they were attending high school in Queens. Both she and Bernie grew up in the Jewish neighborhood of Laurelton. They married in November 1959, when she was 18.

Ruth, who was married to Bernie for nearly 60 years, worked as an accountant for him when he set up his investment business in 1960. But she claimed she didn't know her husband was running a pyramid scheme.

After the husband was accused of massive fraud, the couple attempted suicide on the night of January 1, 2009.

“I don’t know whose idea it was, but we decided to kill ourselves because everything that was happening was so terrible,” Ruth Madoff said in an interview with the program 60 Minutes channel CBS.

Ruth had been visiting her husband in federal prison in North Carolina, but had to stop after son Andrew gave her an ultimatum: If she wanted to hang out with Andrew and see her two granddaughters, she would have to forget about visiting Bernie in prison.

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Who is Bernie Madoff?

Bernard Lawrence "Bernie" Madoff is an American financier who executed the largest Ponzi scheme in history, defrauding thousands of investors out of tens of billions of dollars for at least 17 years and possibly longer. He was also a pioneer in electronic trading and the early chairman of Nasdaq 1990s.

More about Bernie Madoff

Despite purporting to create large, sustainable results, an investment strategy called "breakdown conversion" does exist (see Invest Like Madoff - Without the Jail Time). Madoff simply deposited client funds into a single bank account, which he used to pay clients who wanted to withdraw money. He financed the redemptions by bringing in new investors and capital, but was unable to maintain the fraud when the market tanked in late 2008. He confessed to his sons, who worked in his company, but, according to him, did not know about the scheme - December 10, 2008. The next day they returned him to the authorities. The fund's latest statements indicated it had $64. 8 billion in client assets.

In 2009, at age 71, Madoff pleaded guilty to 11 federal felonies, including securities fraud, wire fraud, mail fraud, perjury and money laundering. The Ponzi scheme has become a powerful symbol of the culture of greed and dishonesty that critics say permeated Wall Street in the run-up to the financial crisis. While Madoff was sentenced to 150 years and prison and ordered to forfeit $170 million in assets, no other prominent Wall Street figure faced legal consequences in the wake of the crisis.

Madoff has been the subject of numerous articles, books, films and an ABC biographical miniseries. (See Investopedia's Guide to Watching 'The Wizard of Lies,' HBO's 'Madoff.')

Bernie Madoff's early career

Bernie Madoff was born in Queens, New York on April 29, 1938, and began dating his future wife Ruth (née Alpern) when both were in their early teens. Speaking by phone from prison, Madoff told journalist Steve Fishman that his father, who ran a sporting goods store, went out of business due to steel shortages during the Korean War: "You watch this happen, and you see your father, who you idolize, build a big business, and then lose everything."

Fishman says Madoff was determined to achieve the "lasting success" that his father did not have, "whatever it took," but Madoff's career had its ups and downs.

In 1960, he founded his company, Bernard L. Madoff Investment Securities LLC, at the age of 22. First trading pennies stocks with US$5,000 (worth about $41,000 in 2017), he earned installation of sprinklers and workers as a lifeguard. He soon convinced family friends and others to invest in him. When the Kennedy Slide jumped 20% off the market in 1962, Madoff's bets turned sour and his father-in-law bailed him out.

Madoff had a chip on his shoulder and was a constant reminder that he was not part of the Wall Street crowd. "We were a small firm, we were not members of the New York Stock Exchange," he told Fishman. "It was very obvious."

According to Madoff, he began to make a name for himself as a scrappy market maker: "I was happy to take the crumbs," he told Fishman, presenting the example of a client who wanted to sell eight bonds; a big firm will flout this order, but Madoff would complete it.

Success came when he and his brother Peter began creating electronic trading capabilities - "artificial intelligence" in Madoff's words - which attracted a massive influx of orders and stimulated business by providing information on market activity." "I had all these major banks coming down, entertaining me," said Madoff Fishman. It was a head trip"

it and four other Wall Street mainstays handle half of the New York Stock Exchange's order flow. Arguably, he paid for much of it - and by the late 1980s Madoff was making about $100 million a year. He became chairman of Nasdaq in 1990, and also served in 1991 and 1993.

