How does the Ponzi scheme with which Bernie Madoff has defrauded 37 thousand people?

He scammed 37,000 people in 136 countries around the world, raising $ 20 billion in investments that would have made a total of $ 65 billion on paper, thanks to an alleged constant return of 10% per year: these are the numbers of the biggest scam in the world. story, enacted by Bernard Madoff, ...

Dollars (Photo: Pixabay) He scammed 37,000 people in 136 countries around the world, raising $ 20 billion in investments that would have yielded a total of $ 65 billion on paper. thanks to an alleged constant return of 10% per annum: these are the numbers of the biggest scam in history, carried out by Bernard Madoff, the American banker who died yesterday in prison at the age of 82. "Monster" numbers, for which the man will unfortunately be remembered: as a young former lifeguard he opened a financial agency in Manhattan with 5 thousand dollars in the 1960s, but then he became one of the greatest criminals in US history, using a system as simple as ancient, the Ponzi scheme.

Instead of creating new wealth with virtuous investments, Madoff used part of the money collected from savers for personal purposes, showing them documents attesting to the alleged returns. In reality, this was the money of the new investors, attracted as everyone else by the promise of a 10% annual return, a rate not exaggerated not to arouse suspicion but constant “through any market trend”. The arrival of new "victims" was essential to continue to feed the chain that otherwise would soon run out. It is the scam model devised by Charles Ponzi, an Italian who in the 1920s deceived numerous compatriots in the States.

In Madoff's case, the scheme was so well thought out and "prudent" that it withstood the economic shocks of the Gulf War, the 1998 financial crisis and the 2001 twin towers bombing, and you are even exposed to Sec from 1992 to 2008, until something went wrong. Not only private moneyers ended up in the scam network, but also investment and savings banks, albeit perhaps with indirect or reduced exposures, such as Unicredit, Banco Popolare, Santander, Royal bank of Scotland and others. Among the excellent victims, also celebrities such as Steve Spielberg, Kevin Bacon and Larry King, as well as the Nobel Peace Prize winner, Elie Wiesel.

Madoff, who for a few years was also president of Nasdaq, yes he had carved out a respectable position in the investment community, as manager of his Bernard Madoff Investment Securities, a hedge fund with strong connections in the Jewish community, where he came from and where he found the most victims. It is not clear when the criminal scheme began, although it dates back to the early 1990s. By attending the most exclusive clubs and locations with a high concentration of millionaires, such as Palm Beach in Florida, Madoff persuaded the unfortunates to invest with him, based on a "split-strike conversion" method, of which he revealed no details.
Because they didn't exist. The millions deposited between the Madoff Investment cards, on the 18th and 19th floors of the Lipstick Tower in Manhattan, were not invested: they remained in an account and turned into paperwork for the sake of appearance. In fact, on the 17th floor, in a wing of the office, there was the "paper mill" of the company from which the letters attesting to the investors their (fictitious) earnings, with lots of percentages and returns, like a real bank. The actual cash loss caused by Madoff would be between 17 and 20 billion dollars, explains the New York Times, but the bursting of the bubble has sent up as much as 65 billion of alleged wealth that savers believed they could dispose of and on which they had built their lives. All false.

It happened with the subprime mortgage crisis in 2008, when requests to redeem investments exceeded any capacity for fiction: 7 billion dollars that the scammer could not repay in one fell swoop. Furthermore, there was no new fish on the horizon to be able to inject new capital into the vicious cycle. So, in a dramatic family reunion, Bernie Madoff decided to reveal his house of cards to the same children who worked with him. On the morning of December 11, 2008, federal agents entered the house (a two-story penthouse on the Upper East Side), finding him in a bathrobe and with no "innocent" explanation. The following year he was sentenced to 150 years in prison, under eleven charges for a crime defined as "diabolical" by the judge and without concessions due to poor health conditions.

The consequences in terms of broken lives and relations between families and investors are difficult to calculate. Staying at the Madoff home, his son Mark could not bear the weight, taking his own life two years after his father's arrest. Andrew lost the fight against cancer in 2014. The Madoff Victim Fund, the fund wanted by the US Department of Justice, quantifies the funds redistributed so far in the money recovery activity at 3.1 billion dollars, with a repair rate of losses of 80%, among almost 37 thousand victims in 125 countries. The latest update was from last December. Not a word about the disappearance of the great scammer.


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