Arrest
Bernie Madoff was taken into the custody of the FBI at his Upper East Side apartment on December 11, 2008 on charges of securities of fraud. The criminal complaint surmised Madoff had confessed his "giant Ponzi scheme" to his sons, Mark and Andrew, the day prior. Martin Flumenbaum, the attorney for Mark and Andrew, allegedly contacted federal authorities with the SEC on their behalf the same day. There was no "innocent explanation," Madoff had confessed and was supposedly prepared to face penalties and possible prison time. Court documents estimated that as of November 30, 2008, BLMIS and its subsidiaries was managing the accounts of approximately 4,800 clients and claimed to hold a balance of $65 billion. The firm in truth "held only a small fraction" of that amount concentrated primarily in Madoff's Chase bank account. The original criminal complaint determined a loss of $50 billion, though estimations would rise as the investigations progressed.
Following the arrest, all activities were frozen within and in connection to BLMIS as well as any trading with Madoff's London firm, Madoff Securities International Ltd. Despite a court-ordered asset freeze, Madoff and his wife, Ruth, mailed over $1 million in jewelry to relatives including his sons who reported the activity to the prosecution. While prosecutors requested a revocation of Madoff's bail, the request was denied by presiding authority, Judge Ronald L. Ellis—though Madoff would be required to document all of his assets and forfeit the privacy of his mailings with the USPS.
By March 10, 2009, an 11-count criminal complaint was filed by the U.S Attorney for the Southern District of New York, charging Madoff with federal crimes including: securities fraud, investment adviser fraud, money laundering, wire fraud, mail fraud, perjury, making false statements, making false filings with the SEC, and stealing employee benefit plans. With the criminal complaint estimating a net loss of $65 billion to Madoff's clientele, the scandal was and still is considered to be the largest Ponzi scheme in the history of finance to-date. At Madoff's London subsidiary, prosecutors asserted he had laundered over a quarter billion U.S. dollars to fund BLMIS in New York. The firm in London also served as a veneer to Madoff's "investments" in the European stock market. While such purported investments were used to entice new investors in the U.S., no such investments were actually being made. This finding would add significant legitimacy to the three counts of money laundering motioned against Madoff of which he pled guilty to two days after the complaint was filed.
Plea
A month prior to plea proceedings, Madoff settled a civil lawsuit filed against him by the SEC. He was and has been forever barred from any activities within the securities industry. Madoff pled guilty to all 11 federal charges on March 12, 2009. No plea agreement was established. A waiver of indictment was signed by Madoff who faced both 150 years behind bars in a federal prison and restitutions adding up to over $7.6 billion. Federal sentencing guidelines for fraud at the time only went as high as $400 million while Mr. Madoff was eventually quoted to have possibly accrued around $65 billion in losses through the operations of his Ponzi scheme. Loss in tax revenue regarding these funds was estimated to be over $1 billion by the IRS. While Madoff's attorney, Ira Sorkin, asked for leniency on his client's behalf with a reduced sentence to 12 years in prison, the court-appointed trustee, Irving Picard, determined that "Mr. Madoff has not provided meaningful cooperation or assistance." The federal judge assigned to the plea proceeding and sentencing, Denny Chin, would state, "I have a sense Mr. Madoff has not done all that he could do or told all that he knows," and later proclaimed in sentencing, "Here the message must be sent that Mr. Madoff's crimes were extraordinarily evil." Madoff is also noted to have moved $15 million into an account held by his wife prior to his confession to his sons.
Sentencing
On June 29, 2009, Judge Denny Chin sentenced the 71-year-old Bernard Madoff to the maximum of 150 years in federal prison. He has since been incarcerated in the Butner Federal Correctional Complex in Raleigh, North Carolina under the inmate number #61727-054 where he has since had one altercation in the prison yard with another elderly inmate. Judge Chin also ordered Madoff to pay $17 million in restitutions to affected clients, not including the $170 million he had ordered to be forfeited three days prior. Ruth Madoff was ordered to relinquish $80 million of her own assets leaving her with only $2.5 million in liquidity. The combined assets of Madoff and his wife were estimated around $826 million when they were frozen in the December of his arrest. Later, $2.6 million in jewelry was uncovered including nearly a dozen fine sets of watches and cufflinks. Mark and Andrew had also accrued over $30 million in loans owed to their father. Upon sentencing, Bernie Madoff apologized to his victims with the following statement: "I have left a legacy of shame, as some of my victims have pointed out, to my family and my grandchildren. This is something I will live in for the rest of my life. I'm sorry, I know that doesn't help you."
Aftermath
In the months to years following, Madoff and his inner circle suffered major mortal losses. Mark Madoff committed suicide on December 11, 2010, the two-year anniversary of his father’s arrest. Jeffry Picower, the founder of one of BLMIS's largest beneficiaries, died of a heart on October 25, 2009. His wife, Barbara, settled for a $7.2 billion forfeiture of funds accrued through BLMIS, the largest forfeiture in American judicial history. In September of 2010, Stanley Chais, a "middleman" in Madoff's operations, also passed after suffering anemia from a rare blood disorder. Madoff's other son, Andrew, died from a brain tumor on September 3, 2014. The alleged CFO of BLMIS, Frank DiPascali, would pass less than a year later on May 7, 2015 from lung cancer. He was still awaiting sentencing at the time.
Irving Picard, the court-appointed trustee for BLMIS, conducted the majority of lawsuits filed for asset liquidation and fund recovery following Madoff's arrest, plea, and sentencing. While approximately $13 billion in lost funds have since been repossessed as of 2019, tens of billions of lost liquidities still remain unresolved and unaccounted for. Indeed, it is possible hundreds of millions to billions of U. S. dollars in misallocated investments are still hidden away in several offshore accounts. Victims who sustained millions to billions in losses include the economist Henry Kaufman, Hollywood director Steven Spielberg, Hollywood producer Jeffrey Katzenberg, screenwriter Eric Roth, actors Kevin Bacon, Kyra Sedgwick, John Malkovich, and Zsa Zsa Gabor, media proprietor Mortimer Zuckerman, Baseball Hall of Fame pitcher Sandy Koufax, owner of the New York Mets Fred Wilpon, broadcaster Larry King, and World Trade Center developer Larry Silverstein. Political activist and Holocaust survivor Elie Wiesel lost approximately $15.2 million to the Ponzi scheme through his foundation. This included the life savings of both he and his wife.