Bernie Madoff Ponzi Scheme

It's not entirely clear when Madoff's Ponzi scheme began. He testified in court that it began in 1991, but his account manager Frank Di Pascali, who had been with the firm since 1975, said the fraud had been going on "as long as I can remember."

It is even less clear why Madoff carried out this scheme at all: “I had more than enough money to support any lifestyle and that of my family. I didn't have to do it," he told Fishman, adding, "I don't know, I know why." The legal wings of the business were extremely profitable, and Madoff could earn the respect of the elites on Wall Street solely as a market maker and pioneer of electronic trading. .

Madoff repeatedly suggested to Fishman that he should not be entirely to blame for the fraud. “I just let myself talk into something, and it’s my fault,” he said, without making it clear who was talking to him. I thought I could get out after a while. I thought it would be a very short period of time, but I just couldn't."

The so-called "Big Four" drew attention to their long and profitable involvement in Bernard L. Madoff Investment Securities LLC. Madoff's relationships with Karl Shapiro, Jeffrey Pickover, Stanley Chai and Norma Levy date back to the 1960s and 1970s, and his scheme cost them hundreds of millions of dollars each.

"Everyone was greedy, everyone wanted to continue, and I just went with it," Madoff told Fishman. He pointed out that the Big Four and other - a number of feeder funds were siphoning client funds to him, some of them, in addition to outsourcing their management of client assets, must have been suspicious of what kind of returns he had generated or at least should have had. “How.” can you make 15 percent or 18 percent when everyone is making less money?” Madoff asked.

These apparently super-high returns convince clients to look the other way. In fact, Madoff simply deposited his funds in an account at Chase Manhattan Bank, which merged to become JPMorgan Chase & Co. in 2000, and let him sit. One estimate is that the bank may have allocated as much as $483 million from these deposits. USA, so he was not inclined to request either.

When clients wanted to buy out their investments, Madoff financed the payouts with new capital, which he attracted through his reputation for incredible returns and courting his victims by earning trust. Madoff also cultivated an image of exclusivity, often alienating clients initially. This model allowed about half of Madoff's investors to cash out their profits. These investors had to pay into a victim fund to compensate the defrauded investors who lost money.

Madoff created a front of respectability and generosity, courting investors through his philanthropic work. He also defrauded a number of non-profit organizations, and some of them nearly destroyed their funds, including the Elie Wiesel Foundation for Peace and the global women's charity Hadassah.

He used his friendship with J. Ezra Merkin, an officer at Manhattan's Fifth Avenue Synagogue, to approach the congregation. According to various accounts, Madoff defrauded between $1 and $2 billion from his members.

Madoff's credibility to investors was related to a number of factors:

1. His core public portfolio appears to have stuck to solid investments in blue-chip stocks.

2. Its returns were high (10-20% per year), but consistent, not outlandish. As The Wall Street Journal reported in a now famous interview with Madoff from 1992: "[Madoff] insists that the returns are really nothing special, given that the Standard & Poor's 500 stock index had an average annual return of 16.3% between November 1982 and November 1992. "I'd be surprised if anyone thought the 10-year S&P match was anything remarkable," he says.

3). He claimed to use a collar strategy, also known as a smashed conversion. A collar is a way of minimizing risk in which the underlying stock is protected by purchasing an out-of-the-money option.

Financial analyst Harry Markopolos wrote in a scathing 2005 letter to the Securities and Exchange Commission (SEC) that Madoff's stated strategy "cannot beat the recovery in U.S. Treasury accounts... If that isn't a regulatory hunch, I don't know what is."

Bernie Madoff Study

The SEC had been investigating Madoff and his securities firm since 1999, a fact that disappointed many after he was finally brought to trial because it was believed that most of the damage could have been prevented if the initial investigations had been rigorous enough.

