The Bernie Madoff Scandal - A Simple Overview

I don't like this guy it's Bernie Madoff and the reason I don't like him is because he scammed a bunch of people out of a bunch of money I've been studying up on the scandal and I have to say the more I learn about it the more I dislike him it's a story that's been all over the news you may have heard some reports about his Ponzi scheme that's one of those terms you hear occasionally but feel like you never quite understand exactly what it is that might be the case with this entire scandal you've heard about it but don't feel like you have a great understanding of what happened keep in mind this whole thing is complicated and beyond impossible to fully explain in a short video like this but I think I can provide a decent overview pretend the year is any year before 2008 2004 it's well before any kind of scandal and pretend I'm a well-off guy I've been doing pretty well for myself I have an extra million dollars lying around I'm looking to invest it somewhere I check out some potential investment opportunities I'm checking out the interest rate on some savings accounts those aren't great maybe look into an investment property I've been keeping my eye on a few different stocks that look promising while I'm trying to make my decision my buddy calls me on my 2004 flip phone and says he's friends with someone who knows a guy who says he can connect us with Bernie Madoff now this is the best news I've heard in some time I'm actually honored that Bernie Madoff would even consider me see Bernie Madoff is a financial wizard he's been investing for nearly 50 years he used to be chairman of the Nasdaq anyone who's ever done business with him has made a ton of money so a week later I meet with him and he says he can invest my million dollars on the stock market in such a way where it'll grow about 1% every month meaning I could just sit back and earn $10,000 every month of all those other investment opportunities I've been investigating this is by far the best again I just feel blessed he doesn't accept just anybody as a client the Bernie Madoff the financial wizard has agreed to invest money so of course I agree to it fast forward about a year my investment is doing exactly what he said it'll do I'm looking over all these reports he sent me and the stocks are doing great life couldn't be better right now that was my perspective as an investor now let's look at what was actually happening on the end of Bernie Madoff well it turns out he's not the world's greatest investor when I handed over that million dollars he never bought any stocks with it he simply put the money into a bank account those reports he was sending me about my earnings they were completely fake just typed up in the office that's what the Ponzi scheme was any money anyone trusted him to invest went straight into a bank account this was a big bank account it had billions of dollars in it when I had my ten thousand dollar gain at the end of the month I got my ten thousand dollars because he pulled it from this account as long as people were giving him more money than he was returning this can go on forever and people were standing in line to give him money there's no telling exactly how long he was doing this he admitted to doing it for about 15 years but many people suspect it started as far back as the 1970s just to be clear for at least 15 years one of the greatest and smartest investors of our time never actually made any investments Bernie Madoff did not invent the Ponzi scheme the term comes from Charles Ponzi who was doing similar stuff in the 1920s and in reality it probably existed long before him too but Bernie is responsible for the biggest Ponzi scheme of all time that we're aware of hopefully there's not something bigger than this happening right now the question we should all have at this point is how in the world does he get away with this and I have a list of answers for one bernie is a charismatic guy he's the classic conman he just looks like a guy you can trust if you were to talk to him for a few minutes he'll have you believing anything also he had a reputation is the emoji movie really that bad I don't really know I haven't seen it but since everyone else says it's bad now I think it's bad if everyone else says Bernie as a guy you can trust then I guess I trust him and also he was offering 10% maybe 12 percent returns remember since the returns were fictitious he could set the numbers anywhere he wanted he figured 5% wouldn't attract as many people 15% might be too unbelievable he found that exact number that wouldn't raise suspicion but was still convincing enough and probably more importantly these returns were consistent since he set the rates they could be as consistent as he wanted and people love to see consistency if you look at any stock on the market the graph goes up but then it goes down you could make some money you could lose some money it's the stock market everybody accepts those risks going in but with Bernie there was no great highs no drops just a steady return and consider all the other ways he made it look legitimate you received official looking reports showing what was happening it would never even cross your mind to think that they're all fabricated when you wanted to take some money away from your investment he did it without hesitating as first the customer was concerned Bernie Madoff was investing their money and he was doing it well there is one guy I want to mention that wasn't fooled Harry Markopolos he's an accountant that started looking at some of the returns and saying it didn't add up the returns were impossible