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Notorious Ponzi scheme mastermind Bernie Madoff has died in federal prison at the age of 82.
A Bureau of Prisons spokesperson says Madoff died on Wednesday morning at the Federal Medical Center in Butner, North Carolina.
The spokesperson says he died of natural causes and that his death is not believed to have been Covid-19 related, but a cause will be determined by a medical examiner.
Madoff was serving a 150-year prison sentence for orchestrating the largest Ponzi scheme in history. In 2009 he pleaded guilty to 11 crimes related to swindling billions of dollars from thousands of investors over a period that stretched from the 1970s until late 2008, according to investigators.
In February 2020, Madoff’s lawyers sought an early release from prison, saying that he was dying from kidney disease. The request was denied.
Madoff’s victims included many famous people as well as institutional investors, charities, and ordinary people hoping to retire with the money they believed they had set aside. Many of the latter went from a status of wealth to near destitution overnight.
A court-appointed trustee has recovered more than $13bn of an estimated $17.5bn that investors put into Madoff’s scheme.
At the time of his arrest, fake account statements told clients the scheme had holdings worth $60bn. The scandal ruined lives, destroyed families, and further damaged trust in financial services even at the height of the financial crisis.
Speaking on CNBC shortly after the news broke, analyst David Faber said that so-called Ponzi schemes should have been renamed after Madoff “because he was the ultimate schemer”.
Among those who invested money with him were film director Steven Spielberg, actors Kevin Bacon, Kyra Sedgwick and John Malkovich, broadcaster Larry King, and Holocaust survivor Elie Wiesel.
Once hailed as a financial wizard who championed computer trading and chaired the Nasdaq, his scheme was a classic Ponzi structure, using money from new investors to pay returns to longer-term investors.
Madoff’s scheme went undetected for so long because instead of paying outlandish returns to investors, he reported more modest numbers – though healthy enough to continue to pull in new money through smaller firms and other intermediaries.
The calibre of his clients and the perceived exclusivity of being welcomed in to invest with Madoff were often the biggest selling points. Recommendations came from family members and trusted business associates who likewise had unwittingly bought into the scheme. Reputations and relationships were destroyed in the aftermath.
In theory, it could have gone on indefinitely, but then the 2008 global financial crisis hit Wall Street. As clients demanded their returns, Madoff did not have the funds to pay them, and the delicate house of cards came crashing down.
He founded the firm Madoff Securities in 1960 with a loan from his wife Ruth’s parents and money he had saved up working as a lifeguard while at college.
The family was heavily involved in the firm. His brother Peter was chief compliance officer, and his sons Mark and Andrew were traders. Peter spent eight years in jail for his part in the scheme after pleading guilty to federal tax and securities fraud in 2012.
Madoff is said to have confessed the scheme to his two sons, who then reported him to federal authorities. He was arrested and charged with securities fraud on 11 December 2008.
While their roles were separate from Madoff’s, and not directly linked to the investment side of the company, it has never been entirely clear what they knew and when they knew it.
Two years to the day after his father’s arrest, Mark died by suicide aged 46. His younger brother passed away from cancer four years later aged 48.
At his sentencing in June 2009, Madoff read a statement to a packed courtroom.
“I am responsible for a great deal of suffering and pain; I understand that. I live in a tormented state now, knowing of all the pain and suffering that I have created,” he said.
“I have left a legacy of shame, as some of my victims have pointed out, to my family and my grandchildren.”
Madoff is survived by his brother and a sister; his wife Ruth; and several grandchildren.