About 23,000 people around the world are going to have a happy new year courtesy of the Department of Justice. The DOJ is paying out $131.4 million to victims of Bernie Madoff and his Ponzi scheme.
The DOJ announced Monday that the final distribution of funds to Madoff's victims has begun. This is the 10th such payout, and is due to make mostly whole 23,000 of his 40,930 known victims. The victims live across 127 countries.
Overall, the Justice Department has paid out $4.3 billion to all his victims, making up 93.71% of losses, the DOJ said. The majority of these were small investors, according to the DOJ, those who lost less than $500,000.
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“These victims implicitly trusted Madoff with their investments only to ultimately lose significant monies to his selfish plan. With the Justice Department’s steadfast support, the FBI will continue its tireless seizure of assets from criminals who steal from others and seek to recover those assets for victim losses,” Assistant Director in Charge James E. Dennehy of the FBI New York Field Office said in a statement.
“This office has never stopped at pursuing justice for victims of history’s largest Ponzi scheme,” Acting U.S. Attorney Edward Y. Kim for the Southern District of New York added.
Madoff‚ at one time the chairman of NASDAQ, defrauded his victims of billions, starting as early as 1964. Madoff founded his investment securities company in 1960, but it was in 1999 someone finally noticed something was up.
Madoff had long reported massive gains due to his investments, but analyst Harry Markopolos told the SEC in 2000 that he didn't think his successes were mathematically possible. But Markopolos said the SEC didn't investigate his reports. Things could have stopped much earlier if the SEC had taken more interest in what Markopolos had to say.
Madoff wasn't actually running an investment firm, but a Ponzi scheme. He told investors that due to his expertise, he was earning them massive returns on investment. Instead, he was just depositing their money into his bank account. When an investor requested a payout, he'd just cut them a check.
But of course, his bank account's interest wasn't nearly enough to cover the kind of returns he'd been promising. So, like all Ponzi schemes, he required a constant influx of new victims in order to pay the older ones.
The wheels started to come off in 2008, when the amount of requested payouts started to overtake the amount of money he had coming in. Madoff started that year with at least $5.5 billion in his bank account. That had fallen to $234 million by December—and more requests for payouts were still coming.
It was at that point he ended up confessing the fraud to his sons, who in turn told the FBI and SEC. He was arrested on December 11, 2008.
Madoff was sentenced to 150 years in prison in 2009. He died at the age of 82 in 2021 at the Federal Medical Center in Butner, North Carolina.
