The Madoff investment scandal was a major case of stock and securities fraud discovered in late 2008.[1] In December of that year, Bernie Madoff, the former NASDAQ chairman and founder of the Wall Street firm Bernard L. Madoff Investment Securities LLC, admitted that the wealth management arm of his business was an elaborate multi-billion-dollar Ponzi scheme.

Madoff founded Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest.[2][3][4] The firm employed Madoff’s brother Peter as senior managing director and chief compliance officer, Peter’s daughter Shana Madoff as rules and compliance officer and attorney, and Madoff’s sons Mark and Andrew. Peter was sentenced to 10 years in prison, and Mark committed suicide exactly two years after his father’s arrest.

Alerted by his sons, federal authorities arrested Madoff on December 11, 2008. On March 12, 2009, Madoff pleaded guilty to 11 federal crimes and admitted to operating the largest private Ponzi scheme in history.[5][6] On June 29, 2009, he was sentenced to 150 years in prison with restitution of $170 billion. He died in prison in 2021.[7]

According to the original federal charges, Madoff said that his firm had “liabilities of approximately US$50 billion.”[8][9] Prosecutors estimated the size of the fraud to be $64.8 billion, based on the amounts in the accounts of Madoff’s 4,800 clients as of November 30, 2008.[10][11] Ignoring opportunity costs and taxes paid on fictitious profits, about half of Madoff’s direct investors lost no money.[12] Harry Markopolos, a whistleblower whose repeated warnings about Madoff were ignored, estimated that at least $35 billion of the money Madoff claimed to have stolen never really existed, but was simply fictional profits he reported to his clients.[13]

Investigators determined that others were involved in the scheme.[14][dead link] The U.S. Securities and Exchange Commission (SEC) was criticized for not investigating Madoff more thoroughly; questions about his firm had been raised as early as 1999. The legitimate trading arm of Madoff’s business that was run by his two sons was one of the top market makers on Wall Street, and in 2008 was the sixth-largest.[15]