he told the SEC and they never followed up on it they should have but they were fooled in the same way the investors were I think they figured the idea of a Ponzi scheme this big was just ridiculous and wasn't even worth investigating remember when I said a scheme like this could keep going as long as he was collecting more money than he was giving out well in 2008 the market had some trouble virtually every stock was going down and people were pulling their money out of the market meaning Bernie was giving back more money than he was taking in that massive bank account was going down fast until finally there wasn't enough money to give the people what they were asking for that's when all the investors learned their money wasn't invested in stocks in fact their money was gone either stolen by Bernie or used as a fake return for someone else I haven't mentioned the rest of the Madoff family yet but they were in the news right alongside Bernie when all this came out in fact it was his two sons that turned him in when Bernie knew it was all falling apart he came clean to his kids and they felt the thing that they legally had to do was alert the authorities we knew that we couldn't live with this information and not do something about it there is heavy speculation that his wife and kids knew about everything long before that his two sons worked at Bernie's company and you have to suspect his wife must have known something at first glance you would say of course they were all in on it but when you think about it the sons did work in a completely different department from where the fraud was happening and his wife was pretty uninvolved in the business altogether Bernie had thousands of investors fooled he fooled the SEC banks and the general public I feel like he may have been good enough to fool his own family - in 2009 Bernie Madoff pled guilty to everything and was sentenced to 150 years in prison considering he's currently 79 years old things aren't looking good he claimed he acted alone but that's a lot of fraud to do by yourself there have been other convictions related to the scandal as well as for his two sons neither was convicted but things haven't gone well in 2010 one of them hanged himself and in 2014 the other one died of cancer Bernie's wife is the only one of the Ford that remains alive and not in jail though I wouldn't call it a happy ending for her either her husband is in jail her two sons are deceased and she's not very well-liked by the public whether or not she had anything to do with the scandal is unclear but there are many people that believe she was involved in even if she wasn't she did benefit from it for all those years there were thousands of victims here some of which lost billions and some of which killed themselves after they learned all their money was gone many of the victims were rich investors but not all of them there were average people and charities and so many people that were depending on money that they lost the only thing these people did wrong was failed to spot a fraud and his fraud was pretty hard to spot today there's an effort to refund these victims it's called the Madoff victim fund the Department of Justice is trying to make it right the best they can they're pooling any money they seized from the case and giving it back to the victims in November 2017 there was seven hundred and seventy two million dollars distributed but compared to the twenty billion or so lost it just seems so insignificant I think the biggest lessons we can take from this are pretty clear there was lying there was theft there was greed and look what it's led to so many people saw negative effects from this there were no winners I do want to know HBO released a movie last year called The Wizard of lies it's about this exact topic and stars mr. Robert De Niro as Bernie Madoff I wouldn't call it a great movie you probably won't learn much more about what happened but if you're interested in how it happened and the people involved you might want to track it down so let me know in the comments do you agree with me when I say I don't care for Bernie Madoff whenever there's a government program with your last name followed by victim fund that's probably not a great person and what do you think about the other made offs did they know about any of this the movie depicts them as being completely clueless and I have to admit it's pretty convincing of it I have to say Bernie sure made off with a lot of money I only said that to try to prevent it from being in the comments it's one of the easiest jokes you could ever make his name is literally made off it's been in countless news reports it's in the movie just let it go it wasn't clever to begin with and it's been overused the same goes for anything involving weekend at Bernie's I know that mentioning it probably just increased the chances of seeing it in the comments but at least now it's ironic and I can deal with that but any thoughts you have about Ponzi schemes investor fraud or anything else to do with the scandal leave them in the comments I'd like to hear what you have to say thank you for watching [Music]

Channel: Company Man

Views: 1,070,537

Keywords: Bernie Madoff, Accounting, Fraud, Scandal

Id: al5SLsoe0C0

Length: 11min 6sec (666 seconds)

Published: Wed Mar 14 2018

Reddit Comments

[u/sana128]

Made Off !!

[u/jfrancasi]

Besides the movie with Robert Dinero, there was one made with Richard Dreyfuss as Bernie Madoff. It's fantastic. I enjoyed it more than the Dinero version and I feel shows more insight into the man he was and how the downward spiral affected not only him but his family as well.