Death of a Scammer
Bernie Madoff is Dead
Bernie Madoff is Dead
Normally, death is not a time for celebration, but this time I'm going to make a very big exception. The world is a safer and happier place without one of the worst criminals in history. Bernie Madoff died in prison on April 14th, 2021 at the age of 82.
Bernie Madoff was one of, if not the biggest Ponzi scheme scammer ever.
He started off as a relatively successful account manager, but at some point (exactly when depends on whether you believe a convicted liar or those who investigated him), he had to start using new money to pay off claimed trading returns that didn't happen. This turned out to be much easier than actually managing real investments.
The general overview is that he promised 10% per year. Yes, per year, not per week or per month. Although some account managers can make much higher returns, those managers take big risks and have losing months and losing years. With Bernie Madoff's plan, that 10% would happen no matter what the markets were doing. Even better, he was fully licensed in New York. Individuals, companies, and even charitable trusts considered him to be the safest and surest bet on Wall Street. Enough new money came in that there was always enough to pay out withdrawals for many years. If you put in $1 million dollars and set it up for automatic withdrawal of your profits, you would get $100,000 per year, each and every year, always on time.
Conservative investors thought Bernie Madoff was amazing, even too good to be true. It turned out that the too good to be true part was correct. When new investments slowed, he suddenly had reasons to delay or avoid paying out money from the billions that had been invested and the billions of fake profits that were not really sitting in accounts. The authorities started checking and found that they'd let a thief play with other people's money because he had such a great reputation.
Bernie Madoff was sentenced to 150 years in prison. All of his assets were seized to pay back investors. BTW - Most of the early investors who managed to withdraw more than they put in were convinced (or, in some cases, more or less forced) to give back the fake profits.
Cases like this are why anyone letting someone else manage their money should take this wise quote to heart:
I am more concerned with the return of my money than the return on my money.
- Will Rogers (sometimes also attributed to Mark Twain, but it's valid either way)
I've seen so many people fall for Ponzi schemes over the years. In each case, as soon as they see the first payment come in, a large percentage of investors refuse to even consider the possibility that it's a scam. Instead, they demand that I prove the plan (where they have been promised far more than Madoff ever offered his victims) is fake. The simple fact is that without full access to a company's financial records, I can't prove an investment is a Ponzi even if all the warning signs are there. On the other hand, every single time I've gotten into an argument here at the FPA about whether or not a company is a Ponzi, I was right.
These true believers in some investment plan or guru are putting the burden of evidence on the wrong person. The person claiming to offer returns that would make Bernie Madoff blush (if his rotting corpse still had a heartbeat) is the one who should transparently prove his investment prowess. Otherwise, any claimed safe returns could (and likely are) really just using new investor money to pay off current investors.
As for Bernie Madoff, he won't be forgotten. It will be a long time before someone manages to run a scam as big as his.
If you want to learn more about how to protect yourself from being tricked into investing in a Ponzi scheme or a HYIP (the evil little brother of the Ponzi family of scams), I've written an article detailing how they work and how to spot the warning signs:
Ponzi Schemes and HYIPS - Free Money Traps