Madoff Hustle: How do you make $64 billion just, disappear?

  "He was an equal opportunity thief..."

People often hear about money scams in the news and think "I would never be stupid enough to fall for that", however when a scam is so cleverly thought out and manipulated, and it appears to be a solid safe investment, do you really have 'stupid' to fall for it?

Bernie Madoff is regarded as the greatest conmen of all time and was the mastermind behind one of Wall Street's biggest Ponzi schemes. What is surprising, yet could have also contributed to his success, is that he was one of the people working on Wall Street that you would least expect to conduct a scam such as this. He was seen as the "gold standard" of Wall Street and was highly regarded, seen as a reputable family man. Due to this reputation, he was able to draw potential investors in, gain their trust and make them believe that their money would be safe with him. Little did they know, exactly the opposite was true!

This brings me on to the "3 key rules of the long con" highlighted throughout the programme:

1.  If something looks too good to be true, it probably is
2. Everyone wants something for nothing, you just give that nothing for something
3. You can't cheat an honest man (said to be the most important)

 

 

Firstly, the scam was shown to give steady returns of 1% each month, year after year. These were consistent, whether the market was going up or down. This is a modest return on an investment and would likely to be far lower than others around the same time, however what drew people in was the guarantee of consistent returns. It does not appear that this is a case of people being greedy and wanting to gain high returns for very little, just that naïve people put their trust in someone who appeared to be an expert in the area and what to gain a safe, steady return on their money. Indeed, the scheme almost seemed too good to be true and, unfortunately, in this case it was!

Secondly, Madoff convinced his clients that they would be getting steady returns for very little risk, when in reality they were not getting any returns at all. What was actually happening was Madoff was slowing giving them their own money back, rather than gaining the interest they had been guaranteed. Madoff grew this Ponzi scheme as more and more money came in, through new generations hearing about this desirable high returns. As with every Ponzi scheme, it would collapse when the inflow of cash stopped. This occurred for Madoff during the 2008 credit crunch, when all the marks, or victims as they may be referred, wanted their money back all at once, the scam almost became too big to keep going. As noted above, I don't think that those drawn into the scam were being particularly greedy, and therefore may deserve what they got, but rather they just wanted a safe and steady investment. However, Madoff was taking their money and giving them nothing in return. He was indeed giving them nothing for something.

Thirdly, I feel that the final rule may have been proven wrong in Madoff's case. Yes, there is arguably always an exception to the rule; however in this case there appears to be thousands of exceptions. Perfectly honest victims were cheated out of their money, through no direct fault of their own. However, what can also be said is that a common problem with Ponzi schemes, both back when they first became popular and also in modern day, is that people don't look beyond the promised rate of return. Could it then be said that the victims were maybe not as honest as first thought? Had they looked further than the initial face value of return, would they have spotted flaws within the system?

What stood out for me personally throughout the programme was how ruthless Madoff was with his scam, stopping at nothing to get what he wanted. Nobody was off limits when it came to him conning them out of hard earned money. The most shocking for me, and also notably for those interviewed, was the Elie Wiesel Foundation for Humanity, which was cleaned out of $15million worth of assets. It's one thing to scam the super-rich out of money, and the thousands of 'ordinary' people including friends and family, but to target charities and take money from those is just a whole new level of psychopathy. Did Bernie Madoff really have no morals? At least one thing can be said about him, he was an equal opportunities thief. He didn't care whose money he was taking.

Bernie Madoff has been sentenced to jail time and will spend the rest of his life behind bars. Unfortunately, he is still having the last laugh. In pleading guilty, he did not have to face trial and questioning as to how or why he did it and where in fact all the money has gone. I guess we never will find out his secrets and what possessed him to do what he did.

 

 

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