Markopos was one of the earliest informants. In 1999, he counted the day Madoff had to go to bed. He filed his first SEC complaint against Madoff in 2000, but the regulator ignored him.

In his 2005 letter to the SEC, he wrote: “Madoff Securities is the world's largest Ponzi scheme. In this case, the SEC award is not being paid because of that in this case because it is the right thing to do.”

Using what he called the "Mosaic Method", Markopolos noted a number of irregularities. The Madoff firm claimed to make money even when the S&P fell, which makes no mathematical sense based on what Madoff claimed he invested. The biggest red flag, according to Markopol, was that Madoff Securities was earning "undisclosed commissions" instead of the standard hedge fund fee (1% of total plus 20% of profits).

The point, Markopos concluded, was that "investors who are shorting money don't know that BM is managing their money." Markopos also learned that Madoff had applied for huge loans from European banks (seemingly unnecessary if Madoff's income was higher than he said).

It was only in 2005—shortly after Madoff was nearly pulled over by a wave of redemptions—that a regulator asked him to provide documentation of Madoff's trading accounts. He compiled a six-page list, the SEC prepared letters to two of the firms listed, but did not send them, and that was that. "The lie was simply too big to fit into the agency's limited imagination," writes Diana Henriques, author of "The Wizard of Lies: Bernie Madoff and the Death of Trust," which describes the episode.

In 2008, the SEC was taken out by the revelations of Madoff's fraud as well as irregularities by large banks in the mortgage-backed and collateralized debt obligation markets.

Bernie Madoff's Confession and Verdicts

In November 2008, Bernard L. Madoff Investment Securities LLC reported annual returns of up to 5.6%; The S&P 500 fell 39% over the same period. As the sale continued, Madoff became unable to keep up with a cascade of client buyout requests, and on December 10, according to an account he gave Fishman, Madoff confessed to his sons Mark and Andy, who worked at his father's firm." In the afternoon I told them everything, they left immediately, they went to the lawyer, the lawyer said you have to include your father, they went and did it and then I didn’t see them again.”

Madoff insisted he acted even though several of his colleagues were sent to prison. His eldest son, Mark Madoff, committed suicide exactly two years after his fraud was exposed. Some of Madoff's investors also killed themselves. Andy Madoff died of cancer in 2014.

Madoff was sentenced to 150 years in prison and forced to forfeit $170 billion in 2009. His three houses and yacht were put up for auction by US Marshals. He resides at the Butner Federal Correctional Institution in North Carolina, where he is inmate #61727-054. (See also, Bernie Madoff Launches Prison Hot Chocolate Monopoly.)

Consequences of Bernie Madoff's Ponzi scheme

The paper trail of victim statements reveals Madoff's complexity and utter disloyalty to investors. According to the documents, Madoff's fraud spanned more than five decades, dating back to the 1960s. His final account statements, which included millions of pages of bogus trades and shady reporting, show the firm had $47 billion in “profits.”

While Madoff pleaded guilty in 2009 and received a 150-year prison sentence, thousands of investors lost their life savings and numerous stories detailing the anguished feelings of victims.

The Madoff Sacrifice Fund was created in 2012 to help compensate those defrauded by Madoff, but the Justice Department has yet to pay out any of the roughly $4 billion in the fund.

Richard Breeden, the former chairman of the SEC, which oversees the fund, noted that thousands of claims come from "indirect investors," meaning people who put money into funds that Madoff invested during his scheme.

Because they are not direct victims, Breeden and his team must sift through thousands upon thousands of claims, only to have many of them thrown out. Breeden said he bases most of his decisions on one simple rule: Did the person put more money into Madoff funds than they took out? Breeden estimates the number of “feeder” investors to be north of 11,000.

According to a letter written by Assistant Attorney General Stephen Boyd dated September 18, 2017, 65,000 claims have been filed by victims in 136 countries, and 35,000 of the 60,000 identified to date have been approved. Payments from the Madoff Victims Fund will reportedly begin by the end of 2017.

For more information, see "How to Avoid Dropping Loot on the Next Madoff Scam."

 

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