Bernard Madoff was born on April 29,1938 in Queens, New York. His parents were Ralph and Sylvia Madoff. His dad was a plumber. They were living during the great depression, so after financial struggles, Bernie’s mom became a stock broker at a company named Gibraltar Securities. The SEC closed the company down because they did not report their financial conditions. The Madoff’s house also had a $13,000 tax lien, which went unpaid until 1965. During his childhood, Bernie Madoff did not care about money or finances at all. He was very interested in swimming at Far Rockaway School. He eventually got a job as a life guard at Silver Point Beach Club in Long Island, New York. With the money he saved up he made investments later in his life.

Bernie Madoff started college at the University of Alabama in 1956. He only stayed there for one year before he transferred to Hofstra University. Then he married Ruth Alpern, in 1959, who he knew since high school. Ruth was studying finance at Queen’s College.

Using 5,000 dollars from being a life guard, Madoff opened up Bernard L. Madoff Investment Securities, LLC. Madoff gained great of popularity by a social feedback loop, or word of mouth. He also attracted celebrity clients like Stephen Spielberg and Kevin Bacon. Madoff averaged a 10% return for his clients a year, which was amazing. 5 percent of all stocks were said to be owned by Madoff’s company. With all the money Madoff earned, he created a system of computers to deliver stock quotes. This technology soon became the NASDAQ. Madoff was on the board of directors for NASDAQ. Madoff promised 1% gains a month on their stocks. This enticed investors because that is all they wanted, stability.

But what people didn’t know for a long time was that Bernie Madoff’s company was actually a ponzi scheme. A ponzi scheme works like this: an early investor will invest money with Madoff. When more people invest, he will pay the early investors with the money invested by the new investors. The ponzi scheme was named after a man named Charles Ponzi. A big reason that Madoff’s company didn’t raise any red flags is because Madoff produced steady earnings, so it didn’t seem like a “get-rich-scheme”. But a stunning fact is that Madoff never bought one stock. All of his reports were complete lies. All fictitious.

Also, it came out that the five thousand dollars Madoff used to open his company, was actually borrowed from his wife’s family. Not saved up from a lifeguard job. One of Madoff’s biggest targets were charities. Lets say there was a charity for under-privileged children. Madoff would be very active in their cause, until the charity invested with him.

The Security and Exchanges Commission (SEC) was warned repeatedly about Madoff. Harry Markopolos—who was a financial analyst that loved numbers— realized something was wrong with Madoff’s Company. He finally realized that there were patterns in the earnings, and they were not matching up to how the stock market actually was doing. So, he sent in requests to the SEC to investigate Madoff six times, but they ignored him every time. Markopolos finally got the SEC to listen to him. He said that Madoff was either running a Ponzi scheme, or he was doing insider trading. (He was running a ponzi scheme, not insider trading) For some reason, the SEC only investigated insider trading, which meant that Madoff was free.

In 2008, the stock market crashed. That meant that everyone wanted Bernie to take his or her money out of the stock market. But Bernie had a problem. All of that money was gone! He had never put their money in the stock market, he spent it or used it to pay back other investors. So, Bernie Madoff confessed to a 50 billion dollar ponzi scheme. This was the largest ponzi scheme in world history. People were furious. Many of them lost their life savings, there were protests out side of Madoff’s house.

Madoff went to trial at 72 years old. In the verdict, he got 150 years in jail. He could be let out of jail at 222 years old, basically it is a life sentence. On the second anniversary of Madoff’s imprisonment, his son Mark hung himself in his apartment.

So Madoff, in the end, did not succeed. His guilt ate him up and he turned himself in. But still, the Madoff ponzi scheme raises a lot of questions. Is the SEC really effective?