MADOFF: The Monster of Wall Street ending explained: What happens to Bernie Madoff and his family?

‘MADOFF: The Monster of Wall Street’ follows the career of financier Bernie Madoff, the man who ran the biggest Ponzi scheme in the history of Wall Street. The docuseries is now streaming on Netflix.

Warning: This article contains heavy spoilers

Plot summary

Bernie Madoff’s father had several businesses, but they all seemed to fail for one reason or another. He knew at a young age that he could not afford to be a failure.

Madoff marries his high-school girlfriend, Ruth, and starts his business from a tiny desk in her father’s accounting firm. He starts off with $5,000, registers Bernard L. Madoff Investment Securities in 1961, and begins trading in over-the-counter stocks.

Additionally, he starts running a small investment advisory business; he is supposed to manage people’s money and make investments for them. His father-in-law, Saul Alpern, refers his clients to Madoff.

Disobeying the law, he never registers with the SEC as an investment advisor. In 1962, he loses his clients’ money, but he does not admit it to his clients. He covers it up instead by borrowing money from Saul and paying back his clients.

This makes him look like a genius who did not lose a single penny in the worst week in the stock market. In the 1970s, he becomes a market maker, a kind of wholesaler of stocks. Market makers buy and sell shares in good and bad times.

He hires his brother, Peter, to work for him. They start using computerized trading, allowing them to process a trade in three days. His legitimate as well as illegitimate businesses start growing.

Saul hires two accountants, Frank Avellino and Michael Bienes, who then rename Saul’s firm Avellino & Bienes after his retirement. They begin to construct Madoff’s first feeder fund by collecting money from the investors, pooling it, and sending it to Madoff’s unofficial investment advisory business.

Madoff is the secret manager of these funds, but it is never revealed to the clients. His legitimate business also starts bringing in huge profits. 

By 1987, he moves his business to a prestigious building. The same year, his firm becomes one of the very few market makers that were buying several stocks on Black Monday when the market crashed.

As his firm fulfils the obligation of a market marker despite facing losses, Madoff wins recognition from the SEC and the New York Stock Exchange.

He becomes a loyal and trustworthy man in the eyes of the people, getting him elected to three terms as the chairman of the board of NASDAQ.

Meanwhile, Avellino and Bienes keep growing their feeder fund under the radar, until 1992 when one of their subcontracts put out a brochure that grabs the attention of the SEC, Security and Exchange Commission, that aims to protect investors.

The SEC finds out that they have raised $440 million for investment and that the trading decisions were made by Madoff, who then asks Frank DiPascali, his right-hand man, to create fake documents to give to the SEC to prove that real investments have been made.

As a result, Avellino and Bienes are forced to give up their business as it was unregistered and illegal. They are asked to return the money to the investors, leaving Madoff no choice but to turn to his three big investors to lend him the money to repay the investors.

However, the investors, who are more than happy with his performance, come to Madoff directly to invest their money. His illegal business gets more and more popular, attracting thousands of clients. 

To keep his Ponzi scheme separate from his legitimate business, he opens another office in the same building. DiPascali is made in charge of Madoff’s illegitimate investment advisory business, and Madoff hires a bunch of loyal high-school graduates to run it.

These trusted employees would punch in fake trades for almost 5,000 clients, who were not given electronic access to check their account statements. No one, including Madoff’s sons, is allowed on this floor except these employees.

Madoff makes his business appear so exclusive in places like Palm Beach, where it is easy to get new investors, that people would get attracted to it. He impresses them with excellent returns, and if they ask any questions, he asks them to take their money somewhere else.

The people of his community trust him as one of their own and invest, not knowing it is a Ponzi scheme that he is running. Eventually, Jeffrey Tucker, a former SEC regulator, and Walter Noel decide to invest their hedge fund, Fairfield Greenwich, with Madoff.

Unlike other money managers, Madoff does not ask for a share of the fee but just the commission, making the deal look exceptional.

Jeffry Picower, one of Madoff’s big four investors, begins withdrawing huge sums of money between 1998 and 2003.

Additionally, Madoff helps him evade taxes. In return, he invests money when the Ponzi scheme is in trouble due to a cash crunch. Madoff believes that Picower was aware of the scheme.

Erin Arvedlund, a journalist, writes an article speculating the authenticity of Madoff’s business, considering the fact that his hedge fund was consistently making money without facing any losses and that he asked his investors to keep his identity a secret.

This causes Tucker to question Madoff, but DiPascali shows him an account with a regulator called DTC to reassure him. In reality, DiPascali had hijacked the legitimate clearing house feed from Madoff’s official business and had woven fake trades into it.

Madoff even gets his own software created for fictitious trades. He silences his two computer programmers, Jerome O’Hara and George Perez, with money when they blackmail him.

In 1999, Frank Casey, a salesperson at Rampart Investment, meets Thierry de Villehuchet, an investor and an investor conduit to some of the richest people in Europe. Thierry tells him about his secret hedge fund manager, who has never had a loss.

Casey finds out that the manager is Madoff. Harry Markopolos, a portfolio manager, looks at the returns that Casey shows him and figures out immediately that these numbers are not authentic. In 2000, he submits a report to the SEC regarding the same.

