Madoff: a $65 billion pyramid without a single crypto token

Long before the arrival of cryptocurrencies and "automated trading bots", the largest financial pyramid in history was built by a man with an impeccable reputation on Wall Street — the former chairman of the NASDAQ exchange. For decades, Bernard Madoff's clients received steady returns year after year, in all market conditions, and it was precisely this stability — not some suspicious promise of extraordinary profits — that became the most convincing mask for the fraud.

Madoff began a legitimate career on the stock market back in 1960, founding his own market-making firm on modest savings. His business grew, and in 1990 he even chaired the NASDAQ exchange — a trading platform whose electronic systems were based in part on technology developed by his own company. This respectable public reputation became the foundation of trust for the investment division he ran in parallel.

It was in this very division, according to investigators, that from the 1990s onward a Ponzi scheme in its purest form began to take shape: there were no real investments behind the clients' money, and the statements reporting "profits" were complete fiction. The funds of new clients were used to pay out old ones, while Madoff himself maintained the illusion of a stable, moderate return that alarmed almost no one — it was precisely its predictability, in contrast to the aggressive promises of other fraudulent schemes, that deflected regulators' suspicions for years.

The scheme unraveled in December 2008 against the backdrop of the financial crisis, when a wave of withdrawal requests exceeded what Madoff could cover with new inflows. According to investigators, it was Madoff's own sons who reported the fraud to the authorities. He was arrested on 11 December 2008, and in March 2009 he pleaded guilty. The fictitious balance of client accounts at the time of the collapse reached nearly $65 billion, while investigators estimated investors' actual losses at $18 billion.

In June 2009, the court handed Madoff the maximum possible sentence — 150 years' imprisonment. He died in prison in April 2021, never having been released. The court-appointed trustee worked for years to recover assets for creditors and, as of today, has returned to the victims a sum exceeding $14 billion out of the original $18 billion in actual losses.

Published 28 March 2023