However, the SEC’s trust in Madoff causes them to ignore Markopolos. Casey even gets Michael Ocrant to write about it, but the SEC simply takes Madoff’s word that he does not have a hedge fund.

9/11 gives Madoff an opportunity to grow his Ponzi scheme with much less scrutiny. From 2002-2008, Madoff’s legitimate business does not make the profits that he wants to see, so he starts funneling money from his Ponzi business into the legitimate one.

Casey and Markopolos find out that Madoff’s fraud is much bigger in Europe; he has billions of dollars in offshore accounts in the Cayman Islands. 

The SEC conducts an examination as a result of Markopolos’s claim that Madoff was running a Ponzi scheme and several other tips. However, as it is conducted by two junior examiners and Madoff himself is their sole contact at the firm, nothing comes out of it.

In 2005, Picower and Sonja Kohn, an Austrian financier, help Madoff survive a crisis. Kohn sets up a network of feeder funds all over Europe and an entity called Bank Medici, which ultimately makes Madoff’s scheme reach the global stage.

MADOFF: The Monster of Wall Street ending explained in detail:

How does the SEC fail in stopping the Ponzi scheme?

Markopolos submits a document to the SEC, listing around 30 red flags that point toward Madoff running a Ponzi scheme. In 2006, the SEC realize that a full investigation needs to be done.

They start looking at his hedge fund clients. Madoff even coaches his clients to talk to the SEC in a certain way. A frustrated Madoff goes to the SEC office alone.

They ask him questions and he provides them with a list of banks and his clearing house account number. The SEC could have checked to see if the trades are actually happening or if the assets are where they are supposed to be by calling the banks or checking the account.

The SEC does not make the calls for some reason. They do not catch his fraud and once again ignore Markopolos. They conclude that Madoff has just given some inaccurate information on the advisory side. 

In fact, they make him register as an investment advisor, which allows him to market his scheme as a safe investment and get new investments worth billions of dollars.

As a result of this failure, the SEC is investigated by Congress once the fraud comes to light. Markopolos testifies that the SEC could have ended this fraud in 2000 if they had not ignored his five written submissions and mathematical proofs over the years.

His testimony and his charges against the SEC shake the agency, causing a stir.

How does the Madoff Ponzi scheme come to light?

In 2008, when the markets crash, Madoff fails to meet the withdrawal requests. He has a conversation with DiPascali, aware that the scheme is about to end.

Madoff decides to use the last of his slush funds to write checks to long-term investors, trusted employees, and his family. He finally tells his wife and sons, Andrew and Mark, who have been a part of his legitimate business, about the Ponzi scheme.

His sons contact a lawyer, who advises them to report the crime if they do not want to be accessories to the crime. His sons report the crime, and Madoff gets arrested by the FBI. He tells the FBI everything and takes the full blame.

The FBI seizes his offices, and DiPascali cooperates with them. He is the one who reveals to them the functioning of the illegitimate business.

What happens to the victims of Madoff’s Ponzi scheme?

Madoff’s scheme lost $19 billion dollars of investors’ money. As SIPC could not compensate the investors, they appoint Irving Picard as the Madoff trustee. Trustees are responsible for liquidating a registered broker-dealer who becomes bankrupt.

Picard files clawback lawsuits against several victims, who have withdrawn more money than they had initially invested to compensate other victims; essentially, taking money from victims for other victims.

Madoff’s four big investors are made to pay the most. Picower, who had behaved as a coconspirator, is found dead, and his wife is forced to return $7.2 billion.

The process to recover the money is considered unfair by the public, but Picard is able to recover more than $14 billion through this process.

Who gets punished in the Madoff fraud?

Madoff pleads guilty and takes full responsibility for his crime, which draws the attention away from the banks, big investors, and feeder funds that take no responsibility whatsoever.

In 2009, Madoff is sentenced to 150 years in prison. Annette Bongiorno and Jodi Crupi, his employees, receive a sentence of 6 years.

Jerome O’Hara and George Perez are sentenced to 2.5 years in prison, while Peter pleads guilty and is sentenced to 10 years in federal prison.

DiPascali cooperates with the government and pleads guilty to 10 felony counts. However, he dies of cancer before sentencing.

JPMorgan Chase is the only entity that had a view of Madoff’s Ponzi scheme, but they ignored the phony transactions and did not generate a SARs report as they were financially profiting from the scheme. 

They acknowledge a lack of oversight in monitoring Madoff’s transactions and are made to pay $2 million, but no employee is held responsible and sent to prison.

Kohn denies all wrongdoings and claims to be a victim herself. In 2013, a UK court declares that her “honesty and integrity had been vindicated”. 

Fairfield Greenwich is not charged for anything. Instead, they recover $230 million while contributing $70 million to the victim’s fund.

What happens to Madoff and his family?

Madoff’s family is subjected to constant media attention. His sons end their relationship with him, but his wife fails to completely cut him off, even though her sons give her an ultimatum.

Mark dies by suicide, and Andrew, who was a cancer patient, dies shortly after his brother’s death. Ruth is rendered homeless as all their assets are seized by federal marshals.

Madoff dies at the age of 82 in prison. His family refuses to receive his ashes